Accountancy Age has reported the response of Gibraltar's Chief Minister to last year's National Audit Office report. I am amused that it has taken him six months to notice its existence, but am much less amused by his comments. He said:
There's no lack of capacity either for receiving [or investigating] reports. There's no shortage of investigative resource or inclination to investigate.
Worse though Peter Caruana argued that the balance of suspicious activity reports to convictions, which had prompted the concerns, was 'entirely logical'. He said
Places like Gibraltar are in receipt of enquiries, but the essence of the transaction is unlikely to be in Gibraltar. It's reasonable that there's an imbalance of reports against prosecutions.
This means one or two things. Either Peter Caruana has no understanding of the offshore world or he is dissembling in the hope that those to whom he speaks to not understand how places like Gibraltar work.
Offshore is defined in financial terms not by geography but by the fact that the transactions undertaken in the offshore arena are always between parties who are not resident in the place where the transaction is recorded. The comment he makes is, therefore, a truism. Of course it is unlikely that the transactions that are recorded as taking place in Gibraltar did not occur there. That follows from it being a tax haven that hosts an OFC.
The vital point is though that this does not exonerate Gibraltar in any way. It still has an absolute duty to ensure that money laundering is not taking place in the transactions that are recorded in that place. By definition tax evasion anywhere is money laundering. That means that whenever a transaction takes place in Gibraltar where any reasonable person might have suspicion that a party to what is occurring might be evading tax, whether or not that evasion takes place in Gibraltar or somewhere else, they should always report that transaction under the money laundering regulations of that place. This would, for example, be the case if any bank were told by its clients that they did not wish details of their interest earned to be reported to their home state under the terms of the EU savings tax directive. I believe it would be impossible for any bank to avoid suspicion that their client was evading tax in this circumstance. I stress, they do not need to prove that the client is evading tax, they need only have suspicion to require that they report. Despite this we know that no bank has reported these transactions.
Put simply, the Chief Minister's comments are not just not credible, they are incredible. They are an attempt to excuse fraud. That is unacceptable.
The NAO study was right: Gibraltar is neglecting its duty and so long as people like Peter Caruana remain in office it looks like this will remain the case. That's why it is the UK's responsibility to book places like Gibraltar out of the financial services business for good.
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What right do you or anyone else have to demand that Gibraltar be booted out of financial services?
You do know that Gibraltar is regulated to EU stantards, and has recieved positive reports from many inspectors including the IMF, OECD and others.
Gibraltar has full exchange of information with other EU countries.
In short, the only person on this ‘offshore’ crusade is YOU.
David
You’re wrong
Gibraltar does not share information under the EU Savings Tax Directive for a start
And if you’re unaware of it, I’m far from alone. Oxfam, Christian Aid, Action Aid and others are all in this game.
So too is Barack Obama
You’re a little out of touch down on the Rock
Richard
Actually Richard, you are wrong.
Gibraltar DOES share information under the EU Savings Tax Directive with all other member states of the EU – as is required.
Where I think you might be confused is how this applies at present directly between Gibraltar and the UK.
The problem is that the UK & Gibraltar TOGETHER are the one EU member state!
Now as a member state, the requirements apply to both of them with other member states – but NOT between them! (It would not apply between the UK and Gib!)
As a result of this bilateral agreements were reached whereby the same provisions will be introduced between them. However as a transitional measure – for a short fixed period of time – a with holding tax arrangement will apply between them.
This was deemed an appropriate and acceptable transition measure by both the UK and Gibraltar governments as Gibraltar’s main competitors in the Financial Services sector are the IoM and Channel Islands. As these places are outside the EU, the savings tax directive does NOT apply to them in the same way as EU countries (inc. Gib). So these other places have a withholding tax arrangement instead.
However, with regard to other member states, it does apply NATURALLY. Once the transition period is over then the same provisions as under the directive will apply also between the UK and Gibraltar as bilaterally agreed between them.
By the way, I was NOT suggesting that you were alone in a general anti-off-shore crusade.
What I was suggesting was that you were determined to attach that label, knowing it to be a negative label, to Gibraltar.
It is very hard to think of any criteria where the term off-shore – in its established meaning – could be said to apply to Gibraltar now adays.
Since labels such as that do have baggage, and what is more, are used to convey information we must be careful to ensure places are not being mislabelled in the world of today.
I maintain that it is self evident from your style of writing that you have an agenda against Gibraltar and have great reluctance to actually examine the facts.
David
That’s absurd.
First of all I have nothing against Gibraltar: I have a lot against all tax havens, the UK included.
Second, Gibraltar is a tax haven@ it still has IBCs and is replacing them with a deliberately low tax regime. This is aimed at a non-resident market. It provides considerable secrecy around their use (although, I concede, not as much as some).
That means it is by any reasonable definition an offshore tax haven.
It’s just plain denial to say otherwise.
Richard
Richard, I don’t have time to write a full reply right now.
But if I could ask you one quick question first:
Do you oppose competition – in terms of tax regimes? If not, do you not believe that boosts efficiency and is necessary for open markets to actually be open (not simply merged).
Secondly I’m glad you included the UK as a tax haven. [A similar view has been expressed by the OECD of course.]
What I ask you to consider (and keep in mind) is that you are working with understanding of this industry – and of technical definitions.
While an audience that shares your understanding may be your target, even very technical publications are always released into a wider public domain.
To the average person who does not know about this area, the idea that anyone consider large prominent countries as tax havens seems ridiculous.
Returning to Gibraltar. Forget about the IBCs, as you say, they are currently in the process of being phased out. Keep in mind that the lox tax regime is also a huge benefit to local businesses – who face high costs (due to limited room for economy of scale) and increased cross border competition.
The economies of small states ALWAYS work very different from larger ones for these reasons.
Therefore they use their size to their advantage by offering efficiency in both time and cost to compete.
Personally I’m in favour of tax competition. I’m actually in favour of high tax high spend, but I am in favour of tax competition (since ultimately you consider what you get for your taxes as well).
It is just that your use of term that is so misunderstood without explicit definitions and comparisons (against a backdrop where the places is unquestionably moving away from) is not helpful.
i.e. not helpful to true READER UNDERSTANDING for the wider audience, and equally is detrimental to the understanding of the expert reader – as while they might know the technical definitions, their mind can still be influenced by a deeper set uninformed understanding of the meanings of the words.
So, it is not denial. It is a question of potential misrepresentation without qualification of either the terms of the extent and areas where they do not fit.