An occasional commentator on this blog called Jim for Justice had a letter under the above title in the Manx herald. It said:
The more we learn about the Isle of Man the more we come to discover that it has a financial services industry that is built of smoke & mirrors on quicksand foundations.
The banks & other financial institutions use the IoM as a cheap back street lockup that just take money & pass it on. A UK bank chooses to go off-shore for no other reason than it can operate with lower costs in order to make higher profits. The way the Manx finance houses advertise themselves is all smoke & mirrors designed to give the appearance of offering low risk security coupled with high returns on money placed there. The minute the benefits outweigh the cost these banks leave the island not on the next ferry (that's too slow) but on the next plane.
The simple fact is that once you deposit money in the Isle of Man it ceases to be yours! It becomes the property of the bank. You are nothing more than an unsecured creditor, a liability to the bank because it owes you money. The question of trust does not come into it, so if the bank goes bust you can only fall back on a discredited depositors compensation scheme that will not pay out 'on demand'.
If you have more than £50,000 on deposit you discover that there are secured creditors in front of you in the queue who will take what was once your money before you see a penny of it. Then you also discover that there's also those guys in wigs in front of you, & if the government can take a cut as well, it will. By the time you get to the cashier there's a huge chunk of your money gone!
The banks' information to potential clients is composed of 'smoke & mirror' advertising. The blurb is written to entice you to part with your money in their favour. You are a 'somebody' until you have parted with your money, then you become a 'nobody'. Unless you live on the IoM you are faceless - just a bank account number, a potential source of more money for them to make big money before you get your bit of interest. Then if it all goes wrong - tough! The bank's interest in you vaporizes instantly.
When KSFIOM shut its doors denying depositors access to their savings, did they get a letter of profuse apology from the bank directors explaining what had happened and assuring them that they would be living on bread & water until they had done everything in their power to see that they got your money back? No! Did they take a salary cut? No! Did they claim a bonus? YES! So now KSFIOM depositors have learnt at great personal cost & suffering that the IoM - its finance houses, its government & its failed Financial Supervision Commission - is scheming, deceitful, contemptuous & hypocritical.
There will be a day of reckoning.
Jim for Justice
It seems to me that Jim is remarkably perceptive about the broader impacts of the micro decision depositors in the Isle of Man take.
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Go Jim!! I’d love to see if this gets into the printed media.
“There will be a day of reckoning”….it’s here for the daddy of all “smoke and mirrors” – Bernie Madoff. If there IS any justice in the world (although my experience, to date, with KSFIOM makes me doubt it!)the judge will send a strong message to the world that robbing innocent people of their lifesavings will have serious consequences. I live in hope (and poverty – compliments of the IoM!).
There should be a full public enquiry into the Isle of Man banking fiasco. Ordinary hard working folk have lost their hard earned savings. Depositors entrusted their savings to the IoM. Some of these depositors with KSF actually deposited money with the Derbyshire Building Society who sold them out to Kaupthing Singer and Friedlander bank, so they did not choose to bank with KSf but had it forced upon them. They could not get their money out. The IoM Gov had a financial Supervison commission in place, suposedly supervising this bank, which looks like they have not done their job, do they get sacked for incompetence? No, they get a pay rise instead. While depsoitors struggle to get ANY compensation out of the IoM Government, who by the way assured us they had a 100% guarantee in place for all this money. Where is their guarantee now? 8 months on and still no end in sight. Depositors should be warned about saving monies on the Isle of Man, whether it be in a Building Society or a bank, your money would be safer elswhere. Saving on the IoM seriously damages your health and wealth. The IoM is the only country in the world, that has not backed the depositors of Kaupthing Singer and Friedlander bank when it got into difficulties. And that was while the IoM Gov were supervising it. When the Bradford and Bingley got into difficulty on the Island, the UK Gov stepped in and guaranteed all IoM depositors in full, why hasen’t the IoM Gov done the same?
I will have to disagree with you here, Mr Murphy: whilst there may well be a case to be made against the former directors of KSF (IOM), regulators at the FSC and the operators of the DCS (not to mention the UK government who deliberately collapsed a solvent bank and its offshore subsidiary, and the FSA which assured its IOM counterpart that the UK bank was stable), this letter fails to do so.
In fact, among the breathless verbiage, I can identify only nine factual arguments, all of which I would have thought would be perfectly obvious to a 15-year-old of average intelligence. Namely:
1 Banks take customer deposits and reinvest them elsewhere
2 When banks operate offshore, they do so with the aim of making profits
3 When banks advertise, they aim to present themselves to their best advantage
4 When banks find trading in a particular jurisdiction is not profitable, they tend to close down their operations there
5 When you invest in a bank, you become a liability on the balance sheet and an unsecured creditor in the event of liquidation
6 A small island’s depositor protection scheme may not have the ready funds to pay out instantaneously
7 If you invest more than £50,000 in a jurisdiction whose banking compensation scheme has a £50,000 limit, you are not assured of getting more than £50,000 back
8 When banks are liquidated, lawyers and liquidators tend to be expensive
9 When businesses collapse, the Directors do not always apologise personally and live in sackcloth and ashes
Sadly, there won’t be a day of reckoning for our friend Jim. There’ll always be an audience for poorly argued, insight-free, bilious nonsense among ideological fellow travellers, as the publication of his bizarre missive in the risible “Manx Herald” and this forum proves.
Iliam
You’re right
And you’re also smugly dishonest because you assume everyone should know this
They don’t, and so abuse happens. Accusing those of not knowing of being bilious is highly offensive
But I guess you intended that
Richard
The crux is surely that capitalism is a system that largely allows wealth to be transferred from the unintelligent to the intelligent. It is morally neutral, so the intelligence of the participants on either side is irrelevant to the outcome. Sometimes this means that good people take money off nasty people, sometimes the nasty win.
The Tax Justice approach is that people should be protected from their own stupidity. Quite how to do this is not clear, but it seems to involve (from recent posts on this blog) privatising banks, increasing taxes, and taking the life savings off people with the temerity to order mineral water in restaurants.
I think a better way is to educate people. All you need to do is to tell people that capitalism is nasty and they should expect to be ripped off at every stage. Quite why financial services should be different to mobile telephony, buying a car, shopping at a supermarket etc is unclear to me. The whole capitalist thing is about ripping people off, but its better than the alternative, which is best seen in North Korea and Iran. The road to hell is paved with good intentions.
Sorry, in the previous post I obviously meant the “morality” or “social worth” etc of the participants is irrelevant to the outcome.
Paul
What a very sad view of life you have
Being ripped off is the best we can hope for
Some of us aspire to am little more than that
Richard
Richard,
It’s not a sad view of life – its actually very liberating. But how else do you explain people living in relative poverty yet spending money on things like satellite TV subscriptions, mobile phones, junk food?
The whole of capitalism is an exercise, based largely on advertising, the media and peer pressure, to make people believe they want things that they do not need and to prepare people to overpay for such tat. That is what we need to fix: we need to educate people that you do not need this season’s “must-have” shirt, phone, iPod etc. In fact, you will be better off without it.
But the difference between you and me is that you seem to believe that capitalism – particularly financial services – should be regulated by socially-conscious people like your coterie, and that the effects of capitalism are limited through seizing as much private wealth as possible and giving it to the government to spend.
I, on the other hand, think people should be told to grow up, ditch the tat, control their desires and try to seek meaning and value in their local community and in the natural environment. Money does not lead to happiness, and consumption destroys the environment. Take control of your own life, because you have the power to make your life better. How is that a sad view of life?
Paul, I think that workers should have control of ‘the fruits of their own labour’ and not capitalists. And private banks should not get their main materials (credit) for free – this should be an additional source of govt revenue. This is perfectly achievable under a market system with workers co-operatives (like the Spanish Mondragon system, which also control private banks) and state control of natural monopolies (which could outsource to private companies – owned by the workers, of course). Add to that collection of the full rent of land for public benefit and you have a much better, fairer, efficient economy.
A little unfair, Mr Murphy — no offence or dishonesty intended, and I do have great sympathy for depositors who have lost money in KSF, although I do believe the root cause of their misery lies with the actions of the UK Government. That said, if I were depositing tens or hundreds of thousands of pounds anywhere, I would certainly familiarise myself with the banking regulations and depositors’ protection scheme of the jurisdiction concerned for my own protection.
However, where I think we really differ is on the pseudonymous “Jim for Justice”’s status. You are, I imagine, assuming that he is an impoverished KSF depositor, but reading his letter (which is very carefully worded in this regard — note the use of the third person in “denying depositors their savings”) I believe he is a “tax justice” campaigning rather opportunistically harnessing this issue as a stick with which to beat the island. If I am wrong, then of course my feelings towards him change enormously, and my charge of cynicism against him is withdrawn: his anger then becomes justifiable, although I still believe he is lashing out against the wrong target.
Finally, I will just have to correct one assertion from “Shafted in the Isle of Man” — it was the Icelandic Government who stated that deposits with KSF would be 100% protected. The Isle of Man Government only covered 75% of the first £20,000 at the time, which was increased retrospectively to 100% of the first £50,000 to help depositors in their plight.
Iliam
I have the advantage of knowing he is not a “front” – he is genuine
But I note your contempt for those calling for “tax justice”
Pray, tell me what is wrong with asking for people to comply with the law and pay their tax where it is due? Do you have a problem with that? If so, why?
Richard
Thank you for pointing out that Jim is actually a KSF depositor – he now has my sympathy, although I still feel his letter is more a criticism of the banking system generally than the Isle of Man in particular.
As for “tax justice”, I have no issue with people being required to pay their tax – it’s the actual term that makes me wince, as it seems to imply a sort of tendentious moral superiority.
Iliam
Since when was justice morally superior?
Isn’t it a right?
Richard
Argh, Richard – either you are incapable of reading and understanding a counterargument, or as I suspect, you are an ignoramus delibrately misunderstanding people to muddy the waters. How can you not see the logic in Iliam’s statement?
What happened to you when you worked in Jersey to make you so bitter?!
James
I note I said “You’re right”
Now if I’m not mistaken that suggests I saw the logic of Iliams’s argument, even though I then went on to offer another counter argument
Now , can you remind me – who is having the problem undertsanding things here?
And for the record – I have only worked in Jersey for a very limited period, at the invitation of a scrutiny committee. To what are you referring? Do you also have problems with facts? Or identities?
Richard
I now await a typically sarcastic/patronising response on how I wish to ruin the lives of common decent folk by defending the IOM. Have you spared a thought for the common decent folk who live here, and the destruction of their livelihoods should your ‘justice’ network get its wishes. Public opinion is already beginning to sway on this issue, as jurisdictions such as ours are able to demonstrate their transparency. Why don’t you go after the City of London or Delaware as a starter for six, the corruption and tax abuse pervasive in those jurisdictions would put the IOM to shame…
Is tax justice a right?
I thought “every man has a right to arrange his affairs to minimise his tax liability”.
But, as ever, when the rights of the state meet the rights of the individual, tax justice demands that the individual’s rights be trampled upon.
Agreed that “justice” as a concept is a universal right, but most “tax justice” campaigners take their arguments well beyond tax compliance into tax competition, the tax base and tax rates – issues where there are fewer absolute truths, and multiple viewpoints may have equal justification.
In the same way, the Centre-Left has achieved some neat semantic sleight-of-hand in equating the term “fair taxation” in the national press as synonymous with high and redistributive taxation. In reality, many people would argue that a tax system that allows wealth creators to keep a higher proportion of their earnings, at whatever income level, is “fair”. But when one has defined one’s own stance as “fair”, it’s all too easy to equate one’s opponents with “unfairness”, and vilify their arguments rather than rebutting them with logic.
Iliam
Your logic is right
But if we had not logically and coherently argued our case I am quite sure it would not have made the progress it has
And let’s be clear: we do not argue tax rates – although we do argue for progressive tax systems
And we do argue against tax competition because it is fundamentally anti-democratic
And of course we argue about the tax base – good heavens – why not – what justice is there if not distributive?
But that’s patently about fairness where fairness means equality of treatment – and please argue against that if you will
Richard
Clearly everyone should be equal before the law – I suspect there are very, very few commentators on this site, whether Left or Right, who would argue against that. But when it comes to taxation systems, I am not convinced that there is any objective definition of “equality” – under any system, and any amendments to any system, there will inevitably be winners and losers.
As for arguing that tax competition is anti-democratic, I have always considered this a double-edged sword: surely tax harmonisation across countries impinges upon each territory’s democratic right to set its tax base and rights as it so chooses?
Apologies – in my last post, “rights” should read “rates” in the final sentence.
Tax competition has nothing to do with tax harmonisation
Tax competition is using secrecy jurisdictions to undermine the tax rate in other places
This is what tax havens do – deliberately
And if that is not harmonisation by seeking reduction, what is?
You cannot win this one
Paul
That’s 30s thinking when women were still husband’s chattels, homosexuality was banned and much more
It’s history
Richard
Agreed that opacity is not a good thing – which is why I welcome the move by our government to embrace automatic exchange of information. Similarly, I agree that we should offer the same levels of disclosure (but no more) as major European governments on trusts and other similar entities.
However, where our positions differ is on countries using tax rates as a competitive tool. You, for example, have frequently (and in my view erroneously) described Ireland as a “tax haven” primarily because it has set its corporation tax rate at 12.5%. That, to my mind, is its democratic right, and the same argument applies offshore.
Finally, I’m not sure your logic is correct in suggesting that offshores wish “harmonisation by seeking reduction”. Surely it is to their benefit that tax rates remain higher elsewhere, thus delivering competitive advantage?
Ireland is an secrecy jurisdiction because it does this with deliberate intent to undermine regulation elsewhere – as it does
And you clearly need to mug up on tax competition
Richard
Perhaps we are at cross-purposes here, Mr Murphy. Could you enlighten me as to what Ireland does that is actually secretive? Simply setting its corporation rate at a level that encourages corporations to relocate there (or merely to relocate head offices there for tax purposes, as is perfectly legal under current accounting regulations) does not involve any degree of secrecy.
Try finding the accounts of many Irish subsidiaries of multinational corporations – it is not possible – they file the group accounts instead
If that is not secrecy, what is?
And why is it allowed?
Well, if you have clear evidence that Ireland imposes lower disclosure requirements on its corporations than almost anywhere else, then I defer to you on that point – your technical knowledge of accounting would be considerably superior to mine. However, without being obtuse, without the imposition of country-by-country reporting, what advantage does this deliver the corporations?