The economics editor of the Independent has written a review of Nick Shaxson’s book, Treasure Islands. To be candid, it’s easily the most cynical to date.
As he concludes:
[A]part from new potatoes, gold-top milk and some tourism, Jersey has little going for it economically. Nor do most of the British overseas territories fingered by Shaxson - which are only nominally under UK jurisdiction, a point he neglects or misunderstands. Most are too small and poor to be independent states, even with their financial income. As a second-best they have been granted self-government and they are, uncomfortably for the rest of us, entitled to levy tax as they wish as of democratic, sovereign right - though their self-government sometimes leaves much to be desired. Why should the UK bully them?
Besides, it is an ugly but unavoidable truth that if Jersey or the Caymans didn't do it, then someone else would. At least in "our" havens, we have a chance of keeping an eye on things. In tax, the one great wearisome certainty is that someone, somewhere, in some other obscure treasure island with an even more relaxed attitude to dirty money, will always undercut you in the great race to the bottom.
With the greatest pf respect for Sean O'Grady who wrote this he's wrong. It's obvious he knows he is too. These places - all part of the UK and issuing UK passports - are not self governing any more than the Isle of Wight is. So long as they tow the line they can create their own laws, but all their laws are scrutinised in London, are subject to UK approval and we have the right to legislate for them and take them over when need be - as we have with the Turks & Caicos Islands right now. So much for self government. That's the convenient charade that suits the City, Westminster and these places and the financial services industry rather well. Implicitly he recognises this in his comment on being 'second best'. This shows he knows the charade is a simple game of legislatures for hire.
And again, with the greatest of respect to Sean O’Grady the logic inherent in this analysis is only becoming of an economist, and a poor one at that. His argument on the race to the bottom is akin to saying ‘let’s not bother about crime as it will always be with us’. Or ‘let’s ignore the drugs problem as there will always be addicts’.
We don’t say that of crime, and for good reason. Nor do we say it of drugs, although the reality is that the statements I have made are true.
The difference in this case is that these statement he makes is simply not true of tax haven behaviour. As is being shown time and again, action is working. Under pressure tax information exchange agreements are being signed. As experience of them inreases people are demanding that they be made to deliver. India’s is the latest voice at the table. And as the EU has shown this week, contrary to all that Sean O’Grady says the EU and the UK have real power to impose change on the Crown Dependencies and demand real change, whether they like it or not.
O’Grady is wrong. There is no need for a race to the bottom. There are extremely effectiveweapons that can be used to tackle tax haven abuse. Automatic information exchange is one, and a simple mechanism for achieving this goal that makes tax information exchange agreements worth having is available. / so we would know what profits are recorded by multinational corporations in tax havens, and what tax is not paid as a result. Registers of beneficial ownership of trusts and corporations would transform tax haven secrecy. And the use of a genuine unitary basis of taxation would almost eliminate the allocation of tax haven profits by multinational corporations at least.
The argument that the race to the bottom is inevitable is not in fact an argument at all. It is a statement of political wish, that the status quo be preserved and that as a result the abuse continue. But that is not necessary, at all. The members of the Task Force on Financial Integrity and Economic Development have shown that there is a viable alternative to this abuse. Apologists need to smell the coffee: we're not going to let them get away with saying the abuse of the world's tax systems is inevitable and nothing can be done about it because that's just not true any more.
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It’s really striking how there have not been any negative reviews of Treasure Islands with substantive or technical criticisms. There is clearly a cognitive dissonance here with many people who simply think that as the current situation has arisen without any fuss it must be a natural state of affairs– Hume’s “is-ought” fallacy.
That aside the review is full of tendentious (or just plain stupid) statements, such as
“It (Offshore) has its origins in the reasonable desire of international companies not to pay tax twice on their profits”
Errr no. It (Offshore) has its origins in companies selfish desire to pay less or no tax once in the appropriate place by paying a peppercorn rent to a flag of convenience statelet.
@Richard
If the level of defeatism and cynicism shown in your excerpt is a mark of O’Grady’s general attitude, Richard, then there’s not much point in listening to or reading much of what he says. We may as well go out and shoot ourselves now!
Luckily some of us don’t take such a dim (Hobbesian) view of all humankind – though I admit that it’s difficult at times when confronted with our current government, and many of the cheerleaders for neoliberalism.
With the greatest of respect for you, Mr Murphy, you are the one who is wrong here — and it’s obvious that you know you’re wrong too. None of the places you describe are part of the UK: that is not a matter of opinion but a simple, thoroughly documented fact. I have corrected you on this before, but you have chosen to repeat this nonsense either because you don’t understand the real constitutional position or because it suits you to dissemble. Either way, I don’t think you appreciate the damage that making assertions that are demonstrably untrue and easily checkable does to your credibility. You are, however, quite right that the passports issued in the Crown Dependencies are UK passports in all but name, which underlines the ridiculous constitutional position that attaches to the Dependencies and the Overseas Territories.
All the laws in question are indeed scrutinised in London and subject to UK approval, but convention demands that this cannot unreasonably be withheld — only when it can be proven to be detrimental to the islands’ ultimate good governance or contrary to their agreed international obligations.
Nor does the UK “have the right to legislate for them and take over when need be” — it would be able to do so only when capable of justifying its actions to (a) the local residents and (b) the international community. This was clearly the case in Turks & Caicos, where a corrupt government had become installed; it would not apply to, say, Bermuda, which in my view has been badly governed for many years but where such intervention could never be justified. The consequences of imposing direct rule on a population of between 60,000 and 100,000 people who regarded it as an effective coup d’?©t?¢t would be catastrophic: aside from widespread civil disobedience against the occupying administration, Britain would be opening itself up to terrorism on a scale similar to that deployed by the IRA during the seventies.
You are right that the EU and the UK have power to impose change on the Crown Dependencies, but only within the parameters noted above: in this case, the relevant Dependencies were duty bound to adhere to international regulations to which they had expressly agreed. In return, the Crown Dependencies and Overseas Territories have the power to declare independence following successful referendums: this happened in many small island remnants of the former British Empire during the sixties and seventies, and I do not doubt that it will happen again.
@Iliam Dhone
And as you well know that’s all a game you’re playing
It suits you well to play it
But it’s not real life
That’s what I’m describing
By all means play your games – but we’ve seen through them
Mr Murphy, you are incorrigible. It is not a game to state that you have made a factually incorrect statement, or to assert that your comparison of, say, the Isle of Man to the Isle of Wight is nothing short of ridiculous. (As indeed, it would be if I were to compare the Isle of Man to the Seychelles, a similarly-sized former Crown Colony that declared full independence back in the seventies.) Real life is that the Crown Dependencies have a totally different constitutional position to the constituent parts of the UK — and yes, a totally different constitutional position to fully independent countries. To state anything else can only make one appear ill-informed, simplistic or wilfully reductionist.
@Iliam Dhone
Or more accurately, it is simply to say that London gets its way in the end
As it does
It has suited London to let these places play their games
Now it doesn’t – the zero / ten moves are not chance
It would appear, Richard, through your last post that your are implying that “Might is Right”.
You may want to reconsider that. If it were to be your position, that London gets the last word, when the only way it can achieve that is through military or economic blackmail, then any claim you made to be a balanced, fair observer would be completely and permanently disproved.
As I’m sure you’re aware, there is a growing movement in several crown dependencies to choose independence in preference to further interference from London, perhaps couple with alliance to another state outside UK & EU control. London is walking a fine line to avoid this looming, and perhaps inevitable, constitutional crisis. At the same time ill-informed and deceitful pundits such as yourself are pouring further fuel on the flames of independence – an independence which would channel tens of billions out of the UK and into foreign markets.
Perhaps you ought to ask yourself whose side you’re on? Truth? Justice? Freedom? The UK? If these are your interests they seem strangely misaligned with and badly served by your words and actions.
Your last post is a clear, irrefutable admission that your earlier representations of the constitutional position of the Isle of Man, and its separate relationships with the Crown and the UK, are false, inaccurate, distortions, unrelated to truth. Wake up Richard, if 1% of your assertions are demonstrably false, what value may be attributed to the rest?
Mr Murphy,
My apologies for going off-topic, but perhaps you care to post your views on the shocking revelation today that Barclays paid only £113m in UK corporation tax in 2009 on profits of £11.6bn:
http://www.guardian.co.uk/business/2011/feb/18/barclays-bank-113m-corporation-tax
This must be particularly embarrassing for Bob Diamond, given his recent testimony at the Commons Select Committee. Although he was no doubt technically correct with his submissions, its evident he did not fully embrace the spirit of discussions. Maybe the time for “remorse and apology” is not quite past.
Best regards
David Mercer
covertfox.com
Let’s do this in simple exam style.
Background
Most are too small and poor to be independent states.
Question
What are they?
Answer
They are UK dependent.
Apologists for UK tax-avoidance terrorism industry must be wishing he’d kept his mouth shut.
“These places – all part of the UK and issuing UK passports – are not self governing any more than the Isle of Wight”
The Isle of Man is legally a separate country which has its own Parliament (Tynwald I think) and Westminster is responsibly solely for defence and international treaties – no idea how technically the head of state is though
Channels Islands are each a separate country with their own parliament and like IoM, Westminster is responsible for defence and international treaties only. Head of State is the Duke of Normandy – who of course happens also to be our Queen.
On this point you are wrong
Supposing the UK did push the Isle of Man too hard and the Manx people backed a call for independence from the UK. The UK would find it difficult to deny such a request, particularly in view of the United Nations General Assembly’s proclamation on 14 December1960 concerning the granting of independence to small nations:
http://www.un.org/Depts/dpi/decolonization/declaration.htm
Then supposing the newly independent Isle of Man formed an alliance with the People’s Republic of China, offering them a military base just outside Douglas in exchange for an annual fee which far exceeded the income currently derived from shady tax dealings.
Interesting thought . . . . .
Let’s be clear what I am saying here.
These places are not states. So let’s stop the pretence that they are. States issue passports. States qualify for membership of the UN, and much more. These places do none of those things. So let’s get facts straight.
Yes, the CDs have a form of self government. But under the British Crown and that means parliament – let’s stop the twaddle about the Duke of Normandy
And the reality is this was done historically because they were distant, remote, and hard to govern. All islands are. And they evolved on that basis. So too incidentally did the Isles of Scilly – but in 1953 they opted into UK income tax in exchange for a hospital – and a unique form of unitary authority
So far the CDs have not done that.
The reason why they’re not independent at all is we’re responsible for them – financially. The NAO has concluded their liabilities are our liabilities – as they are under UK rule.
And we do approve their legislation. Sure it’s passed locally – but I’m not a fool writing stuff here that is knowingly wrong although many would like to think that. I made serious enquiry when working in Jersey. It’s very clear Whitehall makes its opinions very clearly known. Ultimately it expects compliance. The MoJ and Treasury both have active engagement, often, for that reason. That makes these places about as autonomous as the City of London – another tax haven
And as the Turks & Caicos prove, we can walk in. As we did also in Northern Ireland – also theoretically self governing when we have done so
It may suit you to claim all you do – but it’s folk lore, and even to some degree tradition and no harm in that. But the buck stops in the Uk, unambiguously. And independent existence is also as a matter of reality nigh on impossible in these places – for all the bluster
I look at substance and ignore form – form is the game tax havens all play – and I seek to see through it. Do so and these places are convenient branches of the City of London – semi autonomous places that serve a financial services elite
When that ceases to be useful so will they be. That’s the reality. And that’s why I am quite sure I am right. You’re welcome to subscribe to your fantasies and play the game they give rise to. I prefer to look at reality
Ah Richard,
The Crown is the UK Head of State. And the Head of State of Australia, Canada, IoM and others. The UK Gov’t performs some administrative services on behalf of the Crown – and sometimes it gets some jumped-up ideas.
Can’t speak for the CIs, but IoM makes independent international agreements – state to state (including with the UK), recognised under international law (including by the UK). Doesn’t sound like the actions of a subsidiary or province. As a small state it has administrative, defence and representation agreements with UK – agreements the UK sometimes honours and sometimes tries to avoid, but the reality is that IoM can move those agreements, agree to work with another state, such as Norway or Ireland, or form an alliance with for instance a coalition of other offshores, and there is little the UK could do other than military intervention – IoM is an independent nation. Perhaps too small to have an international role without the support of a larger partner, but independent nonetheless.
If the NAO believes it is responsible for IoM liabilities it has probably overstepped its authority – a matter that would have to be tested in court. The buck does not stop in the UK, and unlike IoM the UK is arguably no longer a sovereign nation – it is governed by the EU.
Again it’s clear that you don’t understand, or don’t wish to understand, the difference between a self-administering province or region, such as NI, Scotland, Wales, and the IOM. Where is the IoM’s representation in the UK parliament? There isn’t one. Each and every test one considers shows that IoM is as independent from the UK as the UK is from the USA.
All of which is immaterial. Your issue seems to be that some regimes succeed in functioning with a lower tax take and burden per capita than the UK – and you call these places tax havens. I’m sorry, but we can’t help it that the UK state is so inefficient, corrupt, and bloated that it cannot afford to compete in an international market on the basis of state efficiency. Your problem, not ours, you choose to live there, we don’t.
When UK resident businesses succeed in avoiding UK tax on their UK earnings your rants have relevance, but the reality is that the international businesses with presence in lower tax regimes, earning money there, paying employees and taxes there, have no reason, moral or legal, not to do so. There is no difference between establishing a subsidiary in France, Ireland, IoM or Delaware. As long as the company pays its dues where it trades it’s in the right. If that happens to be somewhere with a lower cost base than the UK, well it’s only common sense. No different to choosing to set up a factory in Yorkshire because it’s a cheaper place to operate than the Square Mile.
Incidentally, My passport is an Isle of Man Passport – not a United Kingdom Passport, issued by the Isle of Man, not the UK. Yet again, in the opening paragraph of your last post, you willfully and dishonestly misrepresent the situation. The Isle of Man’s interests are represented in the UN by UK, by agreement – it doesn’t have to be that way. There is considerable desire for change, and it may be that our next general election in September takes us a few more steps in that direction. We are sovereign – it’s our choice, it’s not up to London or anyone else.
Face up to a little reality. IoM may be small in a big world, but it has its own voice, rights, laws, sovereignty. If push comes to shove, London can go hang. And if the IoM chooses to have lower taxes – that is its sovereign right.
@Richard Murphy
I think we’re agreed that the Crown Dependencies and Overseas Territories are not states, nor sovereign, nor entirely autonomous, for the reasons you’ve stated. The problem I have with your original posting is its level of reductionism — suggesting that the Isle of Man and the Isle of Wight have the same constitutional status is plainly, factually wrong, and introducing Turks & Caicos, Northern Ireland and even the City of London into the debate further muddies the waters as these have completely different constitutional positions yet again.
As for “writing stuff here that is knowingly wrong”, with respect I think you have done just that; it is a simple matter of fact that the Crown Dependencies and Overseas Territories are not part of the United Kingdom even if they are to some extent under British control, yet you have explicitly stated that.
I also think you have drawn the wrong conclusions from Turks & Caicos. Yes, Britain can suspend elected government in the Crown Dependencies and Overseas Territories if “good government” there has failed, but as I have already stated such action has to be acceptable to the local population and international community. In the case of Turks & Caicos, a corrupt elite was distorting the democratic process and in Northern Ireland two sectarian factions were on the verge of going to war. This is completely different from the UK simply not liking the direction in which a territory’s government is going. (Aside from which, Northern Ireland is part of the United Kingdom, so this is a misleading comparison to begin with; really it’s no different to the army intervening in riots in Brighton or Bognor.)
Further, UK intervention in Turks & Caicos has not brought the islands into the United Kingdom or even the UK tax net: the islanders still pay no direct tax and are ruled by the Governor not by parliamentary representation in Westminster. Why? Because the UK has no remit to do otherwise, and the Governor is sensible enough not to want 36,000 revolting natives on his hands. Indeed, the plan is to return Turks & Caicos to self-government as soon as corruption has been rooted out in its political system, so long term there will be no change to its constitutional status or level of independence.
You may believe that the Crown Dependencies and Overseas Territories will one day fold into the United Kingdom. Some may do so, but I suspect the majority will choose independence. In the case of the Crown Dependencies, independence and membership of the European Union would seem far more sensible. As the zero/ten issue proves, we are subject to European regulation in any case, so why not cut out the middleman and benefit from European membership and representation at the same time?
Finally, could you please cite an online source for your material regarding the Isles of Scilly? I am very interested in constitutional matters regarding island communities and have never heard of the islands being exempt from UK tax before 1953 (which does not, of course, indicate that you are necessarily wrong about this).
Richard
I suggest that you come to the islands and repeat what you’ve just said. You wouldnt get out alive. You say that you ignore form and focus only on substance and reality. You would very quickly find out both.
You may not accept or recognise our constitutional status. Fortunately what you think counts for zilch. Westminster and Brussels don’t seem to have any problem recognising our status. Its their view that counts.
Sean O’Grady wrings his hands at the scale and symptoms of abusive tax avoidance and evasion, but then ends with a counsel of despair ‘. . if Jersey or the Caymans didn’t do it, then someone else would’.
That is a ridiculous non-sequitur. International agreements could establish a ‘moral high-ground in-crowd’ (i.e. the OECD countries and others), which would agree to tax at (say) 50% all cashflows (no questions asked) leaving an in-crowd regime to an out-crowd regime, or arriving from an out-crowd regime into an in-crowd regime. Thus, all cashflows (no questions asked) ‘through a tax regime black hole’ would be taxed at 75%.
The in-crowd would not need to ‘bully’ the likes of Jersey or the Caymans (as Sean O’Grady would characterise such actions). All such taxation would take place within the in-crowd regime concerned. All out-crowd regimes would be perfectly free to do what they liked within their own regimes, but would have to concede the same freedom to in-crowd regimes.
This proposition, by serendipity, would highlight the weakest link in the money laundering process (for the ill-gotten gains of drug and general crime, for untraceable funding of political influence, and for the funding of terrorism). No legitimate concern would willingly concede double taxation on legitimate cashflows. Therefore, it would be reasonable for the authorities to assume that the very small residual volume of cashflows through out-crowd regimes were suspect, and could concentrate their resources on the in-crowd part of those cashflows.
@Rupert
good to see you’ve resorted to advocating physical violence now. I think it implies you’ve lost. And of course you have.
Also so amusing you keep on digging when in a hole:
“Westminster and Brussels don’t seem to have any problem recognising our status. Its their view that counts.”
Yes, Brussels have just told the UK to sort you out – and the UK has told all the CDs to do so, unambiguously, and you all jumped.
That says it all really, doesn’t it?
Thanks for making it all so clear that you’re little better than glorified county councils – acting within the limts allowed to you
@Iliam Dhone
Please don’t be silly – the EU won’t have you
Do you honestly think Germany is going to say people like Philip Ozouf (a small town councillor at best) can veto its wishes
Grow up
@Iliam Dhone
No on line source – read it in a history of Scilly about a decade ago
@Steve
Let’s stop tis drivel from you
I’ll do it with one example of why you are wrong. Of course your passport says IoM on it – but any UK citizen applying for a passport in Douglas will be issued with one saying IoM on it – it means nothing – it’s A UK passport with a cover saying IoM. An EU passport even – as a result!
So stop playing silly games – because all you’re saying is just that.
Sure you make agreements with our permission. You couldn’t until we said you could – very recently – but the truth is you disclose your completely abusive hand with your comments on tax
Play your games if you will – but you will be rumbled – and have been
No further discussion is being entered into on this issue- because no successful counter argument to what I have said has been presented
Rupert
I’ve never read any so stupid.
We’ve been through this before on the Guernsey Press site. The UK made it quite clear that if Guernsey made policy that was in any way contrary to the direction the UK wanted to take, then it would intervene.
As for the “getting out alive”, you’re just having a laugh. Many Guernsey people wouldn’t mind closer relations to the UK. Look at our students, passengers, health agreements etc.
Get real, and get off your finance bubble. It gets more rank every day.
I repeat comments are now closed – I have deleted a number that simply reiterate errors