I have been sent the full report in the Jersey Evening Post from last Wednesday on the withdrawal of UK support for the zero-ten tax systems of Jersey and Guernsey at the EU Code of Conduct Group meetings — guaranteeing that approval will not be granted.
I note with interest some of the comments, such as this from Treasury Minister Philip Ozouf:
We believe that zero-ten meets the spirit of the code
The trouble is that the Code is not statutory — it is a set of principles, and it was always obvious (if not to Jersey) that zero-ten, which is based on a deceit because the abusive ring fence is moved out of business taxation and into personal taxation, was never going to meet the standard for approval. The fact that companies were required to act a payment agents in some circumstances did, of course, just guarantee non-compliance with the letter as well. But it’s useful to see just where Jersey’s thinking has been, and still is.
And he also said:
The whole global crisis is going to result in different norms in taxation. It makes sense for us to be doing it jointly with the UK and doing some research in Europe ourselves.
I have to say I think this is an excuse: a convenient excuse but not the truth. The reality is zero-ten as enacted did not comply with the Code, and that was always obvious — or I could not have said so. There is however another dimension to this that needs to be explored. The implication seems to be that Jersey has never approached Europe itself on this issue but has always relied on access through the UK. Now, whilst access through the UK is the only official channel, and certainly the only way zero-ten could be formally presented, back in 2006 the Commission were quite willing to meet John Christensen and myself representing the Tax Justice Network to discuss this issue. The assurances they gave us then were that:
a) Zero-ten as proposed at that time did not, in their opinion, comply with the Code;
b) No approval would be given until any law implementing zero-ten was enacted;
c) There was no ‘prior approval’ regime, however unjust that might be (and I admit, it does seem very strange that this could not be given — so much time and effort could have been saved);
d) The UK could express opinion to whomsoever it liked on a proposal but ECOFIN gave approval. The fact that the Code Group was chaired by Dawn Primarolo for a decade did not change that;
e) They were aware that the UK thought moving a ring fence from the corporate tax code to the personal income tax code might ensure Code compliance. It was very clear they did not agree and that they felt the Code Group would not agree.
It is on the basis of these assurances that John Christensen and I have been confident that not only, based on my work, were we sure that the zero-ten proposals did not work, but also that they had not been approved by Europe. As now seems clear, the assurances we were given were right: no approval was ever given by ECOFIN, whatever was said in Jersey.
But this leads to serious questions and comment:
1) As I have said before, if an approval was given by ECOFIN it needs to be published now.
2) If the UK said an agreement had been issued by ECOFIN that letter needs to be published now.
3) If neither can be published question needs to be raised about why such assurances were given.
4) If no one from Jersey did go to Brussels to check this out — and that seems extraordinary if true — questions need to be asked as to why.
5) If the PWC report of 2004 was the only written opinion secured as to compliance that too surely needs to be questioned. My 2005 report said the Code was not complied with — and there’s no doubt it as right as Jersey sought to redesign as a result. What checking was done thereafter to check compliance. Shouldn’t any such opinion also be published?
6) Minsters need to be held to account, surely, for having committed so many resources to this on such a flimsy belief as that which Philip Ozouf notes ‘that the letter of the Code was complied with’.
And I’d join with the Crown Dependencies in asking questions of London on this:
a) Why did London let this continue for so long?
b) Why did London think the move out of corporate tax into personal income tax was adequate compliance with the Code — as I think it did, for a while at least?
c) What was said by London to the Crown Dependencies? There does seem to be a question of accountability to deal with here.
Nothing changes my opinion that the assurances given that the zero-ten systems had been approved by ECOFIN were wrong. Only documentation can do that — and if it is produced I will, of course, have to issue apologies (and will). Their absence so far — and the absence of any hint that they exist is, however, telling. But that hardly seems to be the end of the matter. This issue has to be resolved with a much higher degree of assurance provided and in a much shorter time frame now zero-ten has failed. And that means better thinking and communication is key to going forward.
I hope it happens.
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Richard
I understand that Gibraltar claimed that its originally planned new tax regime had been approved by the EU in 2003, only for the EU to have a change of mind in 2004. There is quite a pattern emerging here. Have all FOUR jurisdictions misunderstood what they were allegedly told ?
[…] would like to see that indication: as I have recounted, the people who might have given it told me in 2006 that any such assurance was not […]
Rupert
The reality is these places misrepresented what they were going to do
So zero ten did not mention the ring fence in personal tax, for example
And Gib did not mention the payroll tax on local employers
And so on
Get an assurance on false pretences and it is not an assurance
And the person making the misrepresentation is at fault
Richard
Richard
Thanks for the clarification re Gibraltar. But there is indeed a pattern emerging here. It seems that the (four) jurisdictions focused on corporate tax because that was the tax they were being forced to change. How much onus was on them to mention their plans re other non-corporate taxes, seeing as they weren’t under review or criticism at that time ?
It seems almost as simple as the difference between:
1) Please change your corporate tax regime as we (the EU) don’t like it.
and
2) Please change the way in which you raise your total tax revenues as we don’t like your corporate tax regime.
The four islands apeear to have focused on the former only, as that’s what they were seemingly asked to do by a body which was only concerned with a Code of Conduct regarding EU corporate taxes.
Maybe the terms of reference weren’t clear. Misrepresentation may not even come into it. I don’t recall that the EU has ever claimed to tell any jurisdiction what personal tax rates or indirect taxes it must apply. Jurisdictions are free to apply whatever other taxes they like to balance their books.
I’m not saying that this is what has happened, but it doesn’t half look as though it might have been what happened.
[…] would like to see that indication: as I have recounted, the people who might have given it told me in 2006 that any such assurance was not […]
Rupter
You claim to work in the CI
Have you ever read the Code?
It’s about business taxation
It was about stopping abuse in business tax
Almost every EU state was affected. It did not pick on tax havens
It was bound to affect corporate tax regimes the most – the clue was in the title
It did not say increase or tax cut
It said stop abusing
The Crown Dependencies have not
Story over
Richard
Richard
I do indeed work in the CI and I do have a copy of the Code on my desk.
You’ve hit the nail on the head – the Code deals with business tax, not personal tax. You state that it deals with abuse, and as it only deals with business tax, any possible or perceived abuse of personal tax isn’t covered by it.
Thanks for the clarification.
But note – business tax – not corporate tax – so business abuse could not be moved into personal ta as the Crown Dependencies have tried to do
Big mistake
Don’t fall into the trap. It’s costly
Sorry, you’ve lost me !
Rupert
So did Terry Le Sueur
If he’d have paid more attention you wouldn’t be in your current mess
Richard
Richard
I am paying attention. Very much so. But you’ve still lost me with the first para of your #6 posting I’m afraid.
@Rupert
Rupert
The Code says that 0/10 will fail…where? The CDs in their international dealings are honest and committed [ignore Richard’s shrill response soon to come]. So I assume that they have been led down a path by the UK and EU and that the route is suddenly a different one because of changes in the international scene – as G and J said in their press releases last week.
The duplicity here has not been from the CDs, but from the power brokers in Europe – principally the Brown-Sakozy combo; who no one in their right mind would ever trust.
We should say stick this and get on with our own version of international responsibility without the EU.
Girrl
If I could work out that Jersey did not comply with the Code others could have done
And they did
But Jersey ignored the issue
Your problem
Hiding your head in the sand and pretending you can run away won’t solve anything
Richard
Rupert
The CDs have tried to claim they are compliant but maintain a ringfence which forces tax to be paid on locally owned companies – which is not allowed under the Code
They did this by thinking that is the ring fence as in personal tax it was OK – because it was not in the corporate tax code
But it wasn’t – the ringfence related to the tax of business profits and so is abusive wherever located
This is what I said in 2005
I think this is what the EU is saying now
And compliance with the ‘letter’ and not the ‘spirit’ will not work
Richard