USA president-elect Barack Obama plans to crack down on international tax havens – including Guernsey – within weeks of taking power in January, according to a national newspaper report.
Senator Obama was one of the signatories of the Stop Tax Haven Abuse Act, a legislation put to Congress last year which blacklisted Jersey, Guernsey and 32 other jurisdictions.
According to the Observer newspaper, growing international pressure to outlaw tax havens is a key part of reforms to the global financial system which will be discussed by world leaders from the 20 most powerful economies at a conference in Washington next weekend.
Key aides to Obama said he would introduce laws as part of a wide-ranging revenue-raising and tax-reform package within weeks of taking power.
Main measures of any proposal are likely to include revealing the beneficial owners of secretive trusts, prohibiting accountants from charging fees on specific tax services and identifying ‘offshore secrecy jurisdictions’ which unreasonably restrict US tax authorities from obtaining needed information.
The article says that the measures could end years of financial secrecy which have protected the super-rich and international businesses as they move money from one jurisdiction to another.
Article posted on 10th November, 2008 - 1.00pm
34 Article Comments
Reading Observer article as well as having read the speech of Senator Levin in promoting the new law, leaves me cautiously optimistic of the outcome for Guernsey.
The Observer article lays stress on the secrecy aspects of tax havens. As Pointed out last week the secrecy issue really bugs Senator Levin. The Guernsey selling of its increased transparency must be a good thing, as places like the UK and Isle of Man are not perceived to be nearly so cooperative.
There are areas such as disclosure of beneficiaries of secret trust that will cause some friction, but all in all I feel the efforts of the politicians and finance industry to sell the transparency to the promoters of the Stop Tax Haven Abuse Act, will pay dividends for Guernsey.
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Stephen John
Whilst I agree with the majority of what you have written above do you still believe we can retain enough credibility to actually appear transparent? Don’t you think we should be fearing President Sarkozy also? The countries that are losing taxes so that our politicians can live it up are about to join up. It maybe something I have missed but it is going to be a crushing blow that nobody will be in a position to do anything about. If we have nothing then. Let their regulators come and see for themselves. Afterall we have nothing to hide haven’t we? What is all the fear about then?
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Knowing how Richard Murphy, Prem Sika and John Christensen have contributed with Reuven S. Avi-Yonah, the Irwin I. Cohn over the years backed by Christian aid and many other large organisations I think it presumptuous that Guernsey will miss the attention of America and Europe Reuven Avi-Yonah Professor of Law at the University of Michigan Law School, and Director of the International Tax LL.M. Program, testified on August 1, 2006 before the U.S. Senate’s Permanent Subcommittee on Investigations’ Committee on Homeland Security and Governmental Affairs. Avi-Yonah’s testimony detailed how U.S. residents have established bank accounts in offshore havens – such as the Cayman Islands – explicitly for the purpose of evading U.S. income taxes, how they do so, the implications, and what corrective actions might be taken. Professor John Zdanowicz found that transfer pricing abuses by corporations cost the U.S. Treasury about $53 billion per year in lost tax revenue. Reports from Tax Justice Network to the HRMC published reports in October 2007 showing the impact of three tax havens, linked closely to the City of London: Jersey, Guernsey and the Isle of Man. One report contained this paragraph:
At the end of 2006, there were $491.6 billion of assets in the Jersey financial sector beneficially owned by non-Jersey individuals who were likely to be illegally avoiding tax on those assets in their home jurisdictions. We estimated the comparable figure for Guernsey to be $293.1 billion.
In November 2007 another report, on the Isle of Man, put the comparable figure at $150.5bn. These three jurisdictions therefore held $935.2bn of such assets. Earning 7%, that much money would generate annual income of $65.5bn. Taxing that at a modest 30% rate would yield $19.6bn. That is more than a third of the sum that the World Bank estimated in 2002 would be needed to tackle the Millennium Development Goals to “reverse the grinding poverty, hunger and disease affecting billions of people.” These are just three tax havens. The Tax Justice Network has identified at least 80 of them.
I would take a bet with anybody that the full spotlight will be put on Guernsey to think that the World will ignore Guernsey with the work Tax Justice have put in is naive. A great thing in our favour is we are well managed but a lot depends how far America France Germany want to take this attack on the Islands. This time many more countries throughout the World want to see our demise in 1997 we did not have a World crisis and Tax Justice had not been formed.
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STEPHEN JOHN
I would of thought my posting was self explanatory people are deluding themselves if they can not see that the offshore areas are under more pressure than they have ever been. To have an attitude of investors should have known better will not wash with individuals that have lost a great deal of money inside and outside the Island.If I lost the amounts of money they lost I would not take kindly to people telling me how stupid I had been and those kind of comments do antagonise people I am surprised the investors have not contacted
Tax Justice Network, run by the Socialist Fabian Society from England, and with ATTAC – the French and German anti globalisation group who demonstrate all over the world? Their aim according to their web site is to counter ‘harmful trends in global taxation, which threaten states’ ability to tax the wealthy beneficiaries of globalisation’. Tax Justice Network arose from meetings at the European Social Forum in Florence in late 2002. These people have more clout in Europe and America now than they have ever had before they have contributed and supported people like Levin and Prof Reuven S. Avi-Yonah who supported the OECD in their first attacks on the Islands and many other Democrats. They are always attacking Jersey so why would you think that Guernsey will not come under the microscope
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Stephen you might be interested in comments just received made by Richard Murphy nobody can tell how far America will want to proceed.
Perhaps our Richard Digard should interview Murphy and ask him how far the measures America will implement will go
1. Does Obama pose a threat to the Isle of Man
2. Search Tax Research UK
Does Obama pose a threat to the Isle of Man?
I note a report that says:
Isle of Man Treasury Minister Allan Bell has sounded a note of warning about new US president Barack Obama’s intentions towards offshore banking centres. Commenting on the election result, he said:
I am sure this is a major improvement on what we have lived with for the past eight years, but – and it’s a big but – he has been very focused on closing down what he sees as offshore financial centres or tax havens. He has not differentiated between well-regulated jurisdictions like the Isle of Man and rogue ones that should be closed down.
There’s good reason Mr Bell. Not one person in the US Senate thinks you are well regulated. Perhaps you have not read Carl Levin’s report of August 2006. But they have. And they know how badly it portrayed the Isle of Man.
Expect no favours Mr Bell. I do not expect any to be given.
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The isle of Man was picked out for special mention by Senator Levin. So it is hardly surprising they might be in for a tough time.
I am sure Guernsey will be subject to searching questions. However, I believe that Guernsey has positioned itself more favourably than places such as The Isle of Man.
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I trust you will not mind me joining this discussion since you have referred to my work in comments above.
Please let me assure you, the Tax Justice Network does not think that Guernsey is any better than Jersey, the Isle of Man or any of the other tax haven. I am not, of course, in a position to tell you of the mindset of those who advise, or might advise, the new US administration, but I’m very strongly inclined to believe that they will share my opinion.
Let me be clear about what offends us so much about tax havens. It is not your tax rate. The Tax Justice Network does not have a position on tax rates, even if I do personally. And your commentator who suggests that we are controlled by the socialist Fabian Society is quite wrong. I have never been a member of that society, and nor to the best of my knowledge have John Christensen or Prem Sikka ever been so either. Our position is much more complex than that which some of you would wish to represent, and to resort to such personal comments really does not do your position any credit. As democrats (and in my case, I fully admit, as a social democrat) our position is unambiguous. If a government can secure a democratic mandate to run its administration with low or even zero rate taxes then so be it, that is a valid democratic choice which we respect.
But this is not the situation in which Guernsey or the other tax havens find themselves. Guernsey seeks to run an administration which delivers OECD member state levels of service to its community without charging the appropriate taxes on that community to pay for that service. To ensure that it can do this it does three things. First it passes legislation to create financial services structures that have little or no use to the domestic community of Guernsey, and which are only designed to facilitate transactions that take place elsewhere, i.e. in other countries. Second, it creates a deliberate and legislatively backed veil of secrecy over the operation of those structures so that in many cases the country in which they have their economic impact cannot identify who the beneficial owner of that structure might be, and whether as a consequence it should be taxed in the place where it really undertakes its investments or trade. Third, it attracts to it shores a range of financial services professionals who are willing to facilitate these transactions, in no small part by turning a blind eye to the regulatory requirements of the places where they actually undertake their trades, whilst ensuring they are fully compliant (and this I acknowledge) with the requirements of regulation in Guernsey.
Let me be clear, once again we have no objection to a structure created in one place being used in another. This is normal. We are well aware of that. But we do have fundamental objection to the secrecy that all tax havens create around such structures. So, for example, we object to no accounts ever being put on public record by a Guernsey company. We object to the use of nominees to hide the ownership and control of those companies, just as we object with regard to the similar abuse that is allowed in the UK and in Delaware. We object to the fact that many of these companies are considered not resident in Guernsey, but there is absolutely no evidence that they are as a consequence considered resident somewhere else for taxation purposes. We object to the use of protected cell companies which Guernsey first created, the consequence of which are unknown at present, but which do, we believe, create opacity, uncertainty, and unwarranted disadvantage to those seeking to make claim on these entities. We object to the use of offshore trusts, most of which we consider to be pure nominee arrangements undertaken solely to facilitate tax abuse without full disclosure being made in most cases to the countries where they have their economic impact. We object to the refusal of places like Guernsey to participate in the EU savings tax directive as a full member, the sole reason for which must be the facilitation of tax evasion. We object to the fact that Guernsey makes it exceptionally difficult for a tax enquiry to be made with regard to the affairs of any structure created in its domain, and the latest tax information exchange agreements do not change this because they are little more than a token gesture in this regard.
Most of all, we object to the deliberate distortions in trade that Guernsey and other tax havens deliberately create by providing an artificial factor of production, called secrecy, which can only be enjoyed by large companies, those with wealth, long established companies, multinational concerns, and those who are blatantly willing to break the law. This provides a deliberate competitive advantage to those who already enjoy great benefits in society and ensures that small companies, new companies, nationally-based companies, the poor in any society and those who are law-abiding will always suffer a greater burden of tax than is justified.
And we object to the fact that these taxation driven structures, hidden behind a veil of secrecy, can also be used by the corrupt and criminal elements of societies around the world. We know that they are used in that way. We know that the money laundering rules of banks in tax havens turn a blind eye to issues outside their own domain: if this was not the case then the thousands of reports of suspected money-laundering in the form of tax evasion in the UK should have been submitted by the main high street UK backs with regard to their customers in Guernsey who refused to exchange information with HM Revenue and Customs under the terms of the EU savings tax directive, which must in every case have created a reasonable suspicion that tax evasion was taking place, giving unambiguous grounds for reporting suspicion under the terms of your money laundering legislation, and yet as far as I know no such reports were made. Why should I assume that any tighter regulation is applied in the more complex cases where corruption is really taking place as a consequence?
We object to injustice. We object to crime. We promote fair competition. We promote fair trade. We believe that markets should have sufficient information to ensure that resources are allocated effectively to maximise the well-being of mankind.
And we believe that Guernsey promotes injustice, might harbour crime, does create unfair competition and unfair trade that will result in market distortions that will be harmful to mankind as a whole, and most especially in the developing countries of the world whom we have proven lose dramatically as a consequence.
And as a consequence of all this you also made a major contribution to the current financial crisis in the world, by promoting private equity that has laden our markets with debt and damages the future employment generation prospects of many otherwise viable companies; by facilitating securitisation which has contributed to the sub-prime crisis; by creating opacity that has generated the uncertainty that means that banks will not lend to each other, and by assisting, through the creation of your make-believe world of offshore structures the degradation of the culture of sound corporate governance that once existed, but does no longer do so, at cost to us all.
Do not doubt, you have a lot to answer for. You will be held to account along with the other tax havens of the world. And you will not get favourable treatment. There is no reason why you should.
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I hope this gets published in the paper version. Please do so.
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This is pseudo-intellectual nonsense.
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CD
No it isn’t.
Is that a good enough comeback to your well considered rebuttal?
You obviously do not have much knowledge about how things ACTUALLY work, rather than the blather the industry churns out at every available opportunity. People in the finance industry turn goggle eyed when you mention any of the above, laugh into their sleeves and then go about continuing to rip people off. Yes, it’s the system and yes, we are playing it, but it doesn’t make it a good thing, or a sustainable thing.
We need to get a grip on global actualities instead of holding on tight to our petty wealth.
Tell me why it is pseudo for a start. I would sooner trust a TJN spokesperson about tax disparity than I would the head of an international finance house. Why wouldn’t you? They have extensive expertise, an apolitical approach and are not constrained by big business lobbyists.
Look at the facts. Look at capital flow. Look at what deregulation and tax obfuscation has done to the world finances. Do we want to be part of that as an island, or are we just here to facilitate the exploiters?
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CD
Please tell me why this is pseudo intellectual nonsense. Then we have the basis for a debate.
Of course I expect people in Guernsey to hold different opinion from me: that is obviously going to be the case.
But you might be better off practising your case in argument with me then you will be in assuming that Obama is not going to have his way. And you won’t be able to tell him that he’s a pseudo intellectual and hope he will go away.
So why not try justifying your position?
Richard Murphy
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I have a much different perception of Guernsey to Richard Murphy and believe the controls and due diligence are to the highest possible standards and everybody in finance is adhering to the letter of the law. What exactly can America and Europe impose on the Islands? I agree with Richard we have a wonderful opportunity to get a clear idea what is the worst scenario that one could envisage for the future of our Islands? Richard it is well known fact that over the years you have helped Politicians around the World to formulate an opinion on offshore areas.
If you were in power or giving advice what restraints would you put on Guernsey and how far do you think Europe and America could go with areas that are supposed self governing?
Are we right in thinking the headline of outlawing the Islands is just a journalist trying to be dramatic and really nowhere the truth?
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Be subjective at our peril. So long as offshore economies are dependent on the flow of even respectable fugitive funds from high tax areas we must recognise that we have negligible control over how long this flow will continue. Ever since havens have somewhat greedily adopted that role there has been the argument that has sounded weaker and weaker that we should be directing resources to alternative industries within the Islands to provide some sort of insurance for our economies.
Once in an essential while we might step outside our perception of how we see ourselves in a global perspecive and seriously consider how others perceive us. Lets take a moment to stand in their shoes if we can tolerate the pain.
It is a fact, that once a Yank you are always a tax paying Yank and the IRS regard this as a religious doctrine never to be breached. So it was, that they have looked on benignly and encouragingly as the European Union of nations, from small beginnings, has enlarged and strengthened, tightening in particular its fiscal network. As a first step any regime seeking to attract funds to its shores must be seen to have established adequate controls to exclude the proceeds of narcotics and crime. So we have strict regulation of enterprises with their indemnity clad practitioners readily proclaiming the rectitude of their operations being wholly permissable in the relevant countries of domicil. So that is a mere basic requirement to keep us clean for the time being. Meanwhile back in the US, back in the UK, back in Europe, common sense is being forced into view.. At a time when debt soaked major economies are struggling to make ends if not meet, to be in distant sight of each other, it should be no surprise that little respect will be shown for havens accumulating billions outside the hard pressed taxation nets: taxation required to prop up essential public services, to restart economies wallowing in recession, somehow to bolster funding through recalcitrant banks and at the same time borrow funds enough to give every one of their citizens a king sized hernia! Coincidentally to smile benignly at the purity of highly regulated offshore centres. You wish, my friends.
In a world where increasing debt has been fashionable for generations, where a man’s status has been determined by the amount he is able to borrow, where fawning financiers tend to entertain customers who are in debt, we have lost any notion of true values. Thus, long in the tooth chickens have come home to roost and perhaps die.
Disaster has therefore beckoned a new order where we will have no say in the construction thereof and it is largely to our disadvantage that we have happily become part of the global fiscal structure. But we are within your law! We cry. You are silly fellows:, we will change those, as of yesterday. Heck! Can we become Guernseyshire and return an MP to Westminster then?
Our presumptions should give way to realism on occasions.
In pursuit of their doctrine the US will look to joining up with the European bastion to settle once and for all a gobal regime that will negate offshore business. Just like that! It is unfortunate that, politically, we are all regarded as undesirable tax dodgers by the mere fact of residence in these offshore centres. In reality some of us are quite poor. I do not think it wise to assume our subsistence on the fact that there are figures high in places over the way who surruptitiously make use of offshore facilities.
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believe me the Americans are not going to be selective in attempting to close all “tax havens”. They will all be treated the same. What really worries me is that they will persuade the OECD that there is no such thing as a”GOOD” tax haven and will put pressure on them to crack down too.
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“Of course I expect people in Guernsey to hold different opinion from me: that is obviously going to be the case.”
I’m sure you don’t mean you expect all islanders to hold a different opinion, Richard. Some of us here choose not to turn a blind eye to the injustices this particular tax haven throws up both locally and globally just because of the ‘wealth’ it generates. There are many of us here who actually agree with a lot of what you say.
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As stated in an earlier post we should welcome the opportunity of being able to debate with Richard Murphy. Would it be possible to put the postings on much quicker to encapsulate the momentum of the debate on such an important issue.
As an Accountant Richard Murphy does blame the auditors quite rightly that they have let the public and the Governments down in not quantifying such toxic debt within the Banks .
I hope Richard is very specific in how he thinks that the Islands will be outlawed or pressurised.
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tax evasion is illegal. tax avoidance is not illegal.
and as far as i know Guernsey finance companies dont help people to evade tax, for this would be illegal.
companies get audited a fair amount and surely the auditors (who are impartial) would pick up on any irregularities that suggest tax evasion?
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Richard I’d be grateful for your comments on the following point.
If anyone wishes to establish a company in Guernsey (or Jersey), they have to ASK the regulators, via the Law Officers, for permission prior to incorporation, and in the process must disclose all ultimate beneficial ownership. It is also a statutory requirement to notify the GFSC (and JFSC) of any change in that ultimate beneficial ownership. In other words, the CI authorities know who beneficially owns every Guernsey/Jersey company and therefore are in a position to disclose that information to other tax authorities around the world.
Contrast that scenario with Cayman, Bahamas, BVI and many other major offshore domiciles and it is a fact that their regulatory authorities do not have anything like the same ownership disclosure requirements. That is a massive distinction to start with in comparison to “unco-operative tax havens”.
But wait – it goes far beyond that. If one wishes to incorporate a company in the United States, the UK, Canada, Australia, France, Germany, Italy, Spain etc., my understanding is that none of them require prior approval of proposed beneficial ownership of a company before permission is granted. Guernsey and Jersey lead the world in that perspective. Hardly the characteristics of shady tax havens relying on secrecy !
Admittedly, the same does not apply for the formation of trusts in Guernsey or Jersey (but actually there is no reason why it couldn’t), but at the same time, the formation of trusts is barely regulated or supervised anywhere else compared to the way in which the fiduciary industries are regulated here in the Channel Islands.
In none of those countries mentioned above for company ownership is it a requirement for the beneficial ownership of companies to be disclosed to the public. Nominee shareholders can be and are invariably used. If a German company uses nominee shareholders then you cannot find out who BENEFICIALLY owns it just by doing a public search. Even the German regulators and tax authorities don’t automatically know that information. That puts rather a different perspective on things doesn’t it ?
Why should a PRIVATE company have to file its accounts publicly ? That is why companies opt for PRIVATE rather than PUBLIC status. Why should every Tom, Dick and Harry be able to find out who owns any company anywhere in the world on public record, and then study its published accounts to find out every individual’s personal net worth ? Human rights do allow individuals the right to privacy, which need have nothing whatsoever to do with tax evasion.
What the rest of the world needs to do is follow the lead of Guernsey and Jersey in actually recording beneficial ownership and granting consent to proposed beneficial ownership. Its actually works. By all means extend it to certain details on trusts as well. Those who have nothing to hide illegally from the tax authorities have absolutely nothing to worry about, but if every jurisdiction bought into this then it would be impossible to hide behind anonymity re. any company incorporated anywhere in the world, whether offshore or onshore. But that information would be regulatory and tax authority information, not information available to any snooping Joe Public or journalist ot potential kidnapper etc.
The world can learn a lot by something so very simple which Guernsey and Jersey have operated for decades rather than spouting ignorance at every opportunity.
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First class posting from David I hope Richard addresses these points. As stated in an earlier posting I would like to know in simple terms what is the worst scenario that an area as well regulated as Guernsey could possibly face bearing in mind we are supposed to be free to make our own decisions?
Please be specific Richard.
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An adddendum to mine above! On top of all this we have the IMF now seeking funding to meet its unprecedented aid demands and that from the developed world. It may not have been in jest that a gratuitous remark two weeks ago indicated that the IMF may have to print money. How that would be conducted almost defeats logic. Just another huge step away from the reality we should be seeking.
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We allowed Tommy Suharto to incorporate Garnet and stash his loot here. Who else?
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I do hate the words “Tax” and “Haven”.
As usual the great and the good can only see as far as then ends of their noses. In many, many instances legitimate jurisdictions like Guernsey offer a service or portal (if you like) to investors from all over the world. An example of this would be where Middle Eastern investors use Guernsey vehicles to invest into US Private Equity LP’s – if the offshore vehicle didn’t exist the investors wouldn’t touch the US LP with a ten metre camel prod!
Without this type of financing many parts of the world would be deprived of huge sources of investment cash. Perhaps the anti tax haven lobby would like to take that on board.
Many other financial institutions are not here for tax reasons at all – we simply have the skilled workforce to manage and administer some pretty complex financial instuments.
It might also be an idea for the US (in particular) to get its own house in order before it has the effrontery to criticise and legislate against well run (generally!) and managed jurisdictions such as Guernsey.
In this debate don’t assume that all money is here for the sole purpose of avoiding tax – it isn’t!
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Why do I think the statement by the Tax Justice network is pseudo-intellectual nonsense? This is why…
Strip away the waffle and it is apparent that The Tax Justice Network is simply arguing for the redistribution of wealth through taxation. Regardless of whether the proponents call themselves “social democrats”, this is essentially a rehash of that most basic of socialist arguments. As a low tax jurisdiction which actively (and legitimately) promotes offshore financial services, Guernsey, in their eyes, is an active participant in a capitalist system which they perceive as unfair and unjust. That is a matter of opinion, but dressing up what is essentially a political cause as a pseudo-economic debate is at best disingenuous and at worst propaganda.
Leaving aside the political and ethical arguments for a moment, the Tax Justice Network puts forward a number of basic assumptions which are either seriously distorted or just plain wrong.
They imply for example that Guernsey conducts its operations in secrecy to facilitate tax abuse and tax evasion. Lets get this straight, Guernsey goes to great lengths to counter financial crime and will willingly disclose any information to law enforcement agencies investigating criminal abuses. What we will not do however is disclose confidential client information to foreign tax authorities who have no legitimate or legal interest in that information. If we are dealing with an international client who has no tax connection with – say – the UK or the USA, why should we hand the UK or USA tax authorities confidential client information to which they have no entitlement and which does not concern them?
Guernsey deals with a great many international financial structures which are as complex as they are diverse. It is impossible to generalise about the tax planning behind these various entities (which TJN clearly do) but one thing they do have in common is that they have all been established to function legally and legitimately within the laws not just of Guernsey but of the international community as a whole. We do not knowingly engage in illegal tax evasion schemes – anyone who did would quite rightly stand to be prosecuted. To say we employ professionals who are willing to turn “a blind eye to the regulatory requirements of the places where they undertake their trades” is simply not true and demonstrates a complete lack of understanding about what we do here.
Other statements are equally disingenuous – for example they say that the object to Guernsey’s refusal to “participate in the EU savings tax directive as a full member, the sole reason for which must be the facilitation of tax evasion”. We do not participate in the EU savings tax directive as a full member because we are not a member of the EU. However, in spite of the fact that we have no legal requirement to do so, we have been voluntarily participating in this arrangement since its inception – we either withhold tax or disclose information to the relevant EU member state where a beneficiary is a citizen of that country.
The entities we administer do in fact pay their legitimate taxes in the countries where they hold their investments. For example, a Guernsey registered company with UK situs investments pays UK income tax on the income it derives from those investments. It does not pay capital gains tax because, as it is not a UK resident entity it is not liable for that tax. This is not tax evasion, this is the legitimate and entirely legal operation of an investor who is not resident in the UK.
Other arguments put forward by the Tax Justice Network are so generalised as to be meaningless. For example they say they object to “the use of offshore trusts, most of which we consider to be pure nominee arrangements undertaken solely to facilitate tax abuse…”. Trusts are not nominee arrangements, they are legally entities which have existed under British common law for centuries. And anyway…which trusts are they talking about, discretionary trusts, accumulation and maintenance trusts, charitable trusts, pensions schemes set up under trust, retirement annuity trusts, trusts set up to provide an income for a disabled child or to protect family assets from an heir with a drug addiction, trusts set up by Zimbabwean farmers in an attempt to protect their assets from theft by Mugabe, trust set up to avoid forced heirship rules in a country where only the eldest son could benefit from the family estate? I could go on and on – the point being that what we do is complex and each case is different – it is certainly not simply about tax avoidance (or “tax abuse” as the TJN choose to perceive it).
Above all, what really irritates me, is the wholly inaccurate presumption that Guernsey engages in practices which are used “by corrupt and criminal elements of societies around the world”. If they knew anything at all about what we do they would know that in recent years we have introduced incredibly stringent anti-money laundering and anti-terrorism regulations which are diligently overseen by the Guernsey Financial Services Commission. Our financial services business have employed dozens of compliance officers (at great cost) to ensure we operate within international law and actively join in the fight against crime. We are well ahead of the UK and most other jurisdictions in our implementation of these regulations and, while neither expect nor want praise for these efforts, it is bloody annoying to have some ill informed political lobbyists telling us that we are a hotbed of criminal activity. If they believe that to be the case then they should prove it – it is not good enough to call us criminals based on nothing more than innuendo and presumption.
I could go through the earlier posting and pick apart just about very statement and argue that it is either inaccurate or deliberately distorted to fit in with a predetermined political and ethical agenda, unfortunately I don’t have time. What is apparent however is that the Tax Justice Network has little interest in understanding the true and complex nature of what we do. They are railing against what they perceive to be the injustices of a capitalist system which recognises that a person or entity who is not resident in a specific country is not liable for tax in that country. Well, sorry, but that is the way the world works and as long as Guernsey continues to operate legally and with the highest possible professional standards I do not feel we need to apologise for our perfectly legitimate business practices.
I do not doubt that Guernsey will come under increasing pressure from the US, UK and EU Treasuries as they seek ways of extending their tax nets. As always we will act in accordance with whatever legislation they introduce. What we don’t need however is the spread of misinformation by bodies like the Tax Justice Network which serve only to distort the international perception of what we actually do.
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CD, great post. I tihnk Richard’s second to last paragraph in his long post showed he is little more than an anti-capitalist “warrior” who has little grasp on reality. His last paragraph sounds like the words of a religious “nutter”!
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CD
It is not capitalism that is the problem but the exploitation of powerful global entities and high net worth individuals that can abuse systems in order to further their power and wealth. The examples you state in Zimbabwe are an indication of how willing we are to participate in meddling in other countries’ affairs. We may not like Mugabe, but that’s surely by-the-by. Surely it is reciprocated by your ‘get orf our land’ attack on global harmonisation? Hypocrisy.
Capitalism relies on free movement of capital. Concentrations of capital in tax havens distorts this ideal.
How do you know we are not inundated by ‘criminal elements’? Just by using the tired ‘prove it or get a lawyer’ tantrum doesn’t mean to say you know anymore than anyone else.
You say “To say we employ professionals who are willing to turn “a blind eye to the regulatory requirements of the places where they undertake their trades” is simply not true and demonstrates a complete lack of understanding about what we do here.” How does that explain allowing millions from an Indonesian dictator to be deposited here?
Guersney may be good at what it does, but it doesn’t mean that what we do is nothing more than exploiting the poor and vulnerable around the world. It really doesn’t take much research. Your comeback just sounds like defending a job and a current system, a bit like I could defend the continuing dumping of sewage into the sea, it doesn’t make it correct.
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Fast Robert
You miss the point (possibly conveniently) that CD is making.
You appear to assume that all money depoisted in Guernsey is “bad” in some way. Also by implication you appear to condone Mugabi et al (perhaps I’m wrong there!). Obviously as all the worlds bad money is in Guernsey the rest of the world must be a pretty wonderful place – I don’t think so!
Refer to my post prior to CD’s excellent piece (mine I fear is not as eloquent). Guernsey does facilitate the free movement of capital for the benefit of many, many totally legitimate enterprises. Another example: US state pension fund wishes to invest in a specialised European portfolio, a Guernsey based investment bank sets up the vehicle, the fund is administerd locally. Money therefore flows from the US via Guernsey to various investments in Europe – these investments (will ultimately be companies) make money and employ people both of whom pay tax. The employees of the Guernsey administrators etc pay tax. The US pension fund increases in value and pays its pensioners who in turn pay tax.
Whats the problem with that?
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Where are you Richard Murphy please tell us how we are going to be outlawed and why ?Please be very specific what measures that could be taken against us?
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Gilthead
No problems as long as it’s all transparent and all tax is paid where it is earned. However if the product is being used to circumvent tax laws in home jurisdictions then, legitimate or not, it is morally dubious. As you say, and indeed I’m sure the TJN would say, the expertise in Guerney could be used equally rewardingly without having to sell ourselves as a tax expense mitigator.
Why do we need secrecy in global finances? What purpose does it serve other than to hide stuff? If things are hidden then it is open to abuse. What’s wrong with not wanting secrecy?
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Sorry to see that already part of Fast Robert’s post has been deleted. It has been reported in the Guernsey Press (so is hardly secret) that the son of the former Indonesian dictator, Tommy Suharto, was able to deposit MILLIONS in Guernsey despite Indonesia being firmly on the black list, and that money having been obtained by fraud.
We have an open and honest system do we? Explain that to the Indonesians living in poverty because of the theft of their property by wicked and corrupt regimes.
However, if our comments are not even able to be published on “your shout”, then what hope have we. Long live the myth of our super duper financial system.
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Neither of Fast Robert’s recent posts have been altered from what was submitted.
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Belinda
I don’t think there’s been any editing, probably more a case of too many posts spoiling the clarity! But it’s good to know someone else has picked up on the Suharto business. Either someone knew who the ultimate owner was and ‘blind-eyed’ it, or they didn’t know who the ultimate owner was but were ’satisfied’. Either way it doesn’t give much confidence to ‘the best due diligence’ in the world, does it?
“Lessons will be learned”, no doubt.
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I note that this discussion has moved on a long way since I first contributed.
I apologise for having not answered all the questions addressed to me: I will try to do so but must be in Westminster all day today influencing those politicians in the way that you note that I seek to do.
I will post further comments over the next couple of days.
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I think it is ludicrous to remove this blog from your shout when it is a popular blog and most people are waiting for Richard Murphy’s reply .In future if the blog is contributed by many people please let it remain.If somebody did not know the article came out on the tenth they might have difficulty finding same.
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In response to Belinda and Fast Robert’s postings in which they cite the Suharto case as an example of dishonest financial practices here in Guernsey.
My knowledge of this case is limited to what I have read on the internet and elsewhere so my comments are of limited value. However I do accept that this is a powerful example of bad practice and I willingly concede that this particular case undermines much of my argument about the legitimacy of our financial services industry.
I would just say to Belinda, to the best of my knowledge, (and perhaps surprisingly) Indonesia does not appear to be on any blacklist. This does not justify the case but it is worth getting one’s facts straight before putting forward a forthright opinion.
From what I can gather, the Guernsey branch of the French bank BNP Paribas accepted some $55 million from Tommy Suharto’s (BVI registered) company Garnet Investments back in 1998. Even though this was ten years ago they must have known that Suharto was the man behind the company and the corruption of Indonesia’s ruling family was well known even then. Tommy Suharto is without question an evil gangster (in 2002 – 4 years after the BNP Paribas transaction took place – he was convicted of the murder of a high court judge). Doing business with him was wrong, end of story.
There are however a couple of points I would like to make (again I stress I am not in any way condoning the Suharto case).
Firstly, our industry’s due diligence regulations and client take on procedures have been changed radically in the ten years since BNP Paribas accepted this money. I am confident in saying this transaction would not be accepted by any Guernsey financial institution in this day and age.
Secondly, I have worked for different companies in various sectors of the finance industry for many years and I have looked after various portfolios consisting of – literally – hundreds of clients. I can honestly say I have never witnessed or been involved in any dealings such as the Suharto case, or indeed any other similarly nefarious business deals – this sort of shady business activity is (and I honestly believe this) truly exceptional.
The trouble is it takes only one such case to give ammunition to those who love to propagate the myth that these sorts of dealings are common practice in Guernsey – they are not. It is frustrating to see ill informed critics of our finance industry seize on this as a “typical” example of the sort of business we do here. In my opinion BNP Paribas deserve to be condemned for accepting this business – the vast majority of businesses and individuals working in our finance industry do not deserve to be beaten with the same stick.
Thirdly – while BNP Paribas were, in my opinion, totally wrong to have got involved with Suharto in the first place, it should be noted that they have since frozen those assets and the Guernsey courts have extended that freezing order while the Indonesian government puts together a case to recoup that money. The Indonesian Attorney General has even been invited as a third party in the trial. Yes, this is bolting the stable door after the horse has bolted, but at least justice is now being pursued.
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