I have nothing to say in response to your 4.14pm post. Those are your views and you are of course entitled to them.

Re. your 4.20pm post, why wouldn’t tax on income be raised where it is earned ? Most onshore jurisdictions levy withholding tax on income paid to non-residents, and most tax foreign companies which trade through a branch or agency there. Not sure that I can see your point.

If an individual sells his business and takes the proceeds with him to a more benign jurisdiction, then he has no future liability to tax in the jurisdiction that he has left as he is no longer earning income there. You don’t seem to have a problem with that.

If a company decides to move its head office from say the UK to Switzerland or Guernsey or Ireland and continues to pay UK corporation tax on its trading operations in the UK, which it would, then you don’t seem to have any problem with that either.

I must be missing your point.

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It is the accounting standards and legal structures of certain instruments that allow those that can afford it to manipulate the numbers as to hide the true worth.

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How can the poor access such choice?

How do you justify to the electorate that a City player can pay less tax whilst living and working in London than their office cleaner does? Is that what the UK population really voted? It’s very different to the tax allowances that are spelled out in Budgets. The man on the street does not know that mandate they provide for a government to act on its behalf is being used to further gratify a tiny percentage of the already rich.

Do you think if they did they would get voted in?

The same here. If a politician said “well I support lowering the tax cap on the high net worths which will mean that there will be likely rises in other taxes to compensate if there is shortfall” would they get much shrift from anyone without money like that?

Where is the proof that it works well for wider society anyway?

So you see, I can’t buy the assertion that “we are where we are” so don’t worry because we’re doing OK out of it.

It’s the same global business that allows vulture funds to exist. They’re legal after all. Does that make them morally acceptable?

If a Guernsey company was found to be making, say, weapons grade white phosphorous and selling it to the Israeli Defence Force would the people of Guernsey consider that ethical, or just business?

We are a booking centre for foreigners to escape paying tax, our resource is our ability to set a tax rate that is less than the originator countries and a legal framework that protects from enquiry. I can see why it is so attractive for Guernsey. It’s easy money to ask the rich to pay fees so that they can absolve any state duties. The ideologies that encourage monster companies to make global monopolies, that allows a small amount of shareholders to ratify distribution of profits, and so empower that company to pay for lobbying (and bribes) governments into setting preferential rates for them, are the same that want to suppress the democratic power of the poor, and to restrict any opportunity they may have for emulating this success.

Globalisation could work, in the sense that trade is now a global issue, without giving the rich the opportunity to hide their wealth and not use it in the real economy.

And are investments really passive? If you play a market, you influence that market. That market may be linked to pensions or food prices. PE funds? Currency dealing? Emerging markets? Any investment affects something, be it the price of essentials, or the intangible confidence of a trading floor.

The more money there is concentrated in one area, the more that area can be said to interfere with the lives of people that have no access to that influence.

I have no agenda, David, I’m just a sad poster on a Guernsey local paper portal, the same as those calling for this or that, but I have to be cynical after decades of armchair politics when those that do well out of a granted luxury without wanting to recognise there may be an equal and opposite reaction to their business say “yes, because a ‘Lord’ who happens to be a legal player in this very field, probably doing nicely from their own personal ‘harmless portfolios’ says we are impressive then we must be impressive to everyone, after all he knows.”

There is a large absence of data and no real stomach from anyone in power to find out what impacts the complicated industry has on life for the majority.

Being global doesn’t mean just the one percent at the top. It means the billions that have no choices too. You make the suffering and the inequality sound like a fait accompli. Why should it be?

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But on the other hand if tax avoidance was outlawed altogether then more individuals and companies would physically relocate to lower tax regimes (as indeed they are doing now, in significant numbers) and so even less tax would be collected as a result.

The surest way to collect more tax is to reduce tax rates to such an extent that taxpayers don’t bother to avoid it. But that isn’t going to happen. How many people actively seek to avoid Guernsey’s 20% income tax ?

But tax avoidence, other than at the more extreme end of aggressive tax planning, isn’t capable of being outlawed. If some countries were to try to outlaw it then companies and individuals would nove outside the taxable scope of the countries concerned. In this day and age, wealth and its owners, both corporate and individual, are totally mobile.

Have you ever been to the South of France or Spain and noticed how many wealthy Swedes and Danes are living there ? They aren’t just there for the weather – they are there because they don’t want to be paying 60%-plus tax on their income and can live even in high-tax EU jurisdictions like France and Spain very tax-efficiently. How many wealthy French and Dutch people live in Belgium ? Tens of thousands of them. Why ? Because they only pay 15% tax in Belgium on investment income and Belgium does not tax capital gains (its even more tax-friendly than Guernsey for wealthy individuals who are living off investment income, while those who are employed in Belgium pay close to 60% tax on their earned income). How many wealthy Germans live in Majorca ? Huge numbers of them. The EU right to freedom of movement of individuals and their capital simply cannot prevent such relocation.

Wealthy people and highly profitable companies will move if the fiscal regime is too unfavourable. It is happening everywhere. Raising taxes or trying to outlaw currently lawful tax avoidance simply accelarates that process. Governments are well aware of this, which is why they can’t afford to do it.

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Not a lack of vision at all, but a realistic view of the factual position, unlike your unrealistic utopia.

Every single country is capable of putting in place appropriate anti-avoidance legislation to whatever extent it chooses, and that’s exactly what happens. We aren’t “sucking the wealth out of nation states”. Residents of those nation states are exercising their lawful and democratic right to place money abroad whilst complying with their tax reporting obligations. Or are you suggesting that they should not be permitted to hold assets abroad ?

And what possible difference does it make whether tax avoidance or mitigation tools such as pensions are domestic or cross-border ? It has the same effect does it not of the the tax bills of the wealthy being lawfully reduced. Have you not heard of globalisation ? The days of exchange controls by countries shutting their borders to foreign outward investment tends to be mirrored by an unwillingness for foreigners to invest into that country, which is self-defeating.

If you believe that countries can keep endlessly raising taxes to fund the fixing of their infrastructures then you are seriously deluded. Companies and individuals reach a point where they simply say “enough is enough” and they relocate elsewhere. Why ? Because they can. And they do. A few socialists aren’t going to stop them. That’s globalisation for you and there’s no going back.

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I accept that mortgage and pension payment relief are both tax avoidance.

If tax avoidance was totally outlawed then it is likely that the basic rate would be lower.

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A burgeoning industry around tax avoidance can only mean that tax is not being used in the countries it is democratically elected to be charged. A global industry is sucking the wealth out of nation states in a secret and undemocratic fashion.

Your other examples relate to domestic allowances, not cross border.

While we can laugh at the faults of bigger countries, maybe we should feel a bit responsible at their crumbling infrastructures and people in poverty?

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But what is the tax that somebody “ought to be paying” ? Is it (a) the maximum amount of tax which the transaction might generate, or (b) the lesser amount which the law permits them to pay by lawfully arranging their tax affairs in such a way that they don’t end up paying the maximum ? The courts for generations have decreed that its the latter, but socialists of course wouldn’t agree.

Do you claim a tax deduction for mortgage interest or for using up your full allowance of pension contributions so that your income tax bill is reduced as a result ? It is of course laeful, but please explain to me how that isn’t “tax avoidance”. Surely a socialist would decline to claim such tax allowances and simply pay the full amount of tax which would be due if such “tax avoidance” was not undertaken. Seems to be to somewhat hypocritical otherwise.

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The other, and more unpleasant side is that tax avoiders are happy to see others less well off than them, pay the taxes they ought but avoid paying.

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As TL correctly states, please rest assured that the UK knows exactly how our finance industry operates.

Arnald

I stand by my assertation of your repetition of Murphy’s views. I follow his blog very closely. I see his views posted on there and then “your” similar views follow on this blog. I also see your postings on his blog. Quite a coincidence isn’t it ?

And I don’t agree at all with your comment about TL’s comments re. the multinationals and the rich being “counter intuitive to the reality”. It rather suggests that TL is much closer to the reality than you are, but of course that rather disrupts your agenda. If you are seeing anything to the contrary at your employer as first-hand evidence then you are clearly working for the sort of organisation which shouldn’t still be operating here.

Like many others with a socialist outlook, you seem to think that paying more tax than is strictly necessary is wrong. TL’s point is that they pay what is due under the relevant tax legislation, but that doesn’t mean that they cannot or should not structure their investment so that, perfectly legally, they may pay less tax through one structure than by another structure. Tax, after all, is a business expense, and shareholders in companies are interested in maximising post-tax returns, not pre-tax returns. That’s a fact and always has been, and is right at the heart of the conflict between left-wing and right-wing regarding the rights and wrongs of taxation systems. You and others openly attack the role of the Big 4 accountants in advising on structures which mitigate a company’s tax liability, yet there is no doubt that the same Big 4 would be negligence in its obligations to its client (the company and its shareholders) if it failed to advise the company to mitigate its tax liability. Even if the directors of the company wrre happy to pay more tax, the shareholders almost certainly wouldn’t be, and that seems to be an unresolvable problem.

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Similarly I could say to you that you are just cutting and pasting tired repetitions from the elite who wish to preserve their unearned power. Because you are, and it would appear that even those less sensitive than me are noticing.

TL
I do keep saying that the issues are not just Guernsey’s. I also keep saying that we do what we need to do very well. But I’m sorry, I can’t buy your rosy precis of how multinats and the rich operate. It is counter intuitive to the reality. And since I live in Guernsey, it would be hypocritical of me to constantly talk about anywhere else, wouldn’t it? After all, Guernsey finance people and politicians are always telling ‘outsiders that don’t know what we do’ to stop interfering.

I’m glad you think that third world administration is up to the job of making multinational companies comply with their tax laws. I can’t imagine why those multinationals wouldn’t want to not try and pay tax there as opposed how they hardly pay any tax anywhere else. How do they do that? Because according to you they do pay their full share.

Prove that Guernsey isn’t facilitating the poor getting poorer. You couldn’t if you tried. Why is such a fundamental question not answerable?

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I’m increasingly convinced that you are just cut and pasting from Murphy’s website as the coincidences are staggering.

As you well know (or should know, given that you are apparently a compliance officer with a local finance institution), a massive majority of companies registered in Guernsey or administered here are not “trading” companies at all. They are investment holding companies who don’t trade at all with third parties. The chances of them wanting to trade with you are non-existent, likewise the chances of you wanting to trade with them. They hold cash or an investment portfolio or a property portfolio – they aren’t interested in touting for Arnald’s business, which rather blows your argument out of the water. Why on earth would you need to know anything about a private, passive investment holding company which has no plans to trade with you or any other members of the public and has no plans to raise extra investment from the public ? It has absolutely nothing to do with you and if you had access to its accounts it would be of no use to you unless you were intending to use it for malicious purposes. So what if Mr. X, residing in Hong Kong or Dubai, has $10m in a Guernsey company which holds his personal wealth purely for estate planning purposes (for those who don’t know, the Hong Kong tax system formally exempts foreign income or gains from Hong Kong tax, so massive sums of Hong Kong wealth are held, totally legally, in offshore structures). What possible relevance does that have to you or to anybody else if he is complying with everything that he is required to comply with in all other jurisdictions of relevance ? Its simply none of your business and you have no need to know.

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