Tomorrow night's Panorama is essential viewing for readers of this blog. Made by John Sweeney it looks at just what happens in tax havens.
During production of the programme I was asked by the BBC to estimate the tax lost to the UK as a result of tax haven activity. I did so. The paper I produced can be found here.
The answer at £18.5 billion is, I suspect, an underestimate, but it's always worth being cautious when it comes to these matters. Even so the loss is staggering: that's £18.5 billion a year lost to the UK Exchequer as a result of the abuse of tax havens by corporations and individuals resident in the UK.
Part is avoidance. A significant amount is evasion.
And of course I'm not na?Øve enough to think that this means all can be recovered. But I'm equally adamant that significant amounts could be.
Either unitary taxation, or perhaps even more directly, country by country reporting could deliver at least £3 billion of benefit to the UK Exchequer as a result of curtailing tax haven abuse.
Much of the tax haven abuse by individuals does, I believe, take place in our Crown Dependencies. This could be eliminated either by our major banks being willing to comply with money laundering rules in those places, meaning that they would report all those who refuse to information exchange with the UK as potential money launderers. That would cripple the evasion activity in those places.
Or those places could join the full EU Savings Tax Directive and exchange information with other EU members. That would have the same effect.
And the UK supporting and imposing the expanded EU STD on them would be even more effective, but I'll tell you: my information suggests the UK is doing all it can to prevent that right now.
And of course, we could abolish the domicile rule which is, in any event, illegal because it discriminates on the basis of national origin contrary to the requirements of the Race Relations Act as amended in 2003. That would raise up to £4 billion.
And we could put our own house in order and create a Financial Transparency Act requiring the full accounts of all UK companies and trusts to be put on public record, with full details of beneficial ownership and management attached. It's not unreasonable to think that small company tax yield could increase by 10% of the corporate tax take as a result - so abused is the UK company register at present.
The list could go on. The important point is this. No one has dared calculate such a number before. I have done so. It is, of course, an estimate. It seeks to measure what is not recorded. That means it is bound to be an estimate. I happen to think it an underestimate. But it gives us an understanding of our loss and a target for our gain.
Isn't that vital if action is to be taken?
Now Alistair, what are you going to do about it?
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You are giving an estamate without any concrete back up. Richard you need to understand that we are sick of paying so much tax with more to come in the UK, so if the grass is greener elsewhere so be it. I have no problem with places like Bermuda, BVI or Cayman. Every place should be allowed to have its own fiscal policy and if the UK wasn’t so greedy in the first place, perhaps the wealthy would not have the need to look elsewhere. The ideas are all wrong here.
Sarah
This is called the social contract. If you are not happy with paying proper taxes in this country you have a choice: go and live somewhere else.
What you want is democracy for a discount price. Go and live in Jersey and see what the accountability of politicians is like for 20% tax.
Sara
Up to a point, I agree with you. I can well believe you are paying so much tax, particularly if you are an ordinary salary earner or small businessperson. Part of the reason for this is that the wealthiest corporations and individuals are paying so little. .
Unfortunately, it is expensive to run a wetern society. People want healthcare. They want their children to be educated. They want law and order. It appears in this country that we want to punch above our weight in international affairs and engage in wars. You can’t get any of this on the chepa. God knows, if it could have been done more cheaply, Thatcher would have managed it.
Whya re you saying that Jersey has a corrupt political system because they pay 20% tax? Why did we get the 10% rate abolished in the UK? Why does our tax payers money go to helping people to settle in the UK? I am one of those that is sick of paying so much tax for little in return.
Sara
I am not saying that
If Jersey could survive with a 20% tax system and supply government services at the same rate as the OECD states that its population demand that requires up to 40% of GDP to be spent on their provision elsewhere then it would be 1) very clever 2) a model worth copying.
But of course it cannot. It does it by stealing profits from elsewhere to tax at low rate
I do not criticise the rate of tax – I criticise the calculation of the tax base – something quite different
Richard
Sarah
I never aid that Jersey was corrupt? I said there is no accountability of the politicians.
What I do not like is your rationale: because you believe that YOU pay too much tax, it is ok to steal. Because evading taxes is stealing. If I am hungry and do not want to pay for beef, I do not steal beef, I eat chicken. If you do not want to pay your taxes in this country, you are free to live somewhere else, you are not free to steal. This is what is so scary about your line of thought when you have no clue what it is like to run a company with 60 million employees.
James, I would like healthcare, and I would like to see my children educated – BUT would much rather that the State kept its meddling fingers out. Unfortunately, because of the taxes they raise I have little choice but to live with the consequences.
Hum.. (strange name?) if you are not happy with paying the taxes equally you have a democratic choice to vote for the other guy. Unfortunately however you still have to pay for the damage the socialists have done – personally I know where I would like to stick their social contract…
Alastair
The market cannot provide universal health care. Look at the US
There is no state where the market provides anything approximating to the standard of universal education supplied in the UK
In that case your argument does not make sense unless it is interpreted as meaning “I want these things for me and my own but not for others.”
1) I object to your indifference to the needs of others
2) You would be much worse of if that were to happen as you utterly depend for your economic well being on these facilities being available to others.
In that case your comment is both selfish and economically ill-founded
Richard
I just think it would be best if the UK Government controlled its spending. VAT is due to be raised and a 50p in the Pound tax rate has been rumored. Rather then lash out at other places all the time why can’t they use the tax they already get and sepnd it properly? Okay if they are losing revenue that is fair enough, but how much more tax do they need to improve things? Our council tax bills have gone through the roof over the past 10 years and I am fed up with it all. Maybe the only way to beat offshore tax policy is to offer the same services onshore? That would throw a spanner in the works.
Richard, do you find that you often have to resort to personal insult? Usually thats an indication that your arguments have no merit!
You seem to be suggesting that the only way of providing education and healthcare is via government. Frankly I think this is absurd. But there are two much better question to ask. 1) whether it really requires more than 40% of our GDP to supply the basic neccessities of life to our population, and 2) show me an example of a socialist government that actually works.
Alastair
It’s very hard to treat a person who argues that spending 40% of GDP makes a government socialist
The Tories did that too
Are they socialists?
If this is the level of your argument do you really expect me to take you seriously?
Richard
“Because evading taxes is stealing.”
No, Hum, it might be against the law to evade your taxes but it is not stealing. Imposing taxation is actually legalised theft. You have it the wrong way round.
Clarke
Do you honestly think anyone believes that?
If you argue that a property right established in law is not legal then you do, by default and necessarily, argue that no property right can be established in law
Welcome to the law of the jungle
Is that what you really believe?
If so, you’re right out on your own
Richard
Richard why do you want us all to pay more and more tax? Is the Tax Justice Network an Inland Revenue related group? In fact it has to be. You speak to anybody and ask them whether they would like to do some tax planning they will be all ears. I think Clarke has a point. If you cannot afford to payy UK tax you go to prison and we can blame the Romans for taxes like VAT. I am actually starting to support places that have lower taxes, because the UK Government taxes far too much and it forces the wealthy to look elsewhere.
I watched the programme and if there is a Ten Million award for the Liechtenstien whistle blower’s head then it speaks volumes. I thought John Christensen came across a bit foolishly about Jersey though. He said the Island is not transparent and then the get a HM Treasury spokesman saying Jersey is helpful. Thats a gaff. I was surpised Guernsye wasn’t pulled in though. But if it it also true that the Granite companies were not set up to avoid tax then thats a double gaff by the anti-offshore brigade. ❓
Matt
1) Agreed re $10 million
2) John was right – Jersey does not transfer information – just 4 pieces in a year the the US. What Stephen Timms was saying is 4 is better than none. But he said there was some way to go. A massive understatement
3) Granite was regulatory abuse behind a veil of secrecy – which is what we say these places are really about – and it was massively destructive. That’s not a gaff. We never said it was a tax scheme ever
Richard
Richard
You must have been very disappointed indeed with the final programme which was broadcast tonight. Even I was after you had built it up so much !
Let’s see- Liechtenstein came out of it exactly as expected (rampant tax evasion which we all know about and the royal family executive certainly didn’t help their cause).
Cayman’s 18,000 companies at Ugland House we all know about (old new) and we all knew Obama’s views on that. Even Cayman knows that it has a massive problem there with its huge number of brass plate companies. So nothing new there.
Jersey – apart from the amusing interview with the Dalek (Terry Le Soeur) talking about Granite, a company which the UK regulators always knew about, nothing new at all apart from John Christensen saying nothing that anyone who knows his history new he would say.
Stephen Timms making it very clear that they get what bank information they seek and require from both Jersey and Guernsey and that Jersey had signed a TIEA which they seem happy about. He also made it clear that they are unhappy with some jurisdictions – he named Liechtenstein – and of course he will be unhappy about places like Liechtenstein – but he made no mention of being unhappy with the Crown Dependencies. He made reference to the OECD seeking changes re. tax evasion which nobody is likely to argue with.
All very bland and tame. Hardly hard-hitting – rather like the Guardian this morning. No mention of the UK clearing banks and your big STR point – why was that ? Are you going to suggest that HM Treasury vetoed it being broadcast ?
Interestingly all about blatant tax evasion which even ardent supporters of proper, well-regulated offshore finance centres like me would like to see knocked firmly on the head. Nothing at all about legitimate tax planning and lawful tax avoidance. Seems that the BBC know the difference and respect the difference.
Clarke
“imposing taxation is actually legalised theft”?
Congratulations, that statement puts you in the 3% of the population which are considered as extreme right within the Anglo-Saxon world.
I recall John saying the Island was totally non-transparent and the treasury spokesman did not look that concerned about Jersey. Certainly concerned about Liechtenstein though. I also think the majority blame the down fall of Northern Rock on the UK Government. It was their delay in re-assurance that caused the panic transfers. Something I hear is also happening in Ireland now and their banks. Again not tax related.
Richard. Firstly I said “more than 40%”. And secondly the two questions are not related. And I am intruged – “very hard to treat a person…….” what?
Alastair
Now I see: 2% on GDP makes you socialist
Come on!
Richard
Matt
As I said on Radio Jersey this morning, of course Stephen Timms has to welcome the TIEA with Jersey and 4 pieces of information a year is better than none, but it remains for all practical purposes none.
Timms knows that.
The EU knows that
The EU knows – and is happy enough to say – that Jersey helps people evade tax
And Timms said Jersey has some way to go
Diplomatically that is a clear message – get your act together, or else
I’m delighted
And I would not have included Northern Rock, I’ll be honest, even though I broke the story – it was not a tax issue and the regulatory abuse involved was too complex for television
Richard
Hum..
Clarke feels in good company here – the 3% includes most tax haven practitioners and many commentators on this site
That leaves 97% of us who know this is an issue to be dealt with
Richard
Rupert
Just think BBC lawyers
I know, John Sweeney knows, the whole production team knows that Jersey facilitates tax evasion
Its attitude to the EU STD proves that – its non-cooperation can only be designed to facilitate evasion, and nothing else
The BBC’s lawyers have problems with Panorama saying that
I don’t
But I’ll tell you – I’m pleased – and the reaction of some people in Jersey this morning tells me it hit home
Richard
Richard, why be so blinkered? 40% of UK GDP is a big number, but is it the right magnitude on which to govern our economy? I’m sure you have a view
Alastair
It seems reasonable people the world over rather like, and choose, the level of services this proportion of GDP provides through the public sector, and vote for it, opting to pay tax in exchange.
They include Tories, Lib Dems and Labour supporters, nationalists of various sorts and more, and their like in many other states.
Now tell me, why do they do that?
And tell me why, when they look for a viable alternative serious people given the task of doing so always seem to fail, whatever their belief before being appointed to find the so called ‘waste’ in the system?
No: the problem is not mine. You say why it’s wrong.
And please say also why 97% of the sorld is socisalist in your view as a result
Richard
Richard
I failed to record the programme so can’t double check it, but I don’t recall Timms saying that Jersey has some way to go. I recall him saying some places had some way to go and then he mentioned Liechtenstein.
Why do you think the BBC’s lawyers declined to say what you wanted them to say ? Usually such caution is only shown due to the risk of being sued. They would only get sued if it wasn’t true. There are many of us who know that your allegations are not true, or to the extent that they may be, know that your figures are grossly over-stated. There are also those of us who know that the islands do next to no US business and that could explain just 4 reports under the Jersey/US TIEA. Seems like the BBC’s lawyers also recognised this.
I struggle to work out just why anybody in Jersey will this morning have been concerned about last night’s programme, other than the usual tiny band of people who support John Christensen’s views. It was too bland to be concerned about.
I thought the filming of a the presenter approaching Jersey with a suitcase in a wet suit was incredibly cheesy. In fact it made a mochery of the whole prosection case. Try walking into a Jersey bank with a suitcase of money and see how far you get in doing business. No, these programmes need to get their factual accuracy right before producing such nonsence. Rupert is right about John Christensen, he has been doing the same inaccurate finger pointing for years. This is probably why it all boils down to the Jersey Authorities ignoring him and the organisation he represents.
Richard, thank you for at least partially answering one of the questions. On your other point I have no idea how much of the world is socialist, although the questions was not how much, but rather how much actually works.
The point of the 40% question was to make a simple point. You are right that it is for democratic processes to decide (although I would suggest such a number is rarely explicit – mostly it is “more” or “less” that is offerred). But surely if a country decides on 20% that is their decision to make. Bandying about phrases like “tax haven” misses the point.
Alastair
I will be quite candid with you: we know that a pure socialist states does not work and I probably wanted one no more than you do. I am not a statist. I am a social democrat: I believe that we get the best results when we mix regulated markets and the state, each providing, as far as possible what they are best at.
I happen to think that the state is best at providing universal health care and education and can see no market alternative to it.
I look at the state of health care in the USA and wants to cry: how can a civilised society allows so many of its children to go without?
Candidly, choosing 20% is absurd: almost all countries that have a state sector of 20% or less are in the developing countries of the world, and they do not generate the wealth that we like to enjoy. We would have that level of well if that was the size of our state sector.
You are completely missing the point. 20% tax in a place like Jersey does not mean that they have a 20% state sector. They have services in Jersey which are equivalent to those within any OECD states and there would be rioting in the streets of St Helier if those services were withdrawn. They did this by attracting vast quantities of corporate profits to Jersey which they then taxed: 50% of all its state income came from corporation tax before 2008 – probably the highest ratio in the world, albeit that I suspect that almost none of those profits were actually earned there.
So this is not a question of low tax and low services. This is a question of high services based upon stolen profits – stolen from you and me.
These questions too simply and as a result you get the wrong answer – that is so often the point I’m trying to make to you.
Please do look at the facts. Please do try to understand the accounts of places like the States of Jersey. Please do put these issues in their context. Then we can have a more meaningful debate.
I am happy to have that, But I would rather do so on the basis of the facts instead of therhetorical abuse which is what I receive from so many on the right wing, and which really does not help.
Richard
Voice dictated – excuse any errors
I was speaking to a banker in Jersey and according to him the Inland Revenue gets income from Jersey that would not be obtainable if Jersey were not an offshore finance centre. The Island is a middle link for investment f coming in or monies from outside of the EU.
Richard — Hum and yourself (and probably others) appear to have some muddled thinking on this issue.
First of all you say that “If you argue that a property right established in law is not legal then you do, by default and necessarily, argue that no property right can be established in law” — I have never said that “a property right established in law is not legal”. What I do say is that the fact that it is legal does not necessarily make it moral. Legality and morality are two different things — the first is, at least in principle, an objective matter of what the law is or isn’t; the second is entirely subjective, morals being a “moveable feast” not only at the level of societies but also at the level of the individual. On this basis the right to private property is established in most societies not as a moral right but as a matter of pragmatism — societies with such rights work far, far better than those without them (probably because such rights are much more in keeping with human nature). So, the primacy of private property is a matter of pragmatic organization of society, not a matter of moral view (although if you believe in the absolute primacy of private property you will easily regard it as moral).
Theft is defined much as follows — “the taking away from someone without their consent of that which is rightfully theirs (under the laws of private property) with the intention of permanently depriving them of its use and enjoyment”. This applies perfectly to taxation. If something is yours and someone else simply takes it away from you then, if you hold to the paradigm of private property as an ultimate right, taxation is a wrong and is therefore immoral. I do not deny that taxation is necessary. If you wish to argue that taxation is moral then you must have a completely different world view which denies an absolute right to private property and which holds that all property is for the common weal unless and to the extent that it may be allowed to be enjoyed by individuals as private property. Certainly you can then argue that taxation is not only a matter of law but is also moral because society is only taking what rightfully belongs to it. This is why I have said that I believe that you are, at heart, a Marxist (no abuse intended).
The practical conclusion from the above is that you should not argue on the basis that avoiding (or even evading) taxation is a moral wrong. Rather, avoidance is legal and evasion is illegal — full stop. Therefore, it is morally perfectly acceptable for someone to seek to avoid taxation, as well as legal. Evasion is equally not immoral, but is illegal. And that’s the difference — it’s all a matter of obeying the law, not a matter of morality.
Incidentally, Hum, where did you get your 3% from — your imagination or what?
I just watched the Panorama (which has been dismissed by Jersey news today as nonsence) and I agree that John Christensen looks stupid on this when he says quote ‘Jersey in not transparent’ and then the UK Treasury say otherwise. Is the TJN and JC just after Jersey no matter what? I have read a lot of his letters and write ups on his speeches, and I seriously believe the critics now in thinking that he has a chip on his shoulder about Jersey and its become obsessive. I think if the TJN are seriously looking for more support they must begin in getting some of their facts right first. Check out Channel Online tonight, Jersey Finance Limited have certainly shrugged off last night’s programme.
Richard, do you never wake up and think to yourself:
“If my government were not pursuing an illegal war in Irag, and if it were not obsessed with putting 1 million (general election victory margin) of its own voters into glorified non-jobs, then maybe, just maybe, the UK taxpayer could be taxed a fair amount (20%) and the offshore tax avoidance industry would die a natural death?”
It is good to see the record is starting to be put straight once and for all on this matter. I work in Jersey finance and Panorama was just a one sided, out dated opinion of what goes on in Jersey. I also question the reasons for us actually paying the BBC License fee in they cannot even accurately report on the Channel Islands anymore. I think it is time for John Christensen to perhaps return to the shop floor in Jersey for a few months because his knowledge of our industry is now outdated and his comments actually amount to lies. Panorama over all, made the TJN look out of step with the truth and this was backed up by the UK treasury. Jersey finance and many other leading finance people have torn its allegations to shreds over the past 48 hours and rightly so.
Dear Richard
Just to correct some of your correspondents, Stephen Timms made it clear that Jersey has made some progress with cooperation with the UK government, but further progress is required.
But what about cooperation with other countries? How many TIEAs has Jersey negotiated with non-OECD countries, i.e. the developing countries that are most adversely affected by tax evasion? Why, for example, did the Jersey authorities chose to ignore a request from the Chilean government to negotiate a TIEA?
How many exchanges of information were actually implemented in 2007 and 2008? We know that the number of requests for information exchange is very small indeed, which is largely due to the nature of the TIEAs that Jersey negotiates, based on the OECD “by request” model. This model is far too timid and has virtually no deterrent effect since the burden of providing evidence is stacked against the requesting nation. In other words the TIEAs that Jersey has negotiated are to all intents and purposes, virtually useless in preventing tax evasion.
Why did Jersey opt out of the European Unions Savings Tax Directive automatic information exchange process? The latter in particular demonstrates that Jersey has engaged in window dressing rather than serious efforts to curb tax evasion.
Why aren’t the details of beneficial ownership of Jersey registered businesses publicly available?
Why is there no information whatsoever available about trusts?
Until we can see clear progress on all of the above, and in particular on acceptance by the Jersey authorities to fully engage in automatic information exchange with all countries, OECD and non-OECD, we will continue to treat Jersey as a tax haven that engages in facilitating criminal activity.
best wishes
John Christensen
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The transparency argument is an interesting diversion. I suppose you could argue the UK government is transparent, but given that that is mostly because it has a habit of leaving data around for all and sundry to look it, you could argue this is more by accident by design.
But as a serious point, transparency implies the government is publishing information about individuals. Surely this is a bad thing – not a good thing.
Richard, not sure I understand what you mean by “stolen profits”, but I suspect you are starting from a position of how you think corporate tax should work, rather than how the law says it should work. It is easy to attack Jersey, but I guess you would acknowledge that Jersey does not set UK tax laws?
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