I have been asked by several journalists what sanctions could be taken against tax havens if, as the French and German have proposed, we wish to close these places down. Surely, they have said, this would be very difficult?
I entirely disagree. It would be relatively easy to close down secrecy jurisdictions. First of all, we could change our laws so that any contract written in the secrecy jurisdiction that refused to provide effective information exchange with us (about which I will write in the next day or so) would not be enforceable in our courts. That would completely undermine their banking industry.
Second, we could withhold tax on all payments made to banks in those locations unless they agreed to provide full and open access to free online Information on beneficial ownership of their companies, their management and their trading. It has been accepted that this is legal in EU context.
Third, we could deny tax relief on any payments to any company located in these places. This might be particularly effective in tackling some of the current problems the UK is having to deal with concerning controlled foreign companies. A group could, of course, relocate its activities outside the UK but we would ensure that there was a tax cost to them from doing so.
And we could, of course, extend the EU savings Tax directive and eliminate the withholding tax option.
Some might suggest these look like blunt instruments. I suggest that they are appropriate measures to tackle economic terrorism designed to undermine the effective operation of our economies and our states. In the circumstances they seem remarkably tame. And we really will not be asking for much in exchange if a country wants to avoid their imposition.