Last Thursday was the day of the G20. I suggested we made a step forward — but it was the first of a long journey.
I also challenged Gordon Brown to say if he saw the measures announced as the end of the end of the attack on tax havens or the beginning of the end of tax havens. In the process I asked him to confirm that tax avoidance as well as evasion would be addressed and to confirm developing countries would benefit from change.
He sought to assure me on all points, and Downing Street sought to convince me by sharing a letter he had written to the OECD with me demanding such changes.
All of that was very good news. But today, just a week later he has taken the whole process much, much further. Both John Christensen of the Tax Justice Network and I have been supplied with letters sent by Downing Street today to the Crown Dependencies and the British Overseas Territories.
The letters are quite extraordinary. In diplomatic terms they are incrtedibly blunt. I do not have time to detail all the issues now — and anyway John Christensen has already done so on the TJN blog as I have been committed elsewhere all day. I strongly suggest you refer to his blog where you will find links to the letters in question.
Let’s be clear what these letters say. That to the Crown Dependencies says in diplomatic language that:
- The crowing about complying with international standards when just 12 TIEAs have been signed is nonsense. The UK expects many, many more to be signed. They also expect information to be exchanged. The point we have made, time and again, that Jersey has supplied just five pieces of data to the USA in 8 years has been well and truly noted.
- They are saying that even this is just the start of the process. Evasion has to be eliminated. More than that — these places have to rid themselves of their role in tax avoidance.
- What is made clear that the Foot Commission will look at these issues, and means business. I understand it will be building scenarios for a post tax haven existence for these places on the basis that the trade they now undertake is unacceptable and unlikely to survive.
- There’s also clear indication given that if progress is not made the matter will go back to the OECD and sanctions will follow. As I suggested — this is not a static process this time — the standards required will go up over time.
The letter to the Overseas Territories is even more blunt. They have until September to get to the standard the Crown Dependencies have reached now (which by implication requires the Crown Dependencies to be way beyond there by then). If they fail sanctions will follow. And they too have to prepare for the elimination of avoidance as well as evasion. For them the changes required are beyond their capacity to imagine right now, I suspect.
Some, I know, thought I was wrong to trust Gordon Brown a week ago. I took the risk to do so then — believing I had judged him correctly on this issue. I did. I’m glad I did.
There is time for Gordon Brown to deliver on this policy. Time for him to gain from this policy too — not least because it is so clear George Osborne is completely ducking it because he so obviously believes in tax abuse.
But let’s look at it more widely than that. Last week saw a step taken to eliminate the abuse that tax havens create in the world, with a hint afterwards of more to follow.
Today saw a massive leap forward. The UK is telling its havens that the days of evasion and avoidance through them are over — and I have good reason for thinking trusts will be at the forefront of attention. This announcement can best be seen as giving them notice of closure. They cannot and will not survive the planned process of change — it will ensure they have nothing left to offer, and the UK government knows that.
And this means Switzerland too is on notice — it too has limited time to comply or it will also suffer the sanction fate that will be immensely damaging to it.
But even that is not the end of the conclusion we can draw from these letters. They effectively give notice to the financial services community to quit these places and stop the abuse they have perpetrated from them. Put it another way; the UK government has bought the argument I, the Tax Justice Network and many NGOs have put to them that the activities of those financial services communities (mainly staffed by British expats) undermine democracy, facilitate the handling of stolen property, massively undermine development, destroy the effectiveness of regulation and prevent any prospect of the building of a sound new financial order.
So notice has been given. The party is ending soon.
Expect governments around the world to join in.
Full credit to Gordon Brown though for taking the lead. It’s a day he can be proud of. And remember that this is a blog that has not always, and not by a long way, sung his praises. I am right now.
It’s a very good day.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Hi Richard
I have just recently began following your blog. One thing I don’t quite understand, I have seen trusts singled out for a couple of mentions (also at the TJN blog). Is there something about them that is a particular problem? Is it only the secrecy issue (i.e. identity of the beenficiary) or is it something else?
On an unrelated note, I do think you are being unduly optimistic. Perhaps this is the start of very real change in the world, but time will tell.
The real test will be what the situation is a few years from now when/if the world economy has returned to prosperity.
I see the letter wasn’t sent to Guernsey’s Chief Minister. Is this something else he’s going to gloat about? He’s good at gloating.
Richard
Are you of the view that this is effectively a demand that Jersey, Guernsey and the Isle of Man give up the withholding tax option under the EUSTD, so that the TIEAs have more effect ?
Really pleased for you Richard! And for all taxpayers everywhere. Well done.
Arnald it would be very surprising if the same letter has not also been sent to Jersey and the Isle of Man. There would be no logic to singling out Jersey except perhaps that Jersey only signed the UK TIEA at great duress and at the 11th hour.
Richard you have still not been able to answer my question on another thread about how many TIEA requests from the US to Jersey have been declined. 5 exchanges may well be a 100% success rate. Once you focus on the low number of exchanges with the US as though there is something sinister about it, and once again I remind you that of course the figure is very low because Jersey barely does any US-connected business. You seem determined to use this point as the cornerstone of your attack on TIEAs but cannot get it into your head that there is a very good reason why the figure is only slightly higher than the number of exchanges which would apply to TIEAs with Greenland and the Faroes ! Why do you think the US authorities have stayed publicly that they are very happy with the co-operation that they get from Jersey ? Doesn’t sound like they feel frustrated with the TIEA process, so just how many requests have actually been turned down ? I repeat that your contacts in Washington must surely be able to provide you with this figure so that your continued use of this point becomes credible. You have so far avoided providing this answer and I suspect that we all know the reason why.
Rupert
I readily admit I am getting bored by the repetitiveness of your question which I have answered many times over – and which I guarantee you will not get on here again.
The answer may only be 5.
The explanation has nothing to do with what you would wish to suggest – as everyone who is not quite as blind as you choose to be (I stress the choose – those who condone abuse do so by choice) knows that TIEAs are almost impossible to use because the standard of proof required to raise a request means the US would have needed to know the answer to the questions they raised before submitting the request for data.
TIEAs are 2001 regulation. We know 2001 regulation does not work.
We happenn to know Jesey has boasted it could refuse any request received as well – and did so publicly onm the Jesey Finance website until attention was drawn to the boast.
So the point is not whether or not 6 , 600 or 6,000 requests resulted in 5 peices of data sent – and I suspect it was few more than 5 – the issue remains that TIEAs were designed with tax havens in 2001 and the OECD was daft enough to allow regulation that basically was always bound not to deliver – as the Jersey USA TIEA proves.
And please understand we pick on this example because we have data, and it has been around a long time. I highlight a systemic failure by doing so – not just a particular one.
This is the last time I make these points which are quite simply indisputable.
And please note – unless you now engage with the debate about how Jersey et al considerably raiser their standards anything you post here will be deleted henceforth as I have no more time to waste with apologists like you when you have lost the argument.
Richard
[…] I have noted, these letters are […]
[…] I have noted, these letters are […]
One can only hope that the UK moves quickly to sort out its own money laundering and tax evasion issues as quickly as it is expecting others to do. The Economist recently had an article about global research conducted by an Australian academic on banking secrecy and shell companies amongst other things. This identified that the UK accounting and finance sectors had amongst the worst practices in the world. Hopefully Richard and Gordon will be focusing their energies on this? Interestingly a number of the States in the USA also came out as particularly unethical in their financial practices. Do I smell a whiff of hypocrisy (or is it a stench?). Some key omments from The Economist article:
“MONEY launderers are moved by greed, unlike Jason Sharman, a political scientist at Australia’s Griffith University. Yet with a budget of $10,000 and little more than Google (and the ads at the back of this paper), he showed how easy it was to circumvent prohibitions on banking secrecy, forming anonymous shell companies and secret bank accounts across the world. … The most egregious examples of banking secrecy, money laundering and tax fraud are found not in remote alpine valleys or on sunny tropical isles but in the backyards of the world’s biggest economies.
America is not the only rich nation Mr Sharman tested. He tried to open anonymous shell companies and bank accounts 45 times across the world. These were successful in 17 cases, of which 13 were in OECD countries. One example was Britain, where in 45 minutes on the internet he formed a company without providing identification, was issued with bearer shares (which have been almost universally outlawed because they confer completely anonymous ownership) as well as nominee directors and a secretary. All was achieved at a cost of £515.95 ($753). “In practice OECD countries have much laxer regulation on shell corporations than classic tax havens,” Mr Sharman concludes. “And the US is the worst on this score, worse than Liechtenstein and worse than Somalia.”
Richard,
Compare tax information exchange with interpol.
Information on tax evasion should be shared by govts in a similar manner as they exchange information on criminals by means of interpol.
It looks like the policy makers and business men are not prepared for the information age and are trying to postpone it.
But information age will surely lead to automatic exchange of tax information, that works more like interpol.
Dear Paul,
I am not astonished with your report. As Richard mentioned on his article titled : What next for tax havens?( April 9th,2009), the big 4 really understand what they are doing. Is there somebody there to make comment on this findings?
I know Jason
I helped his research
He is right
We do need reform in the UK too – as I say often
And in Delaware
And the Big 4 will seek to block it – they always do
“the UK government has bought the argument I, the Tax Justice Network and many NGOs have put to them that the activities of those financial services communities (mainly staffed by British expats) undermine democracy, facilitate the handling of stolen property, massively undermine development, destroy the effectiveness of regulation and prevent any … Read Moreprospect of the building of a sound new financial order.” !!!???
What undermines democracy is the present monetary system where more and more of our taxes are used to pay interests on the public debt and less tax return to the society as a whole!!! People are getting increasingly tired to “serve” government instead of being “served” by their government or…. public servants! This is what wil prevail at the end!!
I appreciate the comments and feedback – many thanks. I wonder if the real underlying issue for the UK Government (as opposed to the OECD) is having different tax regimes within the British Isles? Would the UK like to create a ‘level playing field’ on tax in the British Isles? If this is what they are trying to do (and I hope that it is not) it would run counter to their strong opposition to German moves to have unified taxes throughout the EU. It would also be a strange policy to ask independent legislatures (some of whom by law must balance their budgetary books) to raise taxes at a level that reflects the UK Government’s spending plans, not their own.
Richard was interested to know your contacts with Jason Sharman and your involvement in his research. Worrying stuff when the Big Boys choose to operate to lower standards than they are perhaps preaching for others?
That’s one of the things the Egmont Group does. Currently 107 countries run FIUs which provide data, SARs, exchange information etc. So governments are exchanging information but who knows what they are acting on or if they have the manpower to deal with the reports. I did hear or read something fairly recently that alot of these government agencies are under-resourced and are only able to concentrate on crimes over a certain amount. SOCA in particular seem are losing staff and direction.
If you look at SOCA’s website you’ll see they collect information (for further action) re money laundering, countering financing of terrorism, tax evasion/ fraud and many other crimes. So the will and the legislation is there but I doubt they are in much of a fit state to look at or chase it all.
Paul
In admin terms different tax systems would be a nightmare and an opportunity for abuse
I have known Jason for five years – we discussed his research when it began and during it
I share his concerns. I would like substantial reform in the UK
Richard