The UKIP wing of the City of London (and there is such a thing) is hoping that the UK can become even more than a tax haven than at present following Brexit. This issue was one of those discussed yesterday during the session I took part in at the FT Festival of Finance.
My colleague Prof Ronen Palan at City University and I share a view on this, which seemed to also be that of Gabriel Zucman. Perhaps, more surprisingly, it also seemed to be shared by Howard Bilton of the offshore services company, The Sovereign Group. I will, however, offer my version here.
There will be those - and some of them will be close to a Conservative government - who will argue that Brexit will provide the chance to make the UK more tax friendly. Expect plans for relaxation on the domicile rule. Expect passports to be for sale more readily than they already are. Expect a cut in corporation tax rates, again. Expect a more relaxed approach towards our tax havens. And a marked reluctance to delver the substance of international agreements with the OECD.
This however is what these people expect. I seriously doubt their ability to deliver. There are, as usual, several reasons.
First, if we stay in the EEA then free movement of people also means the free movement of capital. But that will also mean we stay subject to all the existing rules that are seeking to restrict tax abuse, without any say on how they are formulated.
Alternatively, if we leave the single market then there is no free movement of capital. Numerous consequences follow. The first of these is that sanctions can be imposed on the UK for tax purposes if we abuse international rules. The EU is planning a tax haven listing: we could be on it.
Much more likely, all the UK's tax havens who are at present largely protected from EU sanction by our membership will be subject to them, and most EU countries will be only too happen to place restrictions on these places for two reasons. One is the harm they cause. The other is that everyone knows that they are the soft underbelly of the City of London: this is where the attack on the City will be mounted. Brexit and leaving the single market could be very bad news indeed for the Crown Dependencies and Overseas Territories.
What is more, the UK will also be vulnerable because, quite surprisingly, it does not have double tax agreements with almost half of the EU's member states. Tax deduction at source before money ever reaches London may be much more common than people realise as a result. I am grateful to Vanessa Houlder for pointing this out.
What surprised me was how popular the line against tax havens was. If they had friends at the event they were not putting their heads above the parapet. No one put forward the argument that tax havens were going to have a new field day, although what was agreed was that they still are. Howard Bilton's claim that they are well regulated places and that Mossack Fonseca was the bad apple in the barrel was met with the scepticism both claims deserved.
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Or course we could take Brexit a stage or two further. I am about to lay my claim to the Thanedom of Northumbria.
It is highly likely and mooted before on this blog.
Unless Theresa May tries to mend the nasty party whilst actually being party leader. But if you have no real hinterland or real local activists to mobilise then you don’t bite the hand that feeds you.
It will be interesting to see what happens.
The fake modesty Gove was putting on yesterday was worthy of an Academy award.
Gove was an aspiring actor in his younger days – which is probably why he’s been remarkably successful with little or no intellect of his own.
Oh hang on – that seems to be the perfect combination for a Tory leader!
I think Gove’s plenty smart enough &, in fairness, when he was Justice Secretary his first steps were to reverse all the decisions made by his predecessor, a truly unpleasant & deeply loathsome tripe hound.
I think Gove has ideals, & just because you or I don’t like them doesn’t mean they don’t deserve respect. He is the classic neo-liberal who believes absolutely in meritocracy. His knowledge of life outside a tiny handful of politicians & journalists & SPADs is limited to the point of non-existent. Like so many neo-liberals he draws up graphs & diagrams, finds that they match to his satisfaction & proclaims the result is clear, ignoring the point that it has little, or nothing, in common with whats actually happening in real life.
“Out there its like a jungle, sometimes it makes me wonder how I keep from going under”
Richard thanks. This was one of my fears. It will be very interesting to see how Brexit plays out. I think under a May leadership staying in the EEA is more likely than not.
That is an interesting claim, Richard, that the UK does not have double tax agreements with half the EU’s member States as I was under the impression that the UK has double tax agreements with all of them. A slight bit of pedantry perhaps but could you list the countries that you claim the UK does not have double tax agreements with and I can research further. I wouldn’t want your loyal supporters to think you made things up to suit or didn’t know what you were talking about.
I have just checked
I will have to check Vanessa’s point
I think it was in context of parent subsid directive
At least half EU agreements do not replicate it was I think her point
I have not stated it correctly : apologies
If that is also wrong, let me know
Please lighten up, we don’t do sarcasm and condescension on this discussion site. If we make mistakes we apologise, learn and move on. I maybe wrong but I sniff a hidden agenda…
So do I!
Ah. The claim was in relation to the PSD. But all EU Countries have implemented this. Such differences as there are in implementation are anti-avoidance measures. Strengthening the PSD to avoid abuse. I’m surprised you did not know this, it’s very basic to cross-border taxation in the EU.
This may shock you: I do not know everything
I admit it
I would not expect anyone to know everything. I would expect a self-proclaimed tax expert who comments on tax to know the basics of the PSD. At least well enough not to repeat nonsensical claims about the UK’s tax treaty arrangements. It does rather undermine your credentials as a ‘tax expert’. After all, your supporters read what you write and repeat it. Think what idiots they would look claiming that the UK did not have tax treaties with half the EU ‘because Richard Murphy said so’. Do you not think you owe your readership some duty of care?
You may think what you wish
I misrepresented a comment
Whoopee
I guess you have never done any such thing?
I cannot see that there is any other role for London banks, when ‘passporting’ is lost.
There will be complex shells of legal entities to carry out activities in London which, on paper, will be carried out by ‘independent’ entities within EU capitals: the resulting game of cat-and-mouse with European regulators will eventually end, with Euro clearing, FX trading and the bond markets firmly under regulatory control in Paris and in Frankfurt.
On the way, the increasingly-opaque and convoluted structures of British and European banking will become a tax-evaders paradise; and, at the end of it, London will become the clearing-house to all the World’s corruption.
Some will prosper; but a cursory examination of, say, Cyprus is a powerful incentive for us all to work towards preventing that – and to get out while there are still foreign firms prepared to give a job to an ex-British professional.
Yes!
UK corporation tax to drop to 15%.
Osborne pulls the next rabbit out of the hat!
As he is no longer committed to balancing the budget (because he decided he didn’t like it anymore and he had failed miserably to achieve it), he will instead cut taxes to the wealthiest corporations in the world.
“Before the referendum, George Osborne said that a vote to leave the EU would force him to introduce billions of pounds worth of tax increases and spending cuts in order to repair damage to the public finances.
It is now clear that his real strategy is very different.”
http://www.bbc.co.uk/news/business-36699642
At the FT event in Friday a senior City lawyer said there was no demand for this
In fact it could be counterproductive and put people off by creating risk