Ill informed comment on the Tax Haven review

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This is in the Times:

Savers with money in tax havens such as Guernsey and the Isle of Man could be forced to pay tax on their offshore bank accounts to fund a deposit protection scheme.

Industry experts believe that the measure may be announced as part of a government-backed review into offshore financial centres.

Andrew Jupp, head of tax at Tenon, the accountant, said: "I would not be surprised if we saw a tax levy on income from offshore bank accounts as the quid pro quo for granting some level of protection, such as guaranteeing a certain level of cash deposits. The Treasury could try to strike a deal with overseas banks to ensure a certain amount of interest is withheld at source."

Most of the article is remarkably ill informed: so is this comment.

There is a tax withholding scheme in force in these places: it is the EU Savings Tax Directive. As we know, advisers do their utmost to avoid its requirements whilst still expecting investor protection. That is the nature of offshore free-loading, after all.

But this is not enough: a withholding tax is not information exchange, it is not enough to guarantee the deposits (let's be honest, as rates fall even the withholding 35% on 4% gross interest it will be just over 1% - and there are other uses for tax than providing insurance for tax abusers) and no doubt advisers will do their utmost to avoid any such tax anyway.

There's also the little issue that the only reason we don't have universal tax withholding on interest in Europe is that the UK Treasury opposed it when the EU STD was first opposed.

But either way, this is not a viable way to tackle the much deeper systemic issues at play here.