A minor furore has broken out in the comments section of this blog on whether or not I am right to claim that about 50% of all EU resident private bank account holders in Jersey opt for tax withholding bon their accounts.
I suggested the current rate was abut 50%. The evidence came from recent interviews undertaken in association with media broadcasts with bankers in the Channel Islands. I thought that a pretty good source for an off the cuff comment.
But the Channel Island commentators on here — many of whom are, I suspect, paid to comment, came back strongly. Take this comment:
Richard
Your 50% figure is way out. I have spoken this evening to three MDs of major Jersey banks, all well known to me, who confirmed that only around 10% of their clients had opted for withholding tax.
And this one:
Richard,
I strongly agree with Rupert. Your 50% figure is way wrong…
Perhaps the 50% you refer to is small investors, each with a average £10,000 deposit. The other 50% with an average of £1,000,000 savings are using methods to avoid the EUSD.
So, as usual, I thought a little objective evidence would be useful. I don’t always credit the government of Jersey with objectivity, but on this occasion I will. It publishes data on this issue, and as it has noted in 2005 about 30% of account holders opted to exchange information with their countries of residence on their income paid in Jersey. By 2008 this had risen to 57%, up from 55% in 2007.
So I am slightly out — but really not by very much at all.
But those who have commented are massively out, supplying straightforward misinformation in the process, as is normal for those who trade in secrecy and therefore think themselves unaccountable for anything they say.
But this leads me to a more important question. About 95% of comments on this blog are from people who supply this sort of misinformed propaganda that is deliberately misleading on what happens in tax havens. I waste a lot of time correcting the nonsensecommentators write. and I am asking myself, why bother? Why not just turn the comment facility off? Or at least, reject all such comments allowing on only those who have reasoned argument to put forward?
Comment please before I decide what to do? and I am aware of the paradox of asking.
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I find the comments useful and informative. I also think they add to the debate, and perhaps even inform.
Of course some of your blog entries are opinions and not reasoned argument (its your blog after all!, so its your prerogative!)
Doesn’t the present of posts indicate that there is an interest, and isn’t raising awareness what your blog and your “organisation(s)” are all about?
Suggestion:
Keep on publishing them and then once a month (or how ever frequently you can stand it) publish an entry that deals with the most egregious.
There´s enough vested interests telling the majority that they should be trusted.
http://www.gresham.ac.uk/event.asp?PageId=45&EventId=725
It´s a slow process – but simply refusing to take comments isn´t a progressive way forward.
Admit that it hasn´t worked for the EU in the UK
http://ec.europa.eu/unitedkingdom/press/euromyths/index_en.htm
– but there´s no harm in trying and the readers of this blog should be more discerning than the average Mail or Sun reader, shouldn´t they?
Richard,
Seriously 😯 ! Richard, you need a break as fatigue is setting in. You are critical of quoted comments which are pro TJN viewpoint! Both comments are factually valid. It’s just that statistics is not Richard’s strong point in this argument. In summary – the 50% figure bandied around relates to a subset of the number of investors, not to the percentage of savings assets, which is the important issue here.
If you look at what percentage of applicable savings assets in Jersey is subject to EUSD, one sees at most 3% – 5% of interest bearing savings assets were to EUSD withholding tax. This means that at least 95% of savings assets was not subject to EUSD.
Assuming that an equal amount of this withholding tax was opted for exchange of info, then 90% of savings tax was circumvented.
So of all the assets that should have been subject to savings tax, only 10% was subjected to the EUSD. Of that, a whopping 50% opted for exchange of info. So 5% of all EU-resident owned savings assets opted for exchange. Whoo hoo… One can also be sure that this 5% comprised only of small accounts.
In layman terms, that’s like saying 50% of all burglars caught are incompetent. What this doesn’t convey is that 95% of burglars never get caught. (Also being caught means you were incompetent in the first place, the professional burglars got away. Equally in Jersey, it’s only the small fish that are being caught by the savings tax). If someone has a savings account for less than £20,000 it isn’t financially worth it to establish a legal entity or arrangement to avoid the EUSD. Therefore only the small fry will get caught by the EUSD net. Of these small fish, 50% will opt for exchange and 50% opt for withholding tax. But 95% will avoid the EUSD completely. So why do you bother quoting the 50% figure in the first place, when 95% do not opt for exchange (90% of those that have circumvented the EUSD and the 5% that opt for withholding).
So now you see why the 50% figure is more than misleading. You were successfully misled by Jersey! Now that is funny.
What Rupert was saying was 10% of investors opted for exchange of info. Maybe another 5% was subject to withholding. The rest all circumvented the savings tax and didn’t have to opt for either. What Rupert and Richard both miss is that quoting statistic involving the NUMBER of investors is meaningless. Saying that 50% of investors do this or that means nothing if those 50% comprise 5% of the total assets.
Richard, please focus future arguments on the ineffectiveness of the EUSD on the total assets earning interest, not the meaningless number of individuals opting for exchange.
“Lies, damned lies, and statistics”.
Mark
Sometimes one has to deal with the pedants at their level
I entirely agree with all the points you make, and hope I make that clear on the blog, often enough
Richard
Your blog is an opportunity for you to point out the error in their thinking, and as you say (and do) you can block the straightforward nonsense – how much time and effort you spend on that is for you to manage, but comments is one of the important bits of a blog. I suspect that if you turn off the comments you will turn off the readers. As John Donne said – no man is an island.
Richard
It’s pretty clear, even for a native of Africa, that your detractors, denialists and their ilk are part and parcel of an orchestrated fight back or counter-attack by those who will lose the most. This form of disinformation and in may cases outright lies will gain a lot of credibility the more they are repeated – unless sanity previals and someone reminds them of the truth.
I love the expression attributed to Peron of Argentina when he said that ‘most taxpayers are honest, but they are better when they are watched’. SO, keep on watching those who have yet to accept that will have to adapt or die – even we in Africa understand this basic concept.
I suppose it is a question of how the comments appear to visitors. It doesn’t matter, for example, if you annoy Jersey Girrl – her opinion of you could hardly be lower! However publishing opposing views implies a certain confidence in your own position, that you are not fazed by opposition. But, I think you could probably comfortably hit the ‘delete’ key a bit more often!
James
I have a strong suspicion I will be following your advice
Richard
By the way, I think the Girrl is not what she claims to be – at least as to gender – and I really dislike that sort of anonymity – as some might have noticed!
Mark
You have misquoted me. I did NOT say that “10% of investors opted for exchange of info”. I said that only 10% of investors had opted for the withholding tax option! The rest of their clients are either (a) geographically outside the scope of the EUSTD (as they are not resident in the EU), or (b) trust/corporate vehicles which are part of a much wider estate planning structure (and which in most cases preceded the EUSTD) and which are not currently within the scope of the EUSTD.
But that was only from the 3 banks that I spoke to. Maybe they aren’t typical of the entire banking sector – although I thought and still think that they are (excluding the retail clearing banks of course).
I hope that clarifies the situation re. my original comment.
Mark – your analysis above is a very logical one.
Richard – the real confusion arises when looking at the banking sector as a whole. Some banks in the Channel Islands, and in the current era I’m certain its a minority, have a retail private client deposit base, where accounts are held by an individual investor. The clearing banks and the building societies would be classic examples. The majority of banks service fiduciary clients with estate planning structures, often with no EU connection whatsoever, and have a much smaller number of direct, personal account holders (probably a very small number of large deposits, in reality).
We therefore need to be clear what exactly we are talking about – a percentage of the total offshore bank accounts or a percentage of the total deposit book, as the relative statistics would be wildly different (as demonstrated by Mark). Mark’s example of a £20,000 (assume UK-resident customer) is interesting. An interest rate of say 1.5% at present generates £300 of annual interest, on which the withholding tax would (at 20%) be £60 per annum. Barely worth the depositor doing anything other than suffering the withholding tax at source. If he’s a basic rate taxpayer at 22% then he would have an extra 3% of tax to pay on his £300 of gross interest, which is just £6 of extra tax. Even if he’s a higher rate taxpayer (perhaps unlikely if he’s only holding £20,000), then its just another £60 of UK tax to pay (or which is being evaded, if that’s the case). The fact that its a trivial amount doesn’t of course make it right to not declare it, far from it, but it does perhaps add some perspective.
If one went to the UK clearing banks and building societies in the Channel Islands and obtained a breakdown of their retail customer deposit base, the sub-£25k and sub-£50k customers would, I believe (but I genuinely don’t know), make up at least 50% to 60% of their total deposit base in terms of number of accounts. Large numbers of small depositors is a key part of their business model). The other 40% to 50% would of course be considerably larger in terms of average size accounts, but at that end of the distribution curve a bigger proportion of customers will be opting for automatic exchange rather than withholding tax.
The statistics can be very misleading to those both within and outside of the industry and so its vital to be crystal-clear about the basis on which any figures are quoted or estimated.
@James from Durham
James #7, and Richard’s reply #9
“However publishing opposing views implies a certain confidence in your own position, that you are not fazed by opposition. But, I think you could probably comfortably hit the ‘delete’ key a bit more often!”
I agree with James. My opinion of Richard is not a low one BTW: I have a great deal of respect for him. He is IMHO, however, polemical and over-polarised. I may therefore wish to offer the odd deflation point as a contra.
Blogging is a rather vain activity, and having comments is a mark both of confidence and of a wish to stimulate debate. Blogging with no comments would cause the site hits here to plummet, as purely looking at Richard’s output would be repetitive. So my hope is that you retain the current approach, even in once in while it winds you up. We all know that you do block comments in any case, so you have the control over the site whichever way you choose to go.
As you always say, Jersey is secret, including its girrls, and so I keep myself to myself, so to speak. By doing this, I have the opportunity on occasion to slip out ‘obscurum per obscurius’!
The Girrl xx
The comment dialogue is an essential part of a serious blog. If once in a while you are shown to be wrong about something, you can be publicly led to an improved position, while in the more common cases of the adverse commentators being organic fertiliser merchants, you can emphasise your own case in your refutations, while showing them up into the bargain.
Rupert
Your analysis is interesting but bear in mind that where the person makes a disclosure to HMRC, they are probably going to be less interested in the interest on the £20,000 than in the £20,000 itself. As you say, who is going to go to a lot of trouble to evade tax on interest on £20K? But if the £20K itself is money which should have been taxed and hasn’t, that’s where the real action is! Now perhaps we are talking about £8000 of tax…
Jersey’s tax laws are legal; both within the UK and the EU so your objection can only be political. But you would do well to consider the benefits of such “havens”. All governments will descend into tyranny unless constrained, regardless of their good intentions; witness Cuba.
Jersey and the like prevent governments doing whatever they please with taxes and for that reason alone should be preserved.
Badly fixed tax rates don’t just damage those caught by them – which is what the Guardian readership hopes – they damage the economic prospects of those who – like me – will never be asked to pay them.
We now have a top PAYE tax rate of over 60%, well above the limit most commentators and experts agree is “efficient”. (An efficient tax rate is one that claws back the optimal amount of revenue by maximising the activity that generates the tax base first and then taxes it at the point that generates the most tax without inhibiting or reducing the activity).
This rate will slowly drive away entrepreneurs, reduce the activity of those that remain and reduce the supply of new business starters through its demotivational impact. Whether we like it or not, economic success is a pure Pareto phenomenon where 90% of all economic growth depends on 1 or 2% of the population.
We the less ambitious, aggressive, capable will be the ones made poorer by these ill thought out tax policies.
The same is true of other taxes; they enable non-beneficial economic activity that would otherwise not take place. You can see this effect in those parts of the UK where the public sector exceeds more than 50% of all economic activity. The private sector is forced out by its inability to compete with the public sector component leading to three unwanted outcomes; over dependence on the public purse, excessive rates of tax to pay for it and inefficient spending both on revenue cost items (salaries, wages, pensions etc) and on capital projects (failed IT systems, dud weapons platforms, and so forth).
All governments elected by popular vote have an insatiable need for tax (so they can buy our votes with our own money) and it is important that the processes which inhibit this appetite are maintained if the vital balance between what is ours to do with as we will and what the government feels it can take, is to be preserved.
Brian
Dangerous anti-democratic drivel that will lead to dictatorship through fascism is my response to your comments
See all http://www.taxresearch.org.uk/Blog/2009/11/06/the-step-report-on-international-finance-centres/
Richard
Richard
Seem to have struck a chipped tooth here.
I don’t understand “anti democratic” at all. Drivel is a little rude don’t you think?
The acid test of a political system’s acceptability is the evident willingness or otherwise of its citizens to pay for it. Democracy cannot be based on compulsion, by its very nature it has to enjoy mass popular support.
Most people would agree with me that a system that takes more of someone’s earnings than they keep for themselves is tyrannical.
Things are a little askew at the moment with all the hoo hah over bankers’ bonuses which were always taxed at 40% anyway; a figure I suggest is at the very limit of a democratic philosophy. Taking over 60% would strike most voters as a bit much. It’s just they are so peed off with them, they’ve temporarily lost sight of what’s going on.
Fascisim, so far anyway, has only arisen in socialist regimes.
Governments wishing to preserve their tax base – and their economic activists – need to make sure they are providing a country in which they wish to live; and work.
Brian
”Dangerous anti-democratic drivel that will lead to dictatorship through fascism is my response to your comments”
wow! glad to see you back on form Richard.
the 2 comments that triggered your posting were simply providing anecdotal evidence from their experience/knowledge. Why would you want to suppress such comments – which you go on to fairly refute in this instance – thus enhancing your credibility ?
”CI commentators on here – many of whom I suspect are paid to comment….”
nonsense – by who !? you have anything to back up your suspicion? – they simply wish to offer up an alternative argument to balance your Guardianista world view. As a liberal democrat – you should welcome and encourage debate.
So do take David #2’s advice. On the other hand ‘just turn off the comment facility off” and watch the site hits evaporate.
Richard, dictatorship through facism? Not so different from your support for HMRC deciding that they are the arbiters of what tax law “really means” and what parliament originally intended when the laws were set (Your post of 22 October “Tax Avoidance is a State of Mind”). If this leads to HMRC being the ultimate authority of what tax law is or is not, surely this is a symptom of another type of dictatorship.