A leak of the OECD's peer review on tax information exchange agreements for Jersey has been leaked on this blog - and not by me, for a change.
What it makes clear is that:
Since January 2007, Jersey has received 36 EOI requests, made by 7 different EOI partners.
As is now known to be true, this report is currently stalled because of objections raised by Norway ( and maybe other countries as well), but I'm quite sure that this factual information is correct.
Jersey likes to claim:
The Island decided early on in its development that the long term future lay in being recognised as being cooperative, transparent and well regulated with a strict adherence to international standards.
If anyone - Philip Ozouf included - thinks that exchanging 36 pieces of tax data in more than four years makes a place transparent then they need help with their understanding of the meaning of the English language.
The reality is that it is a secrecy jurisdiction with £367 bn hidden away in it in December 2010.
And as is also true, it's a place that has signed tax information exchange agreements knowing them to be almost entirely ineffective. I explain why in detail here, where I note:
TIEAs incorporate an inherent problem. A request for information under a TIEA must provide or state:
(a) the identity of the person under examination or investigation;
(b) what information is sought;
(c) the tax purpose for which it is sought;
(d) the grounds for believing that the information requested is held within the jurisdiction of which request is made;
(e) to the extent known, the name and address of any person believed to be in possession of the requested information.
The reason for the low number of information requests becomes obvious immediately. There is considerable secrecy within tax havens. This is either created by law e.g. those that establish banking secrecy, or through the combination of legal entities and professional services designed to ensure that the activities of those availing themselves of those facilities are opaque. As a consequence it is, for example, exceptionally difficult to link bank accounts operated by a company in turn controlled by a trust with a particular taxpayer in another jurisdiction who may or may not be settler and / or beneficiary of that arrangement. In consequence the existence of TIEAs is immaterial: the reality is that they have little or no practical value in very many cases because the ‘smoking gun' required to trigger the information request either does not exist or cannot be created to the standard required by the Tax Information Exchange Agreement process.
I said this in 2009 when there was a rush to sign these deals: I will say it again now. Tax information exchange agreements are hardly owrth the paper they're written on without the smoking gun to ensure that orher countries are aware that their taxpayers have interests in the location that signs them. This latest evidence from Jersey proves that.
And it surely ends the claim of transparency for good - because that is shown to be straightforward nonsense.
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Excellent exposé Richard.
Those who construct tax evasion/avoidance vehicles are dedicated to devising ways to make it impossible to trace the beneficial owner of assets. And rather like a computer virus as soon as a “cure” is initiated the virus transmutes and the game begins again.
So from this perspective there can never be an antidote.
The solution lies in preventing places like Jersey, the Isle of Man and Guernsey from hosting the teams of bankers, lawyers and accountants whose sole vocation is focused on tax — and how to avoid paying it.
But Harry says all Jersey’s clients are tax compliant!
That explains why only 37 dastardly clients, ruining the reputation of the clean island, deserve to have their info exchanged!
It would be interesting to see how many requests were made, and now many were rejected.
Mark
Really? Where did I say that? I said all of my company’s clients were tax compliant and that I know of many more fiduciaries’ clients are fully compliant. I have also said on this blog that I believe many of the banks may not have fully tax compliant clients. Please get your facts straight when stating what people have said or not said. Attention to detail doesn’t seem to be your personal string point but let’s not allow the facts to get in the way of propaganda shall we?
Richard
Just to be clear, are you blaming Jersey for breaching it’s obligations under the TIEAs or are you blaming the TIEAs for not being effective? I’m sure as a buisnesman you will fully appreciate that if Jersey was to provide information to third parties outside the legal protection of the TIEA then the parties concerned would be in severe breach of data protection legislation as well as in breach of their obligations to their clients. By all means attack the TIEA provisions, but I don’t think you can credibly attack Jersey for complying with them !
36 is quite a lot I suppose. It’s better than none surely and this proves just how helpful and nice tax havens really are.
I have to point out to readers that you are from the Isle of Man
And I’d add that your comment is as crass as most comment that comes from the island
Harry, it seems clear to me that Richard is attacking Jersey’s well publicised spin of “we are clean, we have all these tieas to prove it etc”.
I am a mere layman in financial terms but even I can see they are ineffective as drafted and as such should not be lauded by the islands spin masters as supreme methods of making sure we don’t have any money here evading tax.
The problem is it appears that Jersey has complied to the level it was asked to. Why should it go further?
David
There can’t be anybody out there, including in Jersey, who thinks that TIEAs are worth the paper that they are written on. But the fact is that all jurisdictions were ordered to sign up to so many of them to avoid being on an OECD blacklist, and that’s exactly what happened. Jersey didn’t of course draft the terms of the TIEAs – they signed up to what was asked of them. Nothing more, nothing less.
However, Richard seems to be attacking Jersey for “only exchanging 36 items of information” under the TIEAs. But we don’t know whether that’s a rare of compliance requests of 100%, 10% or 1%. If no request is received, no information can be exchanged. I repeat – Jersey did no write the provisions of the TIEAs.
I do agree that as everybody knows that TIEAs have no value, it is not clever to be using that as “spin” for being compliant. I don’t think too many people will be fooled by that. But at the same time nobody should be fooled into believing that Jersey is failing to meet its obligations under its TIEAs – a low number of requests means that a low number of responses is inevitable.
Nonsense, as ever
Of course Jersey has tried to write these in its own style
I assure you – it has upset a lot of people in the process
Note India, for example
They are not a fixed template
Richard
If there is anything in the OECD requirements that states that TIEAs must be automatic exchange, rather than information upon request, then please point it out.
India is the first country with which Jersey has had a problem. Do you know for certain that it came unstuck on the automatic exchange of information point? I’ve heard the real reasons from a very reliable source and understand that that this was NOT the sticking point.
But in any event, why on earth would Jersey voluntarily sign up to something which would go way beyond what’s being asked not only of Jersey, but of every jurisdiction around the world (including onshore jurisdictions)?
Because it says it wants to be open, honest and transparent
But it delivers the exact opposite
To the extent that it would commit economic suicide and give up being a financial centre that anybody would want to use?
Ah, so the secrecy that permits tax evasion and corruption is fundamental to your activities.
I understand now
But Harry!…?!
What’s so wrong with your tax complaint clients accepting automatic exchange? Liar liar is a great movie.
The PSG experience of the island’s “main seedy industry” is not pleasant ..
Neither does it appear transparent, open and honest.
Speak as ye shall find … there is something Machiavellian about Jersey.
Although the normal persons-in-the-street are irreproachable.
Richard
Let me spell it out. A wealthy tax compliant client has choices. He can be fully tax- compliant in an offshore jurisdiction which also respects his right to general privacy or he can choose a jurisdiction which gives him no privacy at all. And I’m not talking privacy from the taxman. You may place no value on such privacy and you may think its wrong that anybody is entitled to privacy but the harsh reality is that wealthy clients think its important and its they who will make that choice. Until there is a level playing field “privacy arbitrage” will always exist. That’s why your “Plan B” has no legs (at least yet).
Mark
Ditto. And you need to climb down off your high horse because I’ve already proved that you can’t get your facts right. At least Richard gets quite a few facts right.
LoL Harry.
Only a muppet would think that the place of majority of a board is equivalent to place where most of the key decisions are taken (not approved). A bunch of rubber stamping gooks ain’t gonna cut it.
“….the place of majority of a board is equivalent to place where most of the key decisions are taken (not approved)….”
I think this is exactly the way HMRC determines the location of a board, and therefore the tax residence of a company. Murphy has been vociferating against it for a while (see here for instance http://www.taxresearch.org.uk/Blog/2010/09/27/time-to-change-the-corporate-residency-laws/). Like it or not, but the facts are on Harry’s side here.
But the EU is looking through it
So does HMRC
Richard, are you implying that the rules have changed and that HMRC now determines the location of a board, and by extension the tax residence of a company, in different way? This would be news.
Darren,
Forget HMRC’s take. My words on place of effective management come from the OECD which is where the EU Commission gets its guidance for pan-European legislation.
This is the guideline the EU Commission will put out to the Member States on this directive..
Mark
There is no problem at all with that definition. For those of us offshore who are acting properly the decisions are unequivocally made ”in substance” by us. It will catch any “rubber stampers” as indeed it should.
Harry,
Thanks to your valuable and insightful input, we gonna ensure that the untaxed entities / legal arrangements listed in the directive’s Annex will be Paying Agent Upon Receipt even if they have at least one manager based in the same jurisdiction. This single manager will have to apply the provisions of the savings tax directive, irrespective if the majority of the board are sitting in a hut in Timbuktu.
Mark
In your usual aggessive manner, I see that you think that we are all “rubber stamping gooks” offshore. I’m very happy for you to carrying on thinking that as it will derail your efforts.
And not every jurisdiction even requires a locally-resident director/board member. Liechtenstein is in fact in a minority in that respect. But hey – if the entity has been wound up altogether and re-established/re-domiciled elsewhere then your approach won’t work either.
I frankly don’t care – as stated previously it really doesn’t concern my clients. I may well be in a minority in that respect but I won’t lose any sleep over it.
Harry
I think the whole world thinks you’re rubber stampers
If you weren’t you wouldn’t have your jobs
Richard
If that’s what you think that I can’t change that view. I know what I think and we will have to happily beg to differ.
Whenever there is an article about Jersey, the one thing that I always wonder is why anyone would want to bank there ?
Is it because they have greater financial security than any where else ? – seems unlikely ,Or they can generate more interest than all the other markets in the world ? again seems unlikely. Perhaps they charge very low for their services ? – again seems unlikely.
I’m left with the only 2 reasonable answers – low tax and secrecy . It can’t be high tax and secrecy – why would anyone want that ?
Am I wrong ?
No, you’re 100% right
@Mark
Don’t let Harry confound you.
Your facts are more accurate than the regurgitated propaganda that sometimes pepper his comments.
One problem inherent with involvement in the finance industries based on Jersey, Guernsey and the Isle of Man is that people are constantly exposed to PR “spin” – either producing it or being inundate with it.
Even those with strong wills and best intentions may succumb to this babble and start believing it.
Dangerous thing propaganda
The PSG has to point out to readers that it is not from the Isle of Man, Jersey or Guernsey
There is one thing you have overlooked. The barriers to a TIEA are high, but this means that if you can make a request under a TIEA, there is little reason to do so. Why? Because you would have to be quite far down the road of an investigation, at which point you say to the person you are investigating “we think you have a account in Jersey – tell us the details now or we will use the TIEA to find them out and impose an additional fine on you”.
In other words, the existence of a TIEA gives authorities greater leverage in their investigations, and only an idiotic person would not co-operate with an authority if the authority had signed a TIEA with Jersey.
Clearly automatic exchange is preferable but until competitor jurisdictions accept it the UK owned Jersey banks refuse to countenance it. I disagree with that approach but bear in mind those banks have been consistent in their view for years, despite some of them being majority owned by the UK government. Go figure!