The Jersey Evening Post reports:
THE cost of going to doctors and dentists is now so high that more than half of Islanders are not having routine health checks, says a major new study.
It costs £32 to see a GP in Jersey.
The shape of things to come under the Tories in the UK?
I suspect so.
I welcome UK bonus tax escapees, says minister » Business » This Is Jersey.
RICH City workers fleeing the UK to avoid rising tax rates will be welcomed into Jersey, according to the politician who approves residency applications from wealthy immigrants.
Housing Minister Terry Le Main sees a ‘huge benefit’ to the Island if British financiers, angered by Labour’s new 50% tax rate and one-off 50% levy on all banker bonuses over £25,000, move across the Channel.
But as the print version of the paper (which I’ve got - miracles never cease given it was published at lunchtime) makes clear - there have been just 10 such people arriving in Jersey this year.
So this is just more completely bogus hype for something that is not happening.
FT.com / Personal Finance - IHT avoidance schemes face scrutiny.
As the FT notes:
As part of the new measures to clamp down on tax avoidance, UK residents will also be obliged to tell the British tax authorities when they open certain foreign bank accounts.
The new reporting requirement will apply to UK residents opening accounts in “certain” offshore jurisdictions, with heavy penalties of up to 200 per cent of unpaid tax for those who fail to comply.
Accountants believe the new rule is likely to be applied in tax havens, such as the Channel Islands, a popular financial centre for UK residents.
The Revenue have had enough of cheating in the Channel Islands and Isle of Man. And rightly so. So things are going to get tough for their banks and for their trust companies - because UK residents are going to have to report if they use them.
There’s no excuse now for a bank in these places saying it did not know that a customer was tax evading in the UK: I think they will have to ask in future and make sure declaration is made or not provide services.
But I bet they won’t do that, all the same. And if they don’t it will prove what I’ve always suspected - that they deliberately want tax evaded funds. If they don’t they’ve certainly been very good at getting them none the less.
From yesterday’s Jersey Evening Post:
The States [of Jersey] paved the way for a Jersey internet gambling industry yesterday when Members unanimously approved the establishment of a Gambling Commission.
Following the landmark decision, a debate on e-gaming legislation will be held next year. Such legislation would enable people to tap into a new industry of websites running online gambling services, such as online poker and sports betting sites.
Senator Maclean said that the commission would also be a consultative and advisory body which would have a social responsibility to protect people from gambling addiction.
This really is desperation: Jersey, like most secrecy jurisdictions, knows that online gambling can cause harm. But it’s going to do it anyway.
Which just about sums up the mentality of offshore abuse.
There’s a new report out on the secrecyjurisdictions.com web site. It’s entitled Key Data Report 3: The Share of the Workforce Engaged in Financial Services. The report does exactly what its ttitle says: it looks at the proportion of the workforce working in financial services in each of the secrecy jurisdictions surveyed. As the report notes:
A high proportion of people working in financial services in the overall economic activity of a country is likely to indicate the existence of considerable political influence by the financial services industry on the government of the jurisdiction. It is almost universally true that the more reliant a territory is upon a particular economic activity the more deferential it is likely to be to the demands of that sector. Such influence can undermine democratic decision making processes, can facilitate corruption, in the case of financial services can create a strong orientation towards the needs of those outsides the territory who would not normally be the prime concern of its government, and can be (but we stress, is not always) conducive to a criminogenic environment.
This is especially so as the issue of employment is always emotive and totemic in politics. A financial services provider in many secrecy jurisdictions will only have to claim that new regulation to limit its activity is “business-damaging” and will therefore threaten employment and if that sector is one of the largest in the economy then politicians will take great heed and the more likely it is that appropriate regulation will be rejected.
Alternatively, and as is well known, abusive regulation may be introduced at the behest of the financial services sector if it has influence of this sort. It is well known that Ernst & Young and PricewaterhouseCoopers paid for the creation of limited liability partnership law in Jersey to suit their own purposes and to bring deliberate pressure to bear on the UK. It is also recorded that the Society of Trust and Estate Practitioners has been active in promoting what many consider abusive forms of trust, including the VISTA trust in the British Virgin Islands. When Jersey introduced broadly similar trusts in 2006 the law was passed without discussion by its parliament at the behest of local professional firms.
The problem is at the end of the day, as we note:
[I]f a high proportion of the labour within a jurisdiction works for the financial services industry there is likely to be considerable and increased tension between the conflicting goals and interests that the state must address. In extremis the end result may be an overt dependency of the government on the financial services industry. Political scientists call such a situation “state capture”, when narrow and particular interests impose their will onto the state and society at large.
There is no doubt that this is happening.
So where is the problem most serious?:
This really is a case of ‘the usual suspects’. And a fairly comprehensive list of those likely to be subject to ’state capture’.
There are, of course, places with more employees:
Powerful as the influence of financial services is though inn a place like the UK it will not be as serious as is the impact in places like the Crown Dependencies.
Note that the UK cannot even make the top 20 by proportion of work force.
Which does, however, make it important to note that data was not available for all secrecy jurisdictions for which we sought data. Full details are in the report.
Accounting, Banking, Cayman, Guernsey, Isle of Man, Jersey, Secrecy jurisdictions
GST changes to lure super yachts » Business » This Is Jersey.
Jersey is going bust.
Tax on ordinary people has to rise.
It’s corporate tax laws do not comply with international standards
But don’t fear! The latest news is:
CHANGES have been made to GST (VAT to the rest of the world - ed) rules to encourage more super yachts to berth in the Island.
It has been agreed that yachts owned by non-residents should be allowed to stay in the Island for an extra six months without incurring the three per cent tax.
Until now, yachts owned by non-residents could stay in Jersey ports for up to a year without GST being charged. That time has been extended to 18 months. The new rules also allow the 18-month time period to restart if the yacht leaves Jersey waters for a period of longer than 14 days before returning.
The rule change, which takes immediate effect, should make it easier to attract more super-yachts such as the giant £11 million Tickled Pink.
Tax expert John Shenton said that it was estimated that about ten per cent of the value of a yacht was spent each year in keeping it in a port, so a £10 million yacht would attract spending of about £1 million annually.
So there we have it: pure regulatory abuse to suit the needs of the rich.
And Jersey denies it has been captured for abuse as a tax haven.
That is exactly what it is.
And they’re Tickled Pink about it.
A commentator on this blog has said, initially quoting me, and overall in response to comment by Dave Hartnett:
“Tax compliance is seeking to pay the right amount of tax (but no more) in the right place at the right time where right means that the economic substance of the transactions undertaken coincides with the place and form in which they are reported for taxation purposes”
Where would you say the economic substance takes place in a collective investment fund that is established in Jersey, has a Jersey board of directors, Jersey Administrator and Jersey Custodian, UK based investment advisor and global investors investing in property funds that are themselves mainly established offshore?
This is actually one of the things that drives business offshore. It is not “tax avoidance”: nobody objects if commercial property held in Paris is sold at a profit and the French government levies a property or capital gains tax. And the investors have no problem paying tax on their gains according to their home jurisdiction. But it is the intermediate vehicles that do not want to be subject to additional tax. Because if they are taxed then one of the things that initially led to the investment - the principle of risk spreading - immediately looks less attractive. After all, why buy a 1/10th share in 10 properties through a fund if you will be double taxed rather than simply buy a single property direct?
I think part of the problem is that you do not regard those sort of investments as investment at all, merely speculation. And you may be right. But the flipside of your position is surely that these transactions have no “economic substance”. They are little more than a form of online gambling.
And Dave Harnett might note that fund management is one of the activities most frequently outsourced from offshore, because while offshore can manage admin and custodian, a smaller (though growing) percentage of investment managers are offshore. Mind you, in my experience the real con artists are the onshore investment managers that clog the weekend papers with their adverts aimed solely at fleecing the moderately wealthy but wholly unsophisticated. That’s another story though.
I quote at length: this is a fair question, which is why the response deserves a separate bog.
And let me be unambiguous: as the description makes clear, nothing but a little admin takes place in jersey in the situation described. The investments in this fund are not Jersey based – they will be in markets in London or elsewhere.
The economic decision making of this fund is London based – which is where the investment advisor is located. And that, after all, is the only substantial activity of an investment fund. So its real management is not in jersey at all.
In that case the Jersey directors and custodian are simply hired guns offering, selling a charade in a jurisdiction where the only product of consequence is secrecy, permitted by a legislature that has permitted this to happen, and deliberately so.
I agree, the admin may be done in jersey. So what? Since when did admin provide an indication of the epicentre of control of an enterprise?
So the question to determine is a simple one – is any activity of substance undertaken in jersey – and the answer is clearly not. In that case the claim of Jersey tax residence is clearly unreasonable – the structure is designed to abuse legislation designed to promote abuse even if the consequence is not a sham because the law has been captured to legitimise what would otherwise be a sham.
So why is the structure in Jersey? The commentator says no one minds source based taxation on investment income: this is disingenuous of him (and as he is a senior Jersey lawyer he knows that to be true). The reality is a great deal of investment income suffers little or no source based taxation these days. And he is adamant the fund must pay no tax in Jersey as indeed, it does not. The question must therefore be about the tax due on the fund in the place here the investor is resident.
Let’s be clear: if the investor invested directly in, for example, the UK the tax paid at source in the UK would not change from that paid via the Jersey fund. The cost of saving through the fund would be saved: prima facie the rate of return might rise (and since most investment managers under-perform the market after costs – by definition – the use of fund manager is not a logical defence for incurring the cost). So why the Jersey structure? The only way it can possible add value is in the country of investor residence. And the only way it can add value there is by reason of the income not being declared either due to avoidance (maybe because of roll up, for example) or because of evasion. But no other explanation is possible.
So to go back to Dave Hartnett, he’s right to say:
Few people put their money in Caribbean tax havens because they are looking for excellence in fund management
He could have said the same of Jersey. The reality is – as Hartnett clearly implied – that the sole use of these places is to avoid, and in many, many cases, to evade tax. There is no other use for a Jersey fund – because as the description provided made clear – there is no economic substance to that fund, at all. There is just a charade: a sham provided by secrecy providers in a secrecy jurisdiction. And let’s be clear what they are:
Secrecy jurisdictions are places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain. That regulation is designed to undermine the legislation or regulation of another jurisdiction. To facilitate its use secrecy jurisdictions also create a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so.
That’s what Hartnett is driving at. I think it pretty fair to say he and I are on the same hymn sheet.
Why don’t the profession like that? Because they’re the secrecy providers. And they need to get their acts in order, very, very fast. Because I think the balance of risk in this equation is going to shift much sooner than the profession expects – as I said to the CIOT and ARC the other evening.
There’s a new report out on the secrecyjurisdictions.com web site. It’s entitled Key Data Report 2: Financial Services-to-GDP-ratio
The report looks at the contribution of the financial services sector to the overall economy of each secrecy jurisdiction surveyed. As we note:
A high share of financial services in the overall economic activity of a country is likely to indicate the presence of considerable political influence by the financial services industry on the government of the jurisdiction.
It is almost universally true that the more reliant a territory is upon a particular economic activity the more deferential it is likely to be to the demands of that sector. Such influence can undermine democratic decision making processes, can facilitate corruption, in the case of financial services can create a strong orientation towards the needs of those outsides the territory who would not normally be the prime concern of its government, and can be (but we stress, is not always) conducive to a criminogenic environment.
There was one major problem with the research: so opaque are many of these secrecy jurisdictions that we could not get the data. This is the list of those where we failed to secure reliable data:
Of those where we could get data this is the result:
It’s a considerable indictment of the Crown Dependencies that they are so dependent upon financial services. It is right that the UK has demanded that this change in the Foot report. Their economies are collapsing as the offshore world falls apart under the pressure for reform.
And it is essential that they and other states where this dependency is high get the support they need to break the spiral of abuse of the world’s financial system that they facilitate. The cost to the UK of doing that is going to be high. The benefit will be higher.
As I have shown, the cost of these locations to the UK might be up to £4 billion a year, the indirect cost much higher still. Giving them subsidies to reform makes straightforward economic sense, and means it will be so much easier to pick off those places that remain in the secrecy world.
Economics, Foot Review, Guernsey, Isle of Man, Jersey, Secrecy jurisdictions, Tax Havens
From today’s Jersey Evening Post:
We note your editorial ‘Harder work for the critics’ (JEP, 5 November). We suspect you would include us among the ‘critics of Jersey’, although that is not true; we are critics of the offshore financial services industry wherever it is to be found. The recently published Tax Justice Network Financial Secrecy Index is solid evidence of that.
Jersey scores poorly in the work that underpins that index. It had an opacity score of 87%, which is nothing to boast about.
It is almost impossible to determine any practical information about Jersey companies, their ownership or trading. No data is available on Jersey trusts. 43% of EU resident account holders in Jersey deny their own governments information on their income from Jersey bank accounts, and the Jersey government is currently refusing to change to automatic information exchange to stop the enormous systematic tax evasion that this facilitates.
Jersey promotes the use of protected cell companies, foundations and other arrangements designed to create a veil of secrecy that undermines the effectiveness of markets, assists tax and other fraud, and undermines the tax systems of democratically elected governments.
While Jersey continues to promote such abuse we have an easy time in pointing it out to a world now all too willing to understand that globalised financial markets require transparency and mutual co-operation to curtail illicit financial flows through secrecy jurisdictions such as Jersey. For that reason we won’t be going away.
Richard Murphy
Markus Meinzer
The Tax Justice Network
The UK has now stopped the Isle of Man benefitting from the UK VAT system.
So what’s next for the Crown Dependencies and VAT? It seems very obvious that Low Value Consignment Relief, which is extensively abused in Guernsey and Jersey should be next to go. The saving to the UK will be at least as much, the cost to the islands in question much less.
There seems not reason not to do this now.
