Not my title: it’s adapted from one in the Guernsey Press and Star this afternoon. As they say:
EUROPE is running out of patience with Guernsey and other places like it, according to a top anti tax-avoidance campaigner.
And the director of Tax Research UK is warning of Europe’s increasing ‘appetite’ for harmonising tax regimes throughout the EU.
The claims come from chartered accountant Richard Murphy, who is also dubbed ‘the muscle behind the Tax Justice Network’ pressure group, which he founded.
They follow recent comments directed at the islands by the new EU commissioner for taxation and customs union Algirdas Semta.
Now Mr Murphy claims that people close to the European Commission that he has spoken to are indicating that patience is now running out with the offshore Crown Dependencies on this point — something, he said, the commissioner’s latest statement bears out.
First an apology to all others who were founders of the Tax Justice Network: I was not alone!
Second, the story (and they called me, I’d add) is based on a number of conversations I had last week. For those who don’t know the European Commission is planning to start work on the Common Consolidated Corporate Tax Base (CCCTB) again next month. It’s assumed Ireland is so knocked out it can no longer object.
And second, the EU Code of Conduct group met on 23 September to hear Colin Powell (with whom I have been in correspondence here) present his reasons for Jersey being compliant with the Code. I’m told they were not impressed. It’s not 0/10 they worry about: that got the nod years ago. It’s the fact that Jersey has [persisted in maintaining the ring fence it was told to get rid of by shifting it into personal taxation that deeply offends them. I did, of course, suggest that this problem existed as long ago as 2005: now the world has caught up.
But this means a double blow for Jersey et al. Any CCCTB formula will be heavily weighted against profit allocation to tax havens, you can be sure. And the Code group are going to demand more change — and maybe positive tax rates in Jersey, Guernsey and the Isle of Man — all of whom are going bust for lack of tax revenue right now.
What a mess.
And all avoidable if only they'd listened.
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Richard
The islands have identified that positive tax rates are not a problem. A code-compliant territorial tax system provides a perfect solution for the Crown Dependencies. All companies will pay (5/10/15/20)% tax on their locally-generated profits, but would be exempt from tax on non-locally sourced profits. No discrimination at all between companies owned by residents and companies owned by non-residents. All companies treated equally.
The concept of EU corporate tax harmonisation is a different ball game altogether. The Crown Dependencies are not part of the EU and probably wouldn’t be accepted as members even if we wanted to be members! EU members can have whatever tax harmonisation they want, but trying to impose it on non-members brings up sovereignty issues which islanders in all three Crown Dependencies will never give into. 800 years of self-government will never be given up without a fight.
But you make the wrong (regular) assumption that the islands are bust. They are not. They have no debt. They have sizeable cash reserves. They have a current structural deficit. Although the Isle of Man has no significant room for maneuvre as it already has 17.5% VAT, Jersey has a 3% GST and Guernsey has no consumption tax at all. The UK’s rate is going up top 20%. Nearly every EU member country is around the 20% mark. Poland is at 23 or 24%. Jersey and Guernsey have a very long way to go before they go bust…if the books still don’t balance after consumption taxes go to 20% then maybe yes we would be bust! Don’t tell me that the EU won’t allow us to introduce VAT or GST at up to 20%. But a package of 10% or 15% or even 20% corporate tax with a territorial system, 20% income tax, no capital gains tax and no inheritance tax, even with am EU-style VAT, is hardly something that the EU can find unacceptable, yet would still be very attractive overall.
“And all avoidable if only they’d listened.”
And yet if only you had listened to those saying 50% would drive out London Hedge Fund Managers and their taxes.
Now 1 in 4 have left with around half a billion pounds of tax revenue lost
http://www.bloomberg.com/news/2010-10-02/hedge-fund-tax-exodus-may-cost-u-k-government-791-million-ft-reports.html
Congratulations
@Creg
And the moon is made of cheese….
That story is utterly and completely implausible
None of them tax plan at all, of course, which would be a requirement for believing it
And much more besides
@Rupert
Keep whistling in the wind Rupert
The CCCTB won’t apply to you? Like the Code of Conduct does not, eh? Or the European Union Savings Tax Directive?
I’ve been right so far
And of course I may not be in future
But something would have to change to prevent me being so
And so far nothing is
Richard
The Crown Dependencies have (rightly in my view) gone along with what’s been asked of us so far. That’s all part of being responsible neighbours to the EU. Nothing ever got forced upon us. There is abslutely no constitutional or sovereignty right to push us where we aren’t prepared to go.
We aren’t part of the EU and have no desire to be. We don’t meet the EU’s membership requirements so can we become a member of a club which won’t accept us and of which we don’t wish to belong?
You’re treading on thin ice if you think islanders in the Crown Dependencies will give up our sovereignty and constitutional rights without a seat at the top table and a vote, and nobody is going to give us that, so I guess that’s a pretty distinct line in the sand. Under New Labour its the sort of trick they’d have tried on, but I think its yoou who is whistling in the wind if you think 250,000 people are going to sit back and accept EU tax harmonisation applying to us.
@Rupert
Complete nonsense
Pierre Horsfall was dragged kicking and screaming (metaphorically) into compliance under threat of the UK imposing withholding on all payments to Jersey etc
And remember – the UK can pass law in the Crown Dependencies any day it likes – as it has in the past
Your argument is fantasy
And as related to reality as the tooth fairy is to the £2 that appears under my sons’ pillows when they loose a tooth
The difference is, the Tories don’t share Labour’s distaste for the Crown Dependencies, or their eagerness to please the Europeans. Mark Field MP has already come out to bat for them.
There’ll be no laws passed at Westminster affecting the Crown Dependencies in this parliament
In the Alice in Wonderland world of smoke and mirrors that is the Isle of Man government, the island’s Stasi (a.k.a. the Financial Supervision Commission) ensures that resources put into complaints about the island’s financial services industry are largely spent on burial rather than investigation.
Meanwhile the island’s £multi-million PR sweetness-and-light campaign continues to mislead even quite intelligent people. Eventually the truth will out.
“Perhaps it hasn’t one,” Alice ventured to remark.
“Tut, tut, child!” said the Duchess. ‘Everything’s got a moral, if only you can find it.'”
Lewis Carroll – Alice in Wonderland – Ch. 9
Hi Richard, the website iomtoday is carrying a report of the offices of a tax consultancy firm being raided. http://www.iomtoday.co.im/news/Police-raid-Douglas-tax-consultancy.6563777.jp
Allegations re Isle of Man tax consultancy firm
A cynic could be forgiven for thinking that this raid would never have taken place were it not for Her Majesty’s Revenue and Customs (HMRC) criminal investigation into suspected fraudulent tax avoidance schemes and the island’s obligations under the Mutual Legal Assistance Treaty legislation.
@PSG. Not just cynics.. realists too, I bet! 🙂
Richard
Pierre Horsfall and Jersey maybe, and how many years ago was that now ? Its NOT the case with Guernsey, and just in case you haven’t noticed, the two Bailiwicks are completely autonomous of each other. Just look at the different ways in which Guernsey and Jersey have dealt with the EU Code of Conduct issue. What does that tell you ? The Channel Islands is solely a geographical description – constitutionally it means zilch. But I’m disappointed – I would have expected you to know that.
And no – the UK cannot “pass law in the Crown Dependencies any day it likes – as it has in the past”. You are wrong – very wrong. Please list when it has done so “in the past”.
@Rupert
The power has been regularly confirmed to be held by the UK
It is, admittedly, rarely used – the Marine Offences Act of 1967 was one of the last occasions – when Uk law was imposed on the Isle of Man
Richard
To say that it has been “regularly confirmed to be held by the UK” is at best an extreme over-statement, even in the very unlikely event that it turned out to be correct. The Labour Government were rightly taken to task last year for their faulure to recognise the constitutional rights of Crown Dependencies, which strongly reinforced the long-held view that the circumstances in which the UK can legislate for us are extremely limited. The UK is obliged to act in our interests, not in its own interests, and certainly not in the EU’s interests.
@Rupert
” The UK is obliged to act in our interests”
Evidence?
Other than goodwill?
Richard
I can’t lay my hands on it at the moment but you need to refer to the report last year which confirmed to Labour that they couldn’t just do as they wished without considering the interests of the Crown Dependencies. It was quite unequivocal.
@Rupert
You mean you can’t lay your hands on a convenient copy of the Treaty of King John right now?
Not surprising: there isn’t one
Rupert
I think you are referring to the House of Commons Justice Committee report published earlier this year? Link here http://www.publications.parliament.uk/pa/cm200910/cmselect/cmjust/56/5602.htm
John
@JohnBuckles
Ah! A report with no status at all. That’s great evidence.
Try again.
If it is “a report with no status at all. That’s great evidence.” Then why did the Tax Justice Network take part in giving evidence?
@JohnBuckles
It was influential
But that does not mean it’s evidence of anything other than a significant opinion
Richard
The UK and the Channel Islands have relied totally on the provisions of the 1204 treaty for more than 800 years. As a matter of general legal principles, an “implied agreement” clearly exists. In the Treaty of Rome 1972 the UK and the EU clearly recognised our constitutional status as well. If they hadn’t then Protocol 3 clearly could not have been agreed. Trying to pretend that it doesn’t exist is a futile exercise and you well know it.
John
Many thanks – yes that is indeed the report. Richard – you obviously wish to undermine it because you don’t like what they confirmed in it. However, the Labour Government took due note of it and their wrists were well and truly slapped.
So you’re backtracking no…it does have some status…it is influential.
@JohnBuckles
influential is not binding – it’s just opinion from a significant source
@Rupert
There is no treaty of King John – and you know it
I accept there are conventions
But the reality is you are a dependency – no more – and the Uk can assert its will if it wishes because you’re not a state – and it does so, often which is why you have to abide by EU requirements on tax
Suggesting anything else is pure BS and you know it – and if you don’t, grow up, fast
Richard
Come on now – no need for that.
You’re grossly under-estimating the facts of the relationship with the Crown. 800 years of convention wouldn’t have existed without substance. You can pretend that it isn’t worth anything, but 800 years of history is compelling and persuasive evidence. You are making the same mistake that the Labour Government made.
As I said earlier (to which you have not responded, I note), how on earth could the Crown Dependencies sign up with the EU under Protocol 3 if they didn’t recognise our capacity to do so?
And sorry, but you are wrong. Yes, we are a dependency. No, the UK cannot assert its will if it wishes to do so. It has no capacity to do so. And you know it. And you say that “it does so”. No – it doesn’t. We abide by EU requirements on tax only because we have agreed to do so. There is no legal mechanism to actually enforce anything upon us that we don’t agree to.
So its not BS on my part. If you are stating that 1204 didn’t happen and that the constitution of the past 800 years was invalid, then I’m sorry but that’s damaging your credibility. You may have gained some influence in the tax/political world, but it does NOT extend to re-writing 800 years of history just because you don’t like the result.
Telling me to grow up because I respect historical facts is totally unnecessary.
I strongly suggest that you go public in the Channel Islands with your views that King John, the Magna Carta and 1204 are figments of our imagination and count for nothing. Now that really would be interesting.
The following is an extract from the aforementioned House of Commons Justice Committee Report:
“Following the loss of Normandy, the English Crown asserted authority over the Channel Islands. King John established the Bailiwicks of Jersey and Guernsey by Royal Charter. The relationship between the Bailiwicks and the UK has, since then, been based on practice, custom, convention, usage and Statute enacted in Westminster and extended by consent to the Islands.”
So:
1) The Bailiwicks were created by Royal Charter; and
2) Since the Royal Charter, Westminster has continuously expressly recognised the constitutional position, without interruption, for precisely 806 years (not counting the additional 140 years between the loss of Normandy and the signing of the Royal Charter in 1204).
And you say that nothing really exists?
@Rupert
And it’s all a convenient myth
For heaven’s sake look behind the fable
It does not work the way you’re recording it
The reality is if London says jump Jersey jumps
So too Guernsey
And with good reason – the myth of independence is based on the distinction between the Dukedom of Normandy and the Crown and the UK parliament
And in 800 years those have changed – you may have noticed
The reality is the UK parliament exercise the power of the Crown and therefore you’re subject to it – but it lets yoyu get along with things as long as they suit the UK.
They did not on the EU Code and the European Union Savings Tax Directive
and you jumped and still are jumping
And jump you will again
This is Realpolitik – not your fantasy
And London and St Helier have both confirmed this to me
Richard
Sorry but we will have to agree to disagree. Myth it most certainly isn’t. Open your eyes. You know as well as anybody that the reason why the EU and the UK haven’t destroyed the Channel Islands is because constitutionally they cannot do so. Any inch given by the islands, whether we are pressured into it or not, is because we have agreed to it, sometimes far more willingly than not, I grant you.
Even though we can stick two fingers up (and at various times misguided politicians have advocated exactly that), commercially it makes far more sense for the islands to act responsibly. Our response to initiatives to eradicate tax evasion have been totally responsible, even if at times there has been a need to persuade dinosaurs that there was no future hanging on to the past. The islands co-operated with the EUSTD and accepted the phased deal offered by the EU (which I ppint out was demanded by full EU member countries). Regulatory standards are very high, as confirmed by the IMF and various others following their reviews. We have met the OECD’s demands re. TIEAs, and whilst you think they are worthless, they are what the OECD demanded.
The only thing that you can’t accept is that despite these massive strides, we are still able to operate with low rrates of corporate tax AND without having to introduce consumption taxes beyond Jersey’s 3%. You can’t accept that we don’t have a publicly-accessible trust register or public disclosure of beneficial owners of companies, conveniently that those don’t even exist in any G7 countries.
Let’s face it – you cannot accept that the islands have become very successful international finance centres, at the original behest of the British government to held Crown Dependencies and Dependent Territories to become self-sufficient through offshore financial centres, and you can’t accept that neither Brussels nor Westminster has the level of control over us that you think they shoould have.
This has nothing to do with what’s legal and what’s not. This is about your personal hatred of the Channel Islands and because your mates in power in Brussels cannot ride roughshod over us because of our constitution. Even the Labour Government couldn’t manage that, despite their best efforts to pretend that our constitution was a myth. It isn’t.
RupertDavid
Why would anyone have a “personal hatred” of an island?
You cannot see beyond the scope of your business. That business is a tiny little slice of the global society. Unfortunately for society it “punches above its weight” and knocks the vulnerable down.
You have to accept that considering the WEEPING SORE that the global finance industry is INSISTING on saying is a good thing for all, people may not like it very much. So therefore it becomes investigated.
Your contempt and laughable attempts to discredit folk who evidently know more than you re the coalface of reality, just shows the disconnect.
Your strategy works in Guernsey because it is just Guernsey; I can’t say even the slightest thing without being called names, but in the wider world, your adherence to “constitutional” nonentities look like childish posturing.
You can repeat full compliance to various international modes, but for people who are seeking social goals those modes do not meet expectation. Stop whinging about your ‘effort’ (through gritted teeth) and start understanding the cause.
The fact is you hate this blogger, and call anyone that happens to agree with their reasoning, because it directly affects your idea of how life really is.
You know nothing. We all know nothing. That is why we have to accept every single idea. I have lived through decades of your type of thinking. I am poorer than my parents, my children will be poorer than me.
Only those who gain, advocate. Those who don’t are ridiculed.
The idea that tax competition is at the core of a failed generational ideology.
Prove otherwise. And then tell that to the next generation.
Stop blathering about kings and queens and get real, yeah.
the idea that tax competition is good is at the core of this failed ideology
Arnald
Who’s David?
Every country/nation has a constitution. Its why every country is different. Heavens, even the United Kingdom and the EU have constitutions. A constitution provides, amongst other things, how a country makes its laws and how it is governed. Pretty hard to argue with.
Guernsey’s constitution is such that it is self-governing. It is not controlled by the UK or by the EU. It is able to set its own tax rates and has done so for 800 years. Unless I’ve missed something, nobody has invaded us or captured us to change our constitution, which remains what it has been for centuries.
Yes, I believe that tax competition is good. I believe that all competition is good. I believe that if any jurisdiction is to be tax-competitive then it must not condone tax evasion and it must be well regulated.
I believe in legitimate tax avoidance. I believe that businesses in the jurisdiction must be tax-compliant.
I do NOT believe that legitimate tax avoidance is socially unacceptable. I believe in free markets. I don’t believe in socialism.
I think my beliefs are crystal clear.
Our beliefs are different. What’s wrong with that?
@Rupert
Guernsey is not a country
It is a Crown Dependency
Stop pretending
Richard
The Bailiwick of Guernsey is self-governing – fact. The UK, the EU and the OECD correctly recognise that. Its only you who seems to disagree. You’ve studied tax, accountancy and economic but didn’t pay attention in your history lessons.
@Rupert
Oh dear
Rupert you really do have to learn the difference between substance and form
The form of local government (not national government) you enjoy is a nice veneer
The substance is it survives so long as it operates within agreed parameters – and others set them
Richard
You’re wrong Richard – factually wrong.
@Rupert
Not at all
You see facts and can’t use them
I see facts and interpret them
Looks like that may be beyond your comprehension
Richard
No – I see the facts of what our constitution actually is. You are trying to tell me that my facts are wrong. Please provide evidence that I am wrong.
Specifically (a) precisely in what way is Guernsey not a self-governing jurisdiction, (b) exactly who else has the power to govern us, (c) exactly who else is governing us, and (d) under what constitutional document or legislation are they doing so?
I eagerly await your response as it looks as though you will have explosive revelations about our constitution which nobody here yet knows about, but of course they will very quickly hear about your revelations once they are inevitably published by the Guernsey media. I hope you’ve got a big PR team lined up – this story is going to be massive. 170,000 residents of the Bailiwicks of Guernsey and Jersey will be truly fascinated by your “facts” about our “new” constitution and how it came to be.
@Rupert
Can you let me have a copy of your constitution?
Richard
The constitutions of the Bailiwicks of Guernsey and Jersey are in precisely the same form as the United Kingdom’s – which is unwritten. Nobody has a copy, as you well know.
King John established the Bailiwicks of Guernsey and Jersey in 1204 by Royal Charter, granting both Bailiwicks autonomy from the English Crown.
Since 1204, in the absence of a written constitution, “the constitution is based on practice, custom, convention, usage and statutes enacted in Westminster and extended, by consent, to the islands.”
The British Crown, the United Kingdom government, the European Union, the OECD and the British Commonwealth, amongst others, all recognise the constitutional status of the two Bailiwicks.
The constitutional status of the Bailiwicks of Guernsey and Jersey are no more or no less formally recorded than the constitution of the United Kingdom.
I’ve answered your question – no formal written constitution exists.
Now please answer my questions – they are all very clear.
@Rupert
So you have no constitution bar “the practice, custom, convention, usage and statutes enacted in Westminster … extended, by consent, to the islands”
So Westminster law applies
And with their consent and approval you can as, for example Northern Ireland does, make law within accepted boundaries
Cross those boundaries and it is Westminster who says you are unconstitutional and steps in (why else are their Crown Officers present in the islands?).
Sorry – you make my case for me. Your law is utterly dependent fro legitimacy on Westminster who sets the terms or reference under which you hold devolved power which you can use so long as you do not abuse it
Is there anything else to add? After all this is the substance – as I said all along – and you have agreed it is correct
You just cling to a quaint notion that there is a form of independence – which is true, but only with the consent of Westminster
Richard
No, anything originating in Westminster is only extended, BY CONSENT, to the islands. If the democratically-elected House in Guernsey does not consent, then the statute from Westminster has noo effect.
As an aside, as the United Kingdom’s own constitution is similarly undocumented, how does that leave the UK in relation to the Channel Islands? It is no more or less absurd for me to claim that the United Kingdom’s own constitution is invalid because it is not formally documented.
Read the Kilbrandon Report and the House of Commons Justice Committee Report. I think you will find that they disagree with your opinion. Or, just like the OECD and the IMF, will you disregard their conclusions because they don’t suit your agenda? For goodness sake, how did the EU agree Protocol 3 in 1972 if the Bailiwicks had no constitutional standing? That was express recognition by the EU of our constitutional status.
Now, are you going to answer my 4 questions or not?
@Rupert
If you can’t get the reality of an unwritten constitution right – and that in this case it is as I say it is – you are tolerated so long as you stay in line – why answer the rest?
The truth is a simple one – at the end of the day you will do as told – by London or the City of London – not the same thing, I admit – and unless you do (and play one off against the other successfully) your days are numbered
That and the fact you’re going bust of course
Your ‘constitution’ will count for nothing then
This is the real world
Now I’m ending this debate – simply because you show no understanding at all – and that makes it a waste of time
Richard
What you mean is that you can’t or won’t answer my questions. Don’t worry – I will ensure that the Guernsey media ask you the very same questions.
And we aren’t going bust – why do you think our States just rejected GST? We don’t need it. Hardly an act of a jurisdiction going bust is it?
There’s a pattern emerging regarding threads on this blog that you aren’t able to win – you choose to end the debate whenever backed into a corner.
@Rupert
Look, the States of Guernsey is as naive as you
Do you honestly think any behaviour on its part is indication of prudence
As for debate – you’ve so resoundingly lost I’m bored
And I can’t even find four questions to answer….
Richard
This is the first time I have looked at your website (a friend recommended I did so) and I have to say that I’m not at all impressed. You appear to take no notice of history, seem unwilling to answer legitimate questions, and to be honest come across as arrogant and immature, not to mention rude.
As for Guernsey “going bust” you really are joking aren’t you? What is the island’s national debt? What is the unemployment rate? How many people live in poverty? How do any proposed cuts measure up to those in the UK?
You appear to live in a world where only your opinion applies, and crossing over to the real one is obviously beyond you.
@Chris
The view from inside a goldfish bowl is always different from that outside
You live in one
And why are you going bust? Have you noticed your uncontrollable deficit?
What uncontrollable deficit would that be?
@Chris
I note you imply you are from Sark, but try leading the local press
http://news.bbc.co.uk/1/hi/world/europe/guernsey/8370182.stm
£42 million and rising
Where did I imply that I’m from Sark?
I am not arguing that there is not a deficit, but to state that it is uncontrollable is ridiculous. A good start would be to reduce the cost of the public sector which is undoubtedly over-staffed and inefficient. The cost of public sector pensions is another area that requires attention.
Coupled with some general “belt tightening” and fairly modest indirect taxation rises, I really don’t think the position is anywhere near as gloomy as you suggest.
@Chris
I’ve heard that story for so long now
And all that happens is that more is spent on consultants
You’re whistling in the wind