What Labour has said on tax havens

 Guernsey, Isle of Man, Jersey, Labour, Secrecy jurisdictions, Tax Havens  2 Responses »
Jan 162012
 

The following is a blog post by Shadow Labour minister Owen Smith MP on tax havens, published yesterday. I reproduce it as it seems to be the Labour line on the announcements made this weekend:

These are tough times for families and businesses. Bills are going up, jobs are being lost, incomes are being squeezed.

And as Ed Miliband and Ed Balls have made clear, if Labour was in government now we’d be making different choices.

We wouldn’t be cutting spending and raising taxes as far and as fast as David Cameron and George Osborne. Their reckless plan has choked off the recovery and put more people out of work, which means £158billion more borrowing than planned.

And the reality is that this Tory-led government’s failure on the economy means tough times are set to continue.

But when unfair choices are being imposed on people – like cuts to tax credits, or changes to child benefit – everything needs to be done to ensure those that owe tax pay their fair share.

I have been urging ministers to get a grip of the rumbling controversy about supposed sweetheart deals cut by HMRC with some of the world’s biggest businesses and we will continue to raise questions about that.

And today, Ed Miliband has highlighted another vital issue where rising public anger shows more than ever the need for real action now. Continue reading »

 Posted by Richard Murphy at 9:25 am

Ed Miliband’s giving an ultimatum to tax havens

 Guernsey, Isle of Man, Jersey, Secrecy jurisdictions, Tax avoidance, Tax evasion  47 Responses »
Jan 152012
 

Ed Miliband is giving an ultimatum to British tax havens. According to the Independent:

Ed Miliband declares war today on the UK’s secretive offshore tax havens which he says could raise £2.4bn for the Exchequer and help to reduce the deficit.

As Ed Balls, the Shadow Chancellor, signals a major shift in economic strategy by admitting that a Labour government would be unable to reverse all of the coalition’s cuts, Mr Miliband will expand on his theme of “fairness in tough times” by making those at the top of society contribute more.

In the Labour leader’s sights are the Channel Islands and the Isle of Man, which shelter UK residents’ cash which would otherwise have to be taxed by HM Revenue and Customs.

European Union loopholes allow UK residents to disguise money offshore held in front companies and trusts. The tax havens are not obliged to let HMRC know which British taxpayer the vehicle relates to.

The EU is attempting to close these loopholes, but Mr Miliband will say that this time-consuming process, which could take years, is allowing billions of pounds to go uncollected.

A Labour source said: “In these tough times, when unfair choices are being imposed on people – like cuts to tax credits, or changes to child benefit – everything needs to be done to ensure those that owe tax pay their fair share.”

Mr Miliband will call on the Government to act as a matter of priority through diplomacy at EU level. The plans are an expansion of his theme, set out in his speech last week, for the deficit to be reduced through fairness – particularly tackling the richest in society, while defending the “squeezed middle” on low to middle incomes.

Tax experts estimate that as much as £2.4bn could be raised by calling time on UK tax havens. Richard Murphy, director of Tax Research UK, said: “Breaking tax haven secrecy is essential to collecting the tax that’s the alternative to cuts.”

The policy, which would be included in Labour’s 2015 manifesto, is designed to show Mr Miliband is acting on reducing the UK’s deficit amid ongoing questions about his leadership and the party’s economic credibility.”

And according to the Observer:

Ed Miliband, the Labour leader, is to demand that the government forcesJersey, Guernsey and the Isle of Man to reveal the identity of British tax evaders with money hidden on the islands.

The tax havens, which are crown dependencies, are costing the government billions every year as the rich protect their money from Revenue and Customs probes through front companies and trusts.

Miliband will this week call for negotiations to begin with the governments on the three islands. He will also demand ministers follow up the talks with threats to shame the islands on the international stage by placing them on a globally recognised blacklist drawn up the Organisation for Economic Co-operation and Development (OECD)..

The move is part of the Labour leader’s attempt to define himself as the foremost campaigner in British politics against the excesses of capitalism. He will claim that every £1m raised by his policy on tax havens is equivalent to a year’s salary for 50 newly qualified teachers.

UK residents with money abroad are required to pay tax in Britain on the income they receive, but many do not declare that they have money stashed away.

Jersey, Guernsey and the Isle of Man have not been co-operating with UK authorities’ requests for the identity of people with money on the islands. Richard Murphy, of Tax Research UK, said the country could recoup £2.4bn.

I have already provided links to my workings this morning. They are likely to be an underestimate as they ignore tax to be recovered on capital hidden offshore.

I do, of course, welcome this move by Labour. My hope is it’s the start of a whole campaign on the tax gap. That though is for time to tell. For now it makes very clear that the claim by the Crown Dependencies that they are transparent and all is now well with them is but a hollow sham: that is far from the truth. Now it is time for them to offer real reform if they are serious in their claim that they do not want tax evaders to use them, something that is all too easy at present.

 Posted by Richard Murphy at 9:11 am

Ed Miliband says it’s time to come clean to the UK’s tax havens

 Cayman, Guernsey, Information exchange, Isle of Man, Jersey, Secrecy jurisdictions, Tax avoidance, Tax Havens  11 Responses »
Jan 152012
 

Ed Miliband’s announced a new initiative today that is sure to resonate around the offshore world.

As I understand it he, in essence, has said three things. The first is that the UK should push as hard as possible for the European Union Savings Tax Directive (ESTD) upgrade planned for 2013 to be implemented as soon as possible. Second, in the process he suggested George Osborne had put back the whole process by negotiating the Swiss tax deal over which the EU is now threatening to pursue the UK because it does not comply with the requirements of the existing ESTD, let alone the revised one. And third he said that if for any reason the EU can’t deliver the ESTD on time because Austria and Luxembourg continue to try to block it then the UK should go ahead and demand that its Crown Dependencies and Overseas Territories enter into deals equivalent to those required under the ESTD with any reasonable country that wants one.

Now this is radical stuff. The ESTD is about tax evasion, that’s all. It has no other purpose. So this initiative extends the whole debate about corporate responsibility from the issue of company tax into the whole arena of the tax evasion that some companies – and notably banks – facilitate through their offshore operations, whether knowingly or not.

Second, whilst the ESTD has been in operation since 2005 it has been widely acknowledged – even by the EU itself since 2008 - that there are gaping loopholes in it. The Tax Justice Network view of this is here. The key points are simply though. First, the existing directive only applies to cash deposits – and based on my research of offshore portfolios that’s rarely more than 20% of offshore asset holdings –  meaning 80% or more of all income escapes the arrangement and so remains untaxed in most cases in the country where it should be declared for tax purposes whilst, second, the ESTD only applies to income held in an individuals name so that cash and other assets held in companies, trusts and other arrangements also avoids or evades tax as well. Put the two facts together and I estimate well over 90% of all income that should be known about in tax havens like the Channel Islands is not advised to HMRC.

Those are loopholes too big to tolerate at a time when tax revenue is the scarcest commodity in the UK economy.

The big question then is, can Miliband do this? My thinking is yes, he could. First, this is about the international relations of the Crown Dependencies and overseas territories, and we are responsible for them, and as such can legislate them if we wish to do so, and opinion that the House of Commons Justice Committee came to in  2010 when reviewing this issue, basing their opinion on the Kilbrandon report. Second, knowing this the Crown Dependencies have actually done all we have ever asked them to do on such issues. That is exactly why they have adopted the European Union Savings Tax Directive and the EU Code of Conduct on Business Taxation despite their reluctance to do so. In practice they knew they had no choice but do so. Third, if they really want to be awkward we could simply remove the exemption from tax being withheld on payments of interest, royalties, dividends and other sums to these places that are in operation at present and they cease to be tax havens overnight and lose their entire financial services industry at a stroke. Given they publicly say they don’t want tax evaders to use them there is no way on earth they’d risk that, but we could impose it, and they know it.

So Miliband, if he were prime minister, would hold all the cards in his hands, and the Crown Dependencies would have the 2,3 and 4 of spades when hearts are trumps. In other words, this threat isn’t hollow; this threat is for real.

And what would we win by doing it? Well, I suggest it could be £2.4 billion a year. That’s best on my 2009 estimates, here and taking just the part relating to the Crown Dependencies into account.

That’s why I applaud this move: it’s a straightforward attempt to tackle tax evasion. That’s exactly what government should be doing now. And it’s a low cost attempt to do so as well. It works by shattering secrecy. After that’s done the pressure on those with these accounts to disclose will be very high indeed – and so the measure is virtually self-policing.

Of course the Crown Dependencies will protest – but if they do so then they’ll be coming out on the side of tax evaders. Is that what they really want to do?

And if their reply is those tax evaders will just move their funds? Then, I suggest, we have to look at regulating the banks involved a lot more aggressively because in that case they will be willingly assisting tax evasion. That’s the next step. But for now let’s note that a politician has taken a courageous line on this issue.

 Posted by Richard Murphy at 7:42 am

A hero bows out

 Guernsey, Jersey, VAT  Comments Off
Nov 172011
 

Richard Allen, who has tirelessly campaigned against VAT abuse from the Channel Islands, and who has won his campaign to end this abuse, has signed off his blog dedicated to this issue since this is a campaign that can safely be said to have concluded.

Richard never imagined he’d be a tax campaigner. Indeed, in many ways he wasn’t. He wanted a level playing field for business freee from the distortions that tax abuse can create.

I salute his work. He’s thanked me on his blog – but this was really his campaign and without his work it would not have been won. He’s a real hero. And so I share the video he put up to signal the end of his work, and look forward to the day when we can say the same for tax havens as a whole:

 Posted by Richard Murphy at 10:01 am

Guernsey company threatens to take UK to court on VAT abuse

 Guernsey, Jersey, Tax Havens, Uncategorized, VAT  Comments Off
Nov 112011
 

A Guernsey company is threatening to demand a judicial review in the UK of the decision to end Low Value Consignment Relief from Guernsey and Jersey in April next year to sop the long running VAT abuse these islands have tacitly encouraged. As the BBC reports:

Guernsey firm Healthspan has announced it is launching a legal challenge to the UK’s decision to end VAT relief on Channel Island goods. Derek Coates, the group’s chief executive, said: “We are in the process of launching a legal challenge, perhaps in the form of a judicial review.” He said it followed advice from accountants and UK lawyers and would be pursued “on the basis of discrimination against the Channel Islands”.

He justified this by saying:

“What is surprising and disturbing for all the Channel Islands is the way the UK have treated our islands with such disdain.  They have taken no steps to stop LVCR imports from any other country outside the EU including Switzerland, Cyprus, Hong Kong, the USA or China.”

My advice to Mr Coates is he should not waste his money. As Richard Allen at RAVAS explains:

A group of retailers headed by a Health supplement mail order company is threatening to take the UK Government to Judicial review over the removal of LVCR from the Channel Islands. It is not understood exactly what the challenge would be but since the UK not only has the option to allow or disallow LVCR but also the discretion to apply LVCR in a manner that prevents tax avoidance and the abuse of the relief,    the argument would appear to rest on whether or not operating a mail order and fulfilment business from the Channel Islands, in order to use LVCR to retail VAT free  on the UK mainland, is an abuse .

RAVAS understands that the UK Government took action after clarifying the legal issues with the European Commission who are not only supportive of the UK’s removal of LVCR from Channel Island mail order goods but responded to a complaint from RAVAS that the UK had failed to take action to prevent an abuse of the import VAT relief.  The UK is obligated by both the LVCR Directive and the Principle VAT Directive to prevent LVCR being abused and used for tax evasion and avoidance particularly if it leads to a distortion of competition in the UK. One of the measures available under the LVCR directive to combat abuse  is to exclude mail order goods from the relief.

In other words – a judicial review has no hope at all.

Time to accept the abuse is over, I say.

 Posted by Richard Murphy at 9:27 am

Who is paying for Jersey to be a tax haven?

 City of London, Corporation Tax, Economics, Guernsey, Isle of Man, Jersey, Secrecy jurisdictions, Tax avoidance, Tax Havens, Uncategorized  24 Responses »
Nov 072011
 

The reason why places like Jersey became tax havens was to raise tax revenue from third parties. The tax revenues raised were, in effect, export earnings that kept their economies afloat.

Deputy Geoff Southern in Jersey has tabled an amendment to the current Jersey budget that shatters the myth that this is still the case. As his amendment says:

Geoff is right to acknowledge there is a race to the bottom in Jersey, Guernsey and the Isle of Man. Promoted by the pinstripe infrastructure of lawyers, accountants and bankers through such coordinating bodies as the Society for Trust and Estate Practitioners (who have their single biggest branch in Jersey but who are active in all three locations) the pernicious influence of these groups has driven these three jurisdictions on a destructive path towards shattering their tax base by eliminating corporate taxes for their clients.

The result is all too apparent. The tax burden has shifted dramatically from businesses using Jersey as a tax haven to the local population who are now paying for the privilege of hosting the tax abuse industry whilst at the same time their economy is facing ruin as local politicians realise they have no idea how to plug the continuing deficits they face and are now suggesting plundering the rainy day fund – a sure sign they are on the slippery slope to running out of money, as I have long predicted.

Geoff Southern has in this case study provided the evidence of what I and the Tax Justice Network have long argued – that the ‘race to the bottom’ in corporate taxes is simply an excuse to shift the tax burden from those able to pay tax (let’s call them the 1%) on to those less able or unable to afford them (again, for simplicity, let’s call them the 99%).

This is happening everywhere but Jersey’s clearly leading the way.

This is what the Tax Justice Network is about.

This is what #occupy is about.

Beating this pernicious process is what re-engagement in democracy should be about for many who feel disenchanted by it.

And this is what beating the exploitative activities of the City of London – the most undemocratic local authority in the UK – has to be about.

 Posted by Richard Murphy at 3:37 pm

The end of Channel Islands’ VAT abuse is nigh

 Guernsey, Jersey, Tax avoidance, VAT  24 Responses »
Nov 012011
 

As the BBC reports in Guernsey this morning:

A reduction in VAT relief on parcels sent to the UK from outside the EU [introduced today] is unlikely to be the last change, according to the UK Treasury.

The tax is not paid on goods below the Low Value Consignment Relief (LVCR) threshold, which changed from £18 to £15 on 1 November 2011.

The Channel Islands are among locations that have been seen as bases for the exploitation of the “VAT loophole”.

A Treasury spokesperson said further changes were being investigated.

The spokesperson said: “We are exploring options to further limit the relief so it can be longer be inappropriately exploited.”

An email in my inbox says expect an announcement soon, possibly today.

And I know that at least one fulfilment company is now laying off staff in the Channel Islands in anticipation of the move.

It’s game over for another Channel Ilsands’ abuse and another win for tax campaigners.

Now when will the Channel Islands realise it is time to rebuild their economies on the basis of something more solid than tax abuse?

 Posted by Richard Murphy at 8:50 am

Channel Islands’ VAT abuse: the end is nigh

 Guernsey, Jersey, VAT  13 Responses »
Oct 122011
 

From Channel Online, yesterday:

Channel Television can reveal that Jersey’s fulfillment industry have been warned that Low Value Consignment Relief could be reduced or even scrapped.

LVCR is a tax loophole by which UK consumers can buy goods from the islands and not pay VAT.

We have learnt that at a private meeting, Jersey’s Economic Development Minister warned the island’s companies to prepare for the worst.

And so another campaign against Crown Dependency tax abuse looks to be heading for a successful close.

I’ve begun to forget the scopre now, except I know they’ve got zero.

And yes, I know this one is not over yet. I just emphasis the ‘yet’.

After all, if you were a Chancellor looking at £200 million extra a year right now would you turn it down? Not even George Osborne could do that. Surely?

 Posted by Richard Murphy at 8:07 am

London is the consolidated #1 secrecy jurisdiction in the world

 Cayman, City of London, Financial Secrecy Index, Guernsey, HMRC, Isle of Man, Jersey, Secrecy jurisdictions, Tax Havens, Tax Justice Network, Uncategorized  11 Responses »
Oct 042011
 

London features heavily in the Tax Justice Network’s new Financial Secrecy Index. Whilst the UK comes in at number 13 places for which the UK is wholly responsible also feature prominently on the Index. The overall scores for London and its satellite offices are:

RANK Secrecy Jurisdiction FSI – Value Secrecy Score Global Scale Weight
2 Cayman Islands 1646.7 77 0.046
7 Jersey 750.1 78 0.004
11 British Virgin Islands 617.9 81 0.002
12 Bermuda 539.9 85 0.001
13 United Kingdom 516.5 45 0.200
21 Guernsey 402.3 65 0.003
36 Isle of Man 230.4 65 0.001
38 Turks & Caicos Islands 218.9 90 0.000
43 Gibraltar 174.6 78 0.000
65 Anguilla 36.0 79 0.000

Pu that lot together – and that’s the fair treatment of them since ministers in the UK and these places always say their value is as conduits to the City – and London is number 1 secrecy jurisdiction in the world.

But the Treasury denies it of course. As the Guardian notes:

The UK, with the City of London and a network of overseas tax haven territories and dependencies including Jersey, Bermuda, the British Virgin Islands and the Caymans, also features prominently in the index’s dirty dozen of top offenders.

The UK Treasury said it did not recognise the picture presented in the index, adding that the UK government had demonstrated a clear commitment to tackling all forms of tax avoidance and evasion.

And as it added:

A spokesman for the Treasury defended the UK record on tax havens, saying: “At the budget this year we published Tackling Tax Avoidance, on tackling avoidance at the root. The Global Forum on Tax Transparency set up by the G20 in 2009 now has over 100 participating jurisdictions and over 600 bilateral tax information exchange agreements have been signed. The world has changed over the past three years and continues to do so, and the government is committed to keep up momentum.”

Respectfully, that’s nonsense. The document in question is a weak re-hash of what was already being done: the one thing it actually made clear was that nothing had changed at all. And much of secrecy jurisdiction activity is evasion anyway.

As for those bilateral tax information exchange agreements: as the Guardian TJN notes saying:

The problem with many of the new tax information agreements, according to TJN, is that they have taken the weakest form possible, in effect requiring tax authorities to know what they are looking for before they ask for information, rather than requiring full disclosure.

Precisely so. And that’s a choice on the part of the UK and others: a smokescreen to hide what’s really happening – as the Treasury and tax authorities  well know.

Indeed, as Dave Hartnett once said to me, he thought he had to sign the deal he did with Liechtenstein because the a standard OECD style tax information exchange agreement would never have produced any data at all, and on this occasion he was right – which is exactly why the Treasury know that what they’re saying is wrong and deliberately wrong.

So for those looking to tackle tax havens in the UK the problem is near at hand – and focused in London EC3.

 Posted by Richard Murphy at 8:55 am
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