GUERNSEY will no longer be referred to as an ‘offshore’ financial centre by the International Monetary Fund. The ‘onshore’ distinction has also been dropped.
The decision represents a massive boost for small jurisdictions such as Guernsey and Jersey, which feel the label has led to them being unfairly targeted. Chief Minister Lyndon Trott (pictured) hailed the change in status as fantastic news.
‘On a scale of one to 10, this is a 10. The IMF is probably the most respected financial agency in the world. The key message is that the IMF has acknowledged that it is wrong to distinguish between jurisdictions because they are either onshore or offshore. The distinction should always be that some are well regulated and others are not so well regulated.’
The IMF said the distinction had been blurred by globalisation, although it still had concerns in certain key areas regarding money laundering and terrorist funding in offshore financial centres. However, it said it was wrong to attach a stigma to all offshore financial centres just because of the concerns surrounding some.
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14 Article Comments
I’ll never understand why it is ‘good’ to encourage tax avoidance and ‘good’ to harbour the proceeds of crime, but hey, apparently this point of view is ‘naive’ because it actually makes people think about the provenance of the finance industry. It is not a pretty picture, like those who would run the island tell us. Do the work if we must, to survive, but let’s not pretend we are benefitting anyone more than the few who are already at the top. Smiling about a label change makes us look childish.
Its because one is legal and the other is illegal. We don’t make the rules.
Hello. Just thought I’d put that one out there. Until tax is harmonised across all jurisdictions, there will always be ways for Guernsey to make money. Guernsey has made great tracks with AML and cross border information sharing, however, all the time so much secrecy abounds in all finance-driven jurisdictions, then this will attract particular types of business. For a start we should not be facilitating the capital movement of avoided tax. Accountants make the rules, then devise ways of bending them. The regulators make a lot of money from the lack of regulations. Businesses ‘mitigate their expenses’. And all that time, cash that should have been reinvested into society is being hoarded in international banking’s universe, being gambled with, and losing the poor schmucks at the bottom our pensions and our incentives. RPI has shot up in Guernsey. It’s not just the high oil and fuel prices. The direct result of attracting companies to make bigger profits.
The hundreds of billions of pounds that the global finance sector has lost in the system is directly linked to the mentality that is running our island. We must be proactive in showing the world that we will only do clean business. That’s ethical fund investments and transparency in all deposits. Sure, some may run, but it would attract proper ‘10 out of 10′ headlines instead of iterating something that we knew already.
Do we have Zimbabwean cash held here? Highly likely.
If only it were all that simple Lawrence.
I know of a Guernsey financial services company that held trust funds which had been settled some years ago by Zimbabwean farmers. Those farmers had the foresight to see the impending collapse of the economy and the theft of everything they owned.
The assets placed in those Guernsey trusts would otherwise have been requisitioned by the state. Robert Mugabe would no doubt argue that this is a tax avoidance scheme and that this money should be “reinvested in society”.
So in answer to your question, yes, in that particular case, there is Zimbabwean cash held in Guernsey. Your ethical argument is laudable Lawrence but my point is that the rights and wrongs of what constitutes “clean business” are always relative.
Provided that the Guernsey finance industry acts honestly and within the legal constraints of whatever tax regime they happen to be dealing with, then I don’t have a problem with what we do.
So the minority whites in Zim, who had most of the land and cash, used Guernsey as a means of saving their cash? Where were those profits made, with who’s work and using who’s infrastructure? Yeah, we all hate Mugabe, but justifying the sucking out of capital from nation states in order to maximise profit for a tiny fraction of a percentage of the global population, because it turns out that a leader has gone mad, is head in the sand stuff. A company like Tesco who uses (Swiss) haven rules to set up subsidiaries to funnel profits from their land deals between holding companies and so avoid tax in the UK should not be allowed to do it. The money was made in the UK. It should abide by UK tax. The rules need tightening. Guernsey has allsorts of these entities for saving billions in untaxed profits. Probably. Good for the sector here, about ten thousand jobs, bad for the UK (or wherever). It is no wonder that ‘dark forces’ are starting to do their homework and finally see how unharmonised global tax jurisdictions distort capital realities for the majority poor.
Instead of making so much profit why don’t companies pay people more, that way we’d all be happier, and there’d be less secrecy by association that there is less perception of ripping off the ‘ordinary’ man? After all, we are civilised, aren’t we?
As always an interesting view Lawrence.
In the case I cited, the Zimbabwean farmers made their money by their own hard work and using an infrastructure that they had largely been responsible for developing (and, yes, of course they employed black workers but they paid them a relatively decent wage which an awful lot more than they have got now). I totally disagree that this is “sucking out the capital” from a nation state - it is a totally justifiable attempt to protect their hard earned personal wealth. But this digresses from you main point.
Tesco - or whoever - are an international organisation and they move their money around the globe because it is entirely legal to do so. The UK revenue has no claim on that money - if they did then Tesco would be acting illegally and they are not. And so it is with the vast majority of the assets that pass through Guernsey.
As I see it, capitalism has won the world battle for economic supremacy Lawrence - even the likes of China are turning toward a capitalist model. Even if Guernsey opted out of the whole game tomorrow and became a self sufficient eco-community it wouldn’t result in a single dollar being redistributed to the world’s poor.
On shore, off shore who cares?
The place is still a tax haven.
Not sure what planet you are on Lawrence but how can you say that “accountants make the rules” ? Where on earth do you get that from ? Its very strange because I thought it was governments which made the rules. You also very foolishly say re. Tesco’s UK land deals: “The money was made in the UK. It should abide by UK tax.” My understanding was that they had abided by UK tax. Through their tax planning the profits were lawfully not taxable. They have not illegally evaded tax. They have legally avoided tax.
Any government is free to introduce anti-avoidance rules to close any perceived loopholes. Many have found that if companies are taxed too heavily then the corporate world simply exercises its right to become resident somewhere else and the tax revenue is lost to that country altogether. Mr. Darling has found that out first-hand over the past 6 months. If governments squeeze too firmly then total tax revenues are reduced. Whether that’s morally right or wrong in your world is up to you. The fact is that its how the real world works.
The concern on many is that Tesco is avoiding paying tax to the UK. If Tesco doesn’t pay its expected leve3l of taxes, through tax planning s Tesco call it, somone else has to ake up the difference.
Do accountants help make rules? In the sense that they devise new means of avoiding taxes (legal but morally questionable)they can be said to participate in the making of rules.
Bit smug to say “The act is that is how the real world works” Why should tax avoiders avoid their obligations and rely on accountants and others to devide ways those who can afford to pay, avoid taxes, and put an unfair burden on those who cannot afford to subisdise the already rich.
Perhaps there is a need for the real world to change its tolerance of tax avoiding regimes.
So the offshore label is being removed - what Trottsky doesn’t say is - what new label is Guernsey going to get stuck with now …the Good, the Bad or the downright Ugly?
And on that note, I can’t help but wonder what Lyndon’s finding to grin at lately, isn’t it time he let us all in on the joke?
No, David, it is not the real world. It is a superimposed order upon the real world. The real world is the majority global poor that has to suffer from this system.
The corporations are too powerful, they bend reality around their aims and are totally unaccountable for.
Of course UK chancellors are scared of them running away. They play by their rules. The ‘growth’ strategies are unravelling as resources dwindle. As always, it will be the essential commodities that take the first hit, any shift in prices will ’squeeze’ the poorest first.
The top percent will always be able to afford.
The poorer in Guernsey are getting priced out. At what stage haven’t they ‘worked hard’?
One rule for the rich, a whole raft for the poor. That’s the reality.
CD, the capitalist model is most successful when tied to social awareness. It is no surprise that Nordic countries enjoy the best education, the highest standards of living and are rated as ‘the most content’. Last time I looked they were taxed to the hilt.
One for all and all for one.
The anglo saxon model is reaping what it sowed. No use blaming OPEC, it’s our dire surrender to consumerism that is strangling us. A botched ideology from an untried US model, monetarism, is still all invasive.
Paradigm shift needed.
Lawrence I prefer to deal with what actually happens than with ideology. In my view what actually happens is fact. In ideology its wishful thinking.
An interesting reference there to the Nordic countries. Yes they have high tax rates but is it coincidence that nearly all of the wealthiest Swedes, Danes and Norwegians actually reside in the UK, the South of France or Spain ? Its not just the weather which has driven them abroad. Individuals and corporates are very mobile. They don’t have to put up with paying higher tax rates than they need to. The evidence of this is there for all to see. Your ideology may not like it but its fact, not fiction.
Yiur “all of the wealthiest Swedes, Danes and Norwegians actually reside in the UK, the South of France or Spain” avoid paying their fair amount of taxes.
That is the issue of morality. It is a little smug to say that that is reality. Reality is relative and can, and hopefully lead to changes, so that the tax dodgers (legal, of course) pay their fair share of taxes.
David, the wealthy can do what they want. The FACT is that those countries are doing better than anyone else regardless of the rich.
It debunks the whole idea of appeasement to money.