The EU Code of Conduct on Business taxation has five criteria which are the basis for assessment. They are:
1. Whether advantages are accorded only to non-residents or in respect of transactions carried out with non-residents
2. Whether advantages are ring-fenced from the domestic market, so they do not affect the national tax base
3. Whether advantages are granted even without any real economic activity and substantial economic presence within the Member State offering such tax advantages
4. Whether the rules for profit determination in respect of activities within a multinational group of companies departs from internationally accepted principles, notably the rules agreed upon within the OECD
5. Whether the tax measures lack transparency, including where legal provisions are relaxed at administrative level in a non-transparent way
As many readers will know, the three Crown Dependencies opted for what has been called a zero / 10 system of taxation of business profits made by limited companies trading in, or registered in, their domains as a consequence of pressure brought to bear on them as a result of the introduction of the EU Code of Conduct.
The logic of the zero / 10 system, which was once called “a neat piece of foot work” by informed commentators in the Isle of Man, was always to get round the requirements of the EU code, and not to comply with it. I argued this in 2005 in a report I prepared for the States of Jersey. Unfortunately for the Crown Dependencies the EU could not consider the issue until their laws were in force, but now they are, and informed sources tell me that the EU has now considered the issue of Jersey and the Isle of Man, but not for Guernsey who have already agreed to reform their system. And that informed source tells me it is bad news for Jersey and the Isle of Man: they have failed on the first three criteria noted above, but have passed the last two.
I am not, as yet, sure whether Jersey and the Isle of Man know this. I've certainly seen no mention of it as yet in the press.I can assure you, however, that my sources says that this news is winging their way very soon. And it entirely justifies the claim that I've made since 2005, which is that these tax systems were deliberately created to get round the requirements of the EU Code of Conduct, and were never designed to comply with them.
It’s a shame the Jersey did not listen to me in 2005, when the then Chief Minister, Sen Frank Walker refused to meet me and the Scrutiny Panel that was discussing the issue, and when Sen Terry Le Sueur, who now fills a similar role said I was straightforwardly wrong. I hope he has the grace to admit he was wrong now, but I won't hold my breath.
I would, however, suggest that the people of Jersey take note. The only two organisations to have consistently got their tax and economic predictions for Jersey right are the Tax Justice Network and Tax Research UK.
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Oh Noooo!!! They’ve hardly had enough time to enjoy the smug feeling after that Moodys rating!!!
Richard
You asked the question of why Jersey didnt listen to you in 2005. I suspect that it was because they were unable to distinguish between (a) you acting in the capacity of an impartial and unbiased advisor, and (b) you being known to be so vehemently against zero-10 based on your openly-stated beliefs. In other words, did they think you were advising them against it because you genuinely thought it wouldn’t succeed, or merely because you didnt like it?
Your subsequent attacks on the consequences of zero-10 on this blog rather suggest that they based their opinion on (b). Wearing your blogging hat at the same time back in 2005 may well have been hugely influential.
That seems to me to be a very fair question.
It rather looks like Guernsey may have called this one right recently, albeit Guernsey would have been happy for Jersey and the Isle of Man to have won the EU Code of Conduct hearings.
@Rupert
Poor dears
Am I really so intimidating?
Or was it their own prejudice that blinded them?
Richard
Not intimidating – don’t flatter yourself. I suspect they didnt trust your motives. Put yourself in their position and it might be obvious why they may have reached that conclusion. I don’t think you could claim to have no broader agenda, knowing what we all know now about your views.
Richard Murphy
Judging by “Rupert’s” bile against your work as demonstrated on the Guernsey Press comments site, it is purely blind prejudice. Since you get it right so often, it’s no wonder that the likes of Rupert despise your analyses.
The latest is that the secrecy jurisdiction list and other such lists are “mythical”.
Rupert says:
“Your subsequent attacks on the consequences of zero-10 on this blog rather suggest that they based their opinion on (b). Wearing your blogging hat at the same time back in 2005 may well have been hugely influential.
That seems to me to be a very fair question.”
It may be a fair question — but even if the answer is “yes — that was a part of the thinking of the Jersey authorities” — that fact hardly excuses or mitigates the stupidity they displayed.
Facts is facts — as the saying goes; and whether one agrees with Mr. Murphy’s politics or like him as a person — is quite irrelevant to the task of coming to an effective, competent decision in respect of long-term fiscal and economic planning for the community of Jersey.
Even if, for argument’s sake — and taking the hypothetical view of a Jersey establishment politician — and thus assuming a love of off-shore and a profound disagreement with those who oppose it — by any intellectually credible analyses, zero/10 was never — ever — going to work. And only a damn fool could have imagined otherwise.
Responsible politics requires coming to evidence-based decisions — rather than letting petty factionalism cloud and sway one’s judgment.
Sadly, for the people of Jersey, I have no difficulty at all in imagining that the kind of shallow, irrational factors suggested by Rupert did play a large part in the thought-process — if it deserves such description — of the Jersey oligarchy.
One cannot escape the conclusion that a government is intellectually bankrupt and mired in a kind of terminal decadence when its entire apparatus can be swayed from facing facts — just because it doesn’t like a particular messenger.
Stuart Syvret
Wasn’t the biggest factor in all of this that following the Isle of Man’s premature decision to change their tax regime, the other crown dependencies felt that they had to follow suit or be faced with a finance industry eager to up sticks and leave?
@Rupert
Of course they did not trust my motives
They did not trust anyone – whatever tone they adopted – who suggested they could in any way be wrong
It was supreme arrogance that blinded them – led by the absurd belief of the finance sector in the power of neoliberal economics (which few if any of them really understood) that got them to this position. No chance in my approach would have altered that, at all. Reasoned argument was beyond them – but it was reasoned argument I supplied
Stuart Syvret – a man with whom I have had differences in my time – and with whom I have shaken hands since and agreed to put issues behind us – can see that. Why can’t you? Is Arnald right?
@John Buckles
The race to the bottom always rules, eh?
Always a good excuse. Citigroup used it after all. Why not you? You’re going the way they did.
Richard (and others)
I would like to think, perhaps naively, that if somebody else other than you had advised them that zero-10 wouldn’t work, then they might have listened. The fact that they knew you were an opponent of everything that Jersey stood for undoubtedly would have swayed them. In other words, you may well have been right at the time, but they sure as hell weren’t going to accept it from you.
Undoubtedly Jersey (and the others CDs) would also have been influenced by the lack of opposition to zero-10 from Brussels and Westminster. I don’t think we will ever know what exactly what was said and what wasn’t said, because those involved are not exactly open with details, but whilst its pretty certain that they weren’t told that it was “fine”, they equally weren’t told that it was unacceptable. That much is clear, although its about the only thing that is clear.
You yourself openly state that “of course they did not trust my motives”. Would it be fair to say that having engaged you to advise them and then rejected your advice, you have had the knives out for them ever since? If that’s the case then their decision to disregard your advice is entirely vindicated because your advice was clearly not impartial or unbiased, but is motivated by revenge.
I couldn’t care less whether Stuart Syvret has “shaken hands since and agreed to put issues behind us”. That’s his perogative. He is very likely to side with absolutely anybody who also attacks the Jersey estbalishment, as you then become an ally of his. I’ve never had any dealings with Stuart Syvret so that’s between the two of you. I’ve had many dealings with you on here and I fundamentally disagree with just about everything that you state or that you stand for, and also with your constantly barbed manner of putting your point across. Like most of your critics, I don’t like being attacked by you in your acidic manner, so of course I retaliate in kind. Your refusal to debate specific points last week with me on another thread is a prime example – you accused me of repetition but I repeated the questions because you simply refused to answer them, which is a similar stance to ones which you have taken previously. You constantly duck out of battles like that whenever it suits you, because you can – its your blog after all. Incidentally, that “reply” of yours was based on your response to another blogger about issues such as the lack of public company beneficial ownership records and company accounts being available to the public being taken completely out of context in relativity terms. On that basis, which jusridictions are NOT secrecy jurisdictions?
There are many posters on the This is Guernsey site who tear you (and Arnald) apart. Its quite a long queue. But no doubt you will wrongly take that as a compliment or an endorsement that you “must be right”.
The words Jersey, Isle of Man and Guernsey evoke the image of a few fat-cats sipping their champagne cocktails whilst in countries across the globe millions of people (particularly children) suffer starvation as a direct result of their government’s frustrated effort to collect taxes due in that country.
This is justified by the allegory that if a family of criminals came to live near you — but far enough away to be out of the jurisdiction of your police force — then the increase in economic activity generated by the proximity of these criminals will (in some mysterious way) have a stimulating effect on the economy of your neighboured!
The lunatics really are running the asylum!
I think 0/10 would have satisfied the EU if they hadn’t bothered with the absurd and convoluted rules on deemed distribution. Whether it would have been fiscally viable is another issue.
PSG – if you are so hostile to the Isle of Man, why did you choose to invest in a TEP fund established in the IoM? Or were you happy to support the “few fat-cats sipping their champage cocktails” (no cliche left unused!) as long as it adds 1% to your rate of return?
Richard, you may not realise this but failed Senator Stuart Syvret is due to be sentenced in the Jersey Magistrates Court tomorrow for data protections charges so don’t flatter yourself for his input at the moment.
Oh and 0-10 is not flawed and if it is until we hear it from a proper source why should we listen to this nonsence anymore?
Any idea when this news will be out of the bag or is it more scaremongering?
@Rupert
Tearing me apart may make the small minded feel better about their fate
But what is the benefit if I am consistently right? are you simply say that the plan is for Guernsey to stick its head in sand (or maybe the English Channel) until such time as it sinks? Is that what you in the financial services industry call a strategy?
Who cares whether I am liked or not? To me that is an issue of some indifference. Isn’t the real issue whether or not my analysis is right, whatever you may think of me as a person?
And as for your claim that that I refused to answer your question – I did so, many times over, repeatedly. The fact that you did not accept the answer simply suggests you come from Guernsey, not that I did not do what you asked.
isn’t it amazing that you still do not recognise answers when you do not like them? Aren’t you just proving that you are as guilty as the leadership of jersey in this respect?
I suggest you open your eyes, very quickly
@mad foetus
I think it a little more complex than you suggest. The failure was on three of the five counts, not just because of the deemed distribution. But I can assure you, the deemed distribution did not help.
@Charlie
I am well aware that Stuart Syvret is being prosecuted. I am also quite sure that the charges have been manufactured to suit a purpose. I have my own good reasons for thinking that the justice system in Jersey is heavily politicised. but that is beside the point. I no more asked Stuart to comment here than I did you.
and of course, you are at complete liberty to ignore what I said. But I’m entirely sure that I am right. You ignored me before, at cost to Jersey. You may do so again, at continued cost to Jersey.
Richard
Do you think the Gibraltar system of taxing only income derived within the Island would pass the test?
My feeling is that this is the route the Isle of Man will go down.
FWIW, my understanding is that if 0/10 is kicked into touch Jersey will move to a territorial tax system. As these exist in a number of EU countries already, it is hard to see that the EU could object.
Hehe.. what are these politicians if they ignore the warnings just because they do not like who is warning them.. idiots??? Richard’s arguments are sound, backed up by logic and evidence.
As for the IOM and taxation.. I expect that if the VAT sharing gravy train comes off the rails, and the 0/10 tax rules also go, they will choose 0% corporation taxes across the board to save jobs and stick personal taxation rates up. Lots of tax migrants who had bought property to gain their domilciled status will probably be snookered… while the IOM tax cap was in place they have probably been very happy to fully disclose all their sources of income, but when the cap comes off, the IOM GOVERNMENT WILL KNOW JUST HOW MUCH TAX TO DEMAND!!! Try and flee to their next tax jurisdiction and they’ll lose the house etc they just bought a few years previously! Not that it’ll be worth as much on the open market by then.. with high personal taxes to cover the government’s spending a lot of people will struggle to keep up with their mortgage payments, especially if interest rates also go up!
Indeed they will – the dogs bark, but the caravan moves on…
[…] reported yesterday that the zero / 10 tax regimes adopted by all three of the Crown Dependencies have failed the test set by the European Commission […]
“manufactured to suit a purpose”
Funny how a person who called you and John Christiensen out right liars in the local news for sometime and then went onto accuse the pair of you of blackmail still takes time to even talk to you now.
Its very strange to watch I have to say.
@Charlie
Grow up
I’ve met Stuart once, maybe twice – both by chance – one at least in the House of Commons – since that debacle
He turned up here this week without me asking – just like you
I decided to shake hands and move on when I met him
I think what he did was wrong – and won’t change my mind about that. The allegation was wholly unjustified and very inappropriately made
But these things happen in life and you move on
That’s what mature people do
It’s called forgiveness
I can’t believe zero ten will not be passed as satisfactory, after all I heard the great Frank Walker tell us all for many years that it had passed all levels of scrutiny and been approved. I and many others are convinced he must have been telling the truth, musnt’t he.
Rupert said
“There are many posters on the This is Guernsey site who tear you (and Arnald) apart. Its quite a long queue.”
No Rupert.
There are a few people that voice their ignorance of wider issues, basing their trust in their knowledge of a very narrow dynamic.
No one wants people to suffer,so if protecting tiny jurisdictions is more important at your personal level, rather than aiding the majority poor, then that is how the industry in the CDs should be marketted.
Then people could make up their own minds instead of this galling feed of untruths that we are subjected to.
Do you get pleasure from knowing that tax avoidance costs lives and development?
This comment has been deleted. It failed the moderation policy noted here. http://www.taxresearch.org.uk/Blog/comments/. The editor’s decision on this matter is final.
@Rupert
Mindless repetition of questions I have comprehensively answered – but not in a way you like – is not going to happen here
Banal commentary may be acceptable in Guernsey
I aim for something better
Maybe someone should read the article linked below, answering why the Isle of Man has heard nothing.
http://www.international-adviser.com/article/code-of-conduct-group-decision-on-zero10-may-not-be-taken-before-december
Also from a previous article on Isle of Man’s VAT payments to be reduced again, the Treasury Sec said in a written answer in the Commons that that is incorrect, and what ever the Isle of Man collects in VAT will be returned to the Isle of Man. Might I point out that many large UK companies who operate in the Isle of Man do not pay tax here they are taxed in the UK out of choice.
@Eddie Power
I reported a leak
I know there is a meeting tomorrow
The outcome may not be conveyed for am week or so
And then we’re in December
And the Treasury Sec said nothing like that at all. He confirmed the IoM was not going to get more than its fair share
Stop making things up
I did not make it up here is the answer:
VAT: Isle of Man
Mr Adrian Sanders LIB DEM TORBAY: To ask the Chancellor of the Exchequer whether he plans to renegotiate value added tax agreements with the Isle of Man. [23363]
Mr David Gauke CON South West Hertfordshire Exchequer Sec HM Treasury : We remain committed to ensuring that the indirect tax revenue sharing agreement with the Isle of Man provides the Isle of Man with the revenue that they would collect if they ran a separate indirect tax system.
Richard,
Do you think that you will get an update on the meeting taking place today?
@Tax Chimp
Yes
I do
Good good.
Will you be putting the details on here? The chances of getting any update by the IOM Gov is remote.
Hi Richard,
Do you have any update from the meeting that took place on Friday?
Anne Craine has announced this morning that the Conduct Group have told the Govt informally that they have “concerns” in some areas.
[…] I gather that the EU recommendations the code of conduct group that met last week was as I predicted: Jersey and the Isle of Man have both failed three of the five tests laid down by the code of […]
[…] I gather that the EU recommendations the code of conduct group that met last week was as I predicted: Jersey and the Isle of Man have both failed three of the five tests laid down by the code of […]
[…] tear that to shreds. Remember there are five criteria for assessing compliance with the Code. They are: 1. Whether advantages are accorded only to non-residents or in respect of transactions carried out […]
[…] tear that to shreds. Remember there are five criteria for assessing compliance with the Code. They are: 1. Whether advantages are accorded only to non-residents or in respect of transactions carried out […]