Ed Miliband is giving an ultimatum to British tax havens. According to the Independent:
Ed Miliband declares war today on the UK's secretive offshore tax havens which he says could raise £2.4bn for the Exchequer and help to reduce the deficit.
As Ed Balls, the Shadow Chancellor, signals a major shift in economic strategy by admitting that a Labour government would be unable to reverse all of the coalition's cuts, Mr Miliband will expand on his theme of "fairness in tough times" by making those at the top of society contribute more.
In the Labour leader's sights are the Channel Islands and the Isle of Man, which shelter UK residents' cash which would otherwise have to be taxed by HM Revenue and Customs.
European Union loopholes allow UK residents to disguise money offshore held in front companies and trusts. The tax havens are not obliged to let HMRC know which British taxpayer the vehicle relates to.
The EU is attempting to close these loopholes, but Mr Miliband will say that this time-consuming process, which could take years, is allowing billions of pounds to go uncollected.
A Labour source said: "In these tough times, when unfair choices are being imposed on people — like cuts to tax credits, or changes to child benefit — everything needs to be done to ensure those that owe tax pay their fair share."
Mr Miliband will call on the Government to act as a matter of priority through diplomacy at EU level. The plans are an expansion of his theme, set out in his speech last week, for the deficit to be reduced through fairness — particularly tackling the richest in society, while defending the "squeezed middle" on low to middle incomes.
Tax experts estimate that as much as £2.4bn could be raised by calling time on UK tax havens. Richard Murphy, director of Tax Research UK, said: "Breaking tax haven secrecy is essential to collecting the tax that's the alternative to cuts."
The policy, which would be included in Labour's 2015 manifesto, is designed to show Mr Miliband is acting on reducing the UK's deficit amid ongoing questions about his leadership and the party's economic credibility."
And according to the Observer:
Ed Miliband, the Labour leader, is to demand that the government forcesJersey, Guernsey and the Isle of Man to reveal the identity of British tax evaders with money hidden on the islands.
The tax havens, which are crown dependencies, are costing the government billions every year as the rich protect their money from Revenue and Customs probes through front companies and trusts.
Miliband will this week call for negotiations to begin with the governments on the three islands. He will also demand ministers follow up the talks with threats to shame the islands on the international stage by placing them on a globally recognised blacklist drawn up the Organisation for Economic Co-operation and Development (OECD)..
The move is part of the Labour leader's attempt to define himself as the foremost campaigner in British politics against the excesses of capitalism. He will claim that every £1m raised by his policy on tax havens is equivalent to a year's salary for 50 newly qualified teachers.
UK residents with money abroad are required to pay tax in Britain on the income they receive, but many do not declare that they have money stashed away.
Jersey, Guernsey and the Isle of Man have not been co-operating with UK authorities' requests for the identity of people with money on the islands. Richard Murphy, of Tax Research UK, said the country could recoup £2.4bn.
I have already provided links to my workings this morning. They are likely to be an underestimate as they ignore tax to be recovered on capital hidden offshore.
I do, of course, welcome this move by Labour. My hope is it's the start of a whole campaign on the tax gap. That though is for time to tell. For now it makes very clear that the claim by the Crown Dependencies that they are transparent and all is now well with them is but a hollow sham: that is far from the truth. Now it is time for them to offer real reform if they are serious in their claim that they do not want tax evaders to use them, something that is all too easy at present.
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This is extremely good news, Richard, and well done for ‘oiling the wheels’ on this one. I’m increasingly of the view that as Cameron and Clegg continue to be forced to steal Miliband’s ideas on ‘caring capitalism’, to show how in touch with the plight of millions of ordinary people they are, we will see Miliband go further with these ideas. Maybe pensions reform next? You have a ready made policy there for him when he comes knocking. We just have to hope the Blairites stay out of the way.
There’s more tax stuff I hope first
Then pensions
But I have no say on such things. I just raise issues – if they pick them up I am pleased
How can any of us in the Crown Dependencies realistically object to attacks on any remaining tax evasion which might be going on?
We are already obliged to report any suspicion of tax evasion, so if any organisations are not complying with that they are committing a crime, with or without a trust or corporate structure in place, unless that structure is itself fully tax compliant.
I don’t believe for one moment though that the sum raised will be anything like £2.4 billion per annum. With income tax rates of an average of (say) 40% and interest returns of an average of (say) 1.5%, by my calculations you are projecting that there is interest on £400 billion of UK capital which is being undeclared!
Then you haven’t looked at my work based on real data
And you ignore ax on the capital sums
Its an appalling piece of spin blaming tax haven evasion on loopholes in EU rules. Governments of every shade have had it in their sovereign power to eliminate the offshore trust menace at any time since the 60s. They haven’t because of the lobbying of the “City” and the fact that these locations are where the 1% keep the family trusts through which much of their wealth is held. I can’t see the tories adopting this one anytime soon.
Fine words from Ed and I’ll believe it when I see it. Also there are plenty of other British tax havens like Gibraltar, BVI etc that should come under the cosh too.
I think you’ll find he’s got all the UK tax havens in his sights….
And so what they could have been dealt with? The hope is they will be
The UK government holds 83% of the shares in RBS. Why don’t they just ensure RBS gives them all of the details they want from those territories. If there are lots of evaders in that lot then they can ask for the government authorities to hand everything over. But if there aren’t, should it not give them pause for thought?
I’d do that
But lawyers say that’s not possible
So let’s create a level playing field
And we don’t need the evidence of that anyway to prove their a massive number of evaders – Jersey is already refusing to cooperate with the Uk precisely because it knows there are and that tax evaders are fundamental to its business – as you well know
If the Tories or Labour go ahead with those sort of plans I’d have a wager we’ll see one or two things firstly, those places targeted will go independent of the UK and secondly, you’ll see a flight of money to Hong Kong and Singapore etc. Taking on China/ Hong Kong would be quite interesting and pretty difficult I would suggest.
They could try independence
It wouldn’t work: we could still withhold tax
And you argue that because we can’t stop all crime we should not tackle what we can? Is that what you’re saying? Run me through the ethics of that
Any such money would leave for Asia regardless of independence.
Tax evaders are well aware that the likelihood of being discovered in the Crown Dependencies is infinitely greater than just about any other offshore jurisdictions and so will have transferred away ages ago. What’s left can surely only be held for the very brave or the very foolish.
I don’t understood how “you” (I assume you mean the UK) could still withhold tax…the interest is surely being paid by the Crown Dependency banks, not being paid to the. It is the payer who withholds tax is it not?
And where do the CI banks get their money from?
Run me through where I say we can’t stop all crime we should not tackle what we can. I never said anything of the sort or even intimated that. I commented about what I thought might happen in the future.
My interpretation is the only reasonable way your comment could be read
If you can’t see it that’s the plank in your own eye
It’s common offshore
The CI banks get their money primarily from two sources. Firstly, from the very heavily regulated fiduciary companies and captive insurance companies running tax-compliant structures for clients from all the world, and secondly directly from individuals. However the latter has dwindled considerably in recent years.
I still don’t understand your withholding tax point. Tax gets withheld on interest (and dividends), and is withheld by the payer of the interest and dividends. The word “withheld” is a clue.
I am sorry – but this is nonsense
There is no money in the CI – because there is nowhere to make money in the CI. All your money comes from elsewhere and all your money goes elsewhere. All you do is record it and what you’re paid is solely the consequence of the economic value attributed to that fact by those who abuse law and rehualtion elsewhere in the process.
And if that’s the case the withholding comes from the fac that the vast majority if the money claimed to be in the CI is in fac in London – which is where fax will be withheld n payments made
Remember in 2009 the OECD said it would impose sanctions on tax havens? Tax withheld at source was one of them. And since the opening up of tax havens has not happened – just as so much reform has not been delivered then the time for sanctions in the case of non-cooperation in the fight against tax evasion has to be on the agenda again
But there again – I am sure the CI authorities will cooperate – as they have said all along they do not want tax evaded cash
This is their chance to prove that in action
Richard
When did I say that the money in the Crown Dependencies was generated from within the islands? Of course it doesn’t – we are international financial centres.
And whilst the OECD did indeed attack “tax havens”, are you sure that the OECD actually classified us as “tax havens”?
Your logic re withholding tax is bizarre and unfathomable. Tax to be withheld by the UK on what? Capital transfers to fully disclosed and tax-compliant structures by UK residents ? How about transactions with Middle Eastern and Far Eastern residents?
Yes, the OECD has persistently considered you a tax haven
The UK still lists you as non-cooperative in the case of Jersey
And you only pay a return on income because it comes from the UK – and that payment to you for onward transmission could have tax deducted from it, very easily. This isn’t deducting tax from capital: it’s deducting tax from interest, dividends and other income paid to the Crown Dependencies, which would be fairly easy to do. And those seeking to shift the paying agent could be subject to a GAAR.
Richard
You are wrong. The Crown Dependencies are NOT currently listed as unco-operative tax havens by the OECD. I have no idea where you have got that from, but it is factually incorrect.
I’m based in Guernsey and I know that both Guernsey and the Isle of Man are not regarded as unco-operative by the UK. If you want to have a go at Jersey then have a go at Jersey, but please be accurate enough to get your comments right re Guernsey and the Isle of Man. We are three separate islands you know, with three separate governments. We do things differently to each other and at different times. Guernsey and the Isle of Man ALREADY exchange information automatically with the EU under the EUSD and yes, that of course includes the UK. Please get your facts right.
As for your ridiculous suggestion that the UK could intervene under Kilbrandon, that’s utter tosh, even in relation to Jersey’s refusal to become co-operative as far as the UK is concerned. What excuse are you going to use for Guernsey and the Isle of Man when the UK already considers us to be co-operative? We can hardly be attacked for being co-operative and giving the UK what it has asked for, indeed what the UK asked for when Labour was last in power!
I know OECD don’t list as uncooperative now
But they have done so
And they only don’t know because the OECD ludicrously said 12 TIEAs was enough to be compliant – which was amongst the more stupid things it’s done
You really don’t need to teach me facts – I know them
As for Guernsey being fully cooperative – no one believes that – least of all HMG – not least because your EUSD disclosure is on about 5% of all assets – so stop lying about your so called automatic information exchange – it’s a sham – like all else you do
And no one said the OECD standard was the last word – it was always anticipated by them and EU standards would push on – you’re ignoring that fact – all Labour is saying (as do the EU) is it’s time to move on again – and you need to up your act because you still very deliberately hide tax evasion. If you don’t you’d agree now
Was Guernsey ever actually listed as non-co-operative by OECD?
Little ol’ Guernsey does not tell the OECD what to do. The OECD sets the agenda. Don’t beat us up because we meet their requirements.
So our EUSD disclosure is based on just 5% of assets held here. Good reasons for that are assets held for non-EU clients (you just cannot or will not accept that we have a huge proportion of non-EU money here !), and also assets held in UK tax-compliant structures which do not therefore require to be reported under the EUSD as they are already disclosed. How can we report what is not reportable?
I think you will fund that the UK is actually targeting non-co-operative Jersey, not co-operative Guernsey. We do NOT operate the same way here, which I would have thought even to you should be obvious. That is not lying – it is reporting what is required to be reported. Yes, money could be held in non-compliant structures and be outside the scope of the EUSD, but what grounds do you have that this is actually happening today in Guernsey? Aim your gun 30 miles to the southeast if you like, but your comment is way off line re. Guernsey.
I have no doubt that EU standards will push on, although I don’t believe that the UK will remain in the EU. But if it does then I am sure that we will comply. I’m not ignoring it – I’d just prefer to deal with it if and when it ever actually comes to fruition. However, if you think that anybody is going to offer to do any more than is actually required or requested then I think you are being a tad optimistic. We need to adhere to the rules of the game but do we want to win the game?
I know who Labour is targeting
My stats are right – read the data I base them on
And sure as heck the OECD has listed you
Please stop telling untruths – it just makes me think you’re hiding something
I have been on the OECD website and I cannot see any indication of Guernsey ever having been listed as unco-operative. I think you are wrong.
Labour can’t even distinguish between evasion and avoidance – they haven’t got a prayer. Seeing as they are unelectable, they will be in opposition for a while to come yet.
Surely the point is not lost on you that if somebody is avoiding tax it is lawful, and thus compliant, and therefore already disclosed to HMRC. What’s so hard to understand? Of course evasion must rightly be attacked and eradicated, but lawful tax avoidance? Nonsense.
I resent being told that I am lying. I could say exactly the same about your claim that your figures are right. They are no such thing. They are estimates and unproven. It is a physical impossibility for you to claim that they are “right”.
Go to the 98 report and the resulting listings
And stop wasting my time
Guernsey was on everyone’s listings for over 30 years – just read my book on tax havens and open your eyes a bit
And since I have said my figures are estimates I’ve never siad I’m right
Now – for the last time – all we’re asking is for openness to stop evasion and you’re refusing it – which shows you’re hiding evasion. That’s my last explanation to you of that obvious fact since you persist in denying the truth
Oh, 1998 – 14 years ago, thats 2 years before all-crimes legislation even came in. And the relevance of that today to what goes on in the island is what exactly? 30 years ago is even less relevant. There have been more changes to offshore in the past decade than in the previous 50 years put together. If you are going to judge a jurisdiction on what it was like so many years ago then that’s neither relevant nor credible.
You say that you have never said that your figures are right. You have a short memory. About an hour in fact, when you said: “My stats are right -read the data I base them on”.
Guernsey is not hiding evasion at all. Adopting automatic exchange under the EUSD rather than withholding tax confirms that. We would hardly have gone down that road – and yes we had a choice as Jersey have showed – if we had anything to hide.
The reality is remarkably little has changed – the process has been glacial, so the comments remain valid. We still have almost no effective information exchange on real tax abuse in Gunernsey and therefore the comments remain totally valid
If you think nothing has changed then you are seriously deluded!
What should have been reported but has not been reported? Legitimate tax avoidance? You may deem that to be “tax abuse” but UK and other international law does not. And if the structure is tax compliant with everything being reported directly by the Settlor/beneficiaries as applicable, then what else can be reported under the TIEA or treaty?
You appear to be wanting Guernsey to report things which are not reportable and are blaming us for not doing so. Bizarre.
I can predict your response right now….”but we don’t believe you”. Well – its impossible to predict a negative. Do you really think that we would risk going to jail, not to mention our businesses,by turning a blind eye to criminal tax evasion when there is probably a 99% chance of being caught? That would be defying all logic.
Lots has changed to very little net benefit – which is no exactly as you intended
Does evasion still occur behind closed doors? Undoubtedly. And do you still look away? Yes.
So you report all currently required and it s no enough so I am asking for changes in the law – and yet again I am baffled as to why you are so incapable of realising that
As to what I want – read this http://www.taxresearch.org.uk/Documents/InfoEx0609.pdf
You say that tax evasion “undoubtedly” still occurs behind closed doors. Really? On what basis can you possibly make such a statement with any degree of credibility?
I really don’t care what you, Richard Murphy, want. I care about what the law says and what the law requires. You don’t write the laws of the UK (although its obvious that you think you should – try getting elected into parliament then!). What I do really care about is being accused of evasion activity without a shred of evidence on your part, just wishy-washy conclusions based on your own research which nobody else has verified.
Easy
About 50% of all accounts in Jersey to which the ESTD applies opt for witnholding
That cam only ve to facilitate evasion
That shows how corrupt you are – it is systemically at th core o what yo do and you are refusing to eliminate it
And as for the law – like it or not I can and do lobby for change with considerable success as all of you in the Crown Dependencies know
No wonder you’re worried
I’m worried about your ability to read. I make it clear that I’m from Guernsey which, like the Isle of Man and unlike Jersey, already has automatic exchange, yet you spew out statistics for Jersey which are totally irrelevant.
Are you seriously saying that Guernsey still applies withholding tax under the EUSD when its no longer an option?!
For heaven’s sake man, Guernsey and Jersey are two separate places with two separate governments who make different decisions to each other. I find it remarkable that such detail seems to have passed you by.
If you honestly expect me to remember the personal details f every tax abusing and excusing troll who comes here and does not give a full name then you’re seriously deluded about m personal priorities
So you’re from guernsey – where all the issues on denying information and trusts apply
Yiu’ve still built a whole economy on tax abuse – and that’s worthy of exactly the same contempt
Ed: I think you have made your point – and I’m utterly bored with hearing your abuses for tax abuse
This correspondence with you is closed
This is nonsense
All this will do will create destitute islands that will need to be bailed out by the Uk.
The money will move to other welcoming tax havens and not to the exchequer.
You are dealing with clever people here unlike Uk civil servants!
At least here the money is in the British economy i.e governments, companies and people of these islands all spend in the Uk anyway so the money is not lost at all, and remember ordinary people spend their money far wiser than governments do.
Let me get this clear
What you’re saying is that the islands can only survive on tax evasion
Because I can’t see another interpretation to what you’re saying
Remember – this demand is not for ‘on the record’ disclosure for individuals – just information exchanfe with tax authorities
And that would kill you? I admire your honesty – as few say this
But if so – don’t you think an industry built on criminality deserves to die?
Without doubt the finance industries are of major significance to these islands
But they do not operate outside the law
The point I am making is that the proposed measures will not make money for the Uk exchequer, it will simply go elsewhere.
And yet again you are saying the sole foundation of your finance industry is evasion
Nothing else can explain your claim
I don’t agree with TJ’s concerns. Only tax evaders need be worried. Tax evaders have had neon warning signs for years that the Crown Dependencies are not where they could safely stash their undeclared money. It would be remarkable if they had not heeded those warnings.
Except all the evidence suggests they bare there – and Jersey by openly refusing to information exchange is encouraging them to stay
Your claims simply don’t match the data and the bahaviour
To put it another way – I don’t believe you
This debate reminds me of the prohibition disasters where the US introduced unworkable laws and then its the fault of Colombians and Mexicans that it does not work.
The challenge is for the UK to replace complex tax codes with simple income and VAT legislation that makes payment less avoidable. Getting rid of loopholes and exemptions could also mean lower rates reducing the incentives to evade. Deal with the problem at source.
Wrong
This is about telling these states to stop assisting crime
And remember, in this case the Uk has the power to legislate for them
But I’m sure it won’t need to do so – they’ll want to beat crime, surely?
This is far more complicated than just eliminating the tax havens and Craig has a point. Carrot and stick are needed. The tax havens subscribe to the libertarian philosophy that TJ appears to espouse above, people spend their money more wisely than governments. The key problem for tax havens is that they go one step further and many of the practitioners in those places do not believe tax evasion is a crime. They think they are helping people manage their money wisely. There is no curing them, they need to have their rug totally removed. The UK tax system is too complicated and needs to be simplified to make compliance and collection easier. Eliminating loopholes exploited by individuals and corporates using tax havens is a big part but not the whole process.
On the point that evaders and or avoiders will try and move their assets further offshore you have to appreciate you are dealing with a wide spectrum of people who are into this. When using trusts they need to literally trust that their stooges will do their bidding and they like to have relatively close contact with the control of their assets. Interacting with agents in Singapore and Hong Kong may be a step too far for many of them, but not all. No doubt the usual suspects will try to make it easier for them. It has taken many years for the UK tax havens to develop the pool of skills to provide trust services and to earn the trust of their customers. These communities will not be easy to recreate in jurisdictions where trust law is alien.
The whole exercise of demolishing tax havens would take massive political will which has never been apparent in the past as I pointed out at 3 above. We’ll see if the onset of a depression will focus minds sufficient to make it happen but the more global the approach, the more likely it is to succeed. On this point there may be room for working with China, remember they shoot tax evaders!
Tax is the rarest commodity in town now
When it’s tackle tax havens or leave people to die then tax havens come firmly into the firing line
And that’s the sort of choice there’s going to be
I don;t think there’s going to be a lack of political will – and you’re right – it’s not chance most people have their money near home and it won’t be moving – and the ESTD upgrade makes it tough even if that is the plan
The writing really is on the wall
Jersey finance workers have a legal obligation to file Suspicious Transaction Reports if tax evasion is suspected for potential and existing clients of any nationality. Not to do so is an imprisonable criminal offence so everyone in Jersey is on the look out for potential evasion. Not sure if Nevis or the Cook Islands have similar requirements.
With regard to the UK having power to legislate for the Channel Islands could you quote what source you are looking at to state this? Thanks
I have quoted my source on power to legislate – it’s in the Kilbrandon report
The UK can legislate on foreign affairs. This is about foreign affairs. In practice we made you change your domestic tax system too
And as for Jersey finance workers reporting tax evasion – not one of them has ever, I suspect, reported a client fro refusing to exchange information under the ESTD and yet in every single case tax evasion must and must unavoidably be suspected as there is no other reason for not exchanging data (and suspicion alone is the sole criteria for reporting tax evasion – proof is not needed) – which shows the systemic failure of Jersey banks to comply with this requirement. So respectfully – I have no confidence at all in the probity of your reporting. Your compliance is a sham
Slight weakness in your argument is that HM Revenue & Customs have trouble in collecting tax in mainland UK, so I doubt they would hit a £2.4bn target. From my knowledge of people holding accounts in these islands they are not the “1%” they are pretty much middle class or working class done good. It does not make it right I agree, but there is worse going on , on the mainland. I agree with other contributors in saying that the smart money has gone elsewhere in the world already. Beware of “unintended consequences” .
a) You clearly don’t realise how narrow the 1% is
b) The £2.4 bn is underestimate – it ignores tax on capital
c) Any bank helping people move could be subject to a GAAR in UK
I don’t agree with you