Put squalid tax havens out of business – Red Ken
Friday 23rd January 2009, 1:00PM GMT.
FORMER Mayor of London Ken Livingstone is the latest high-profile commentator to target closing down Guernsey as a ‘tax haven’.
Speaking at a Fabian Society conference, Mr Livingstone joked about invading the island to achieve this aim.
And in an open letter to Gordon Brown, published in the society’s latest review, he talks more seriously about international changes creating the chance to ‘squeeze squalid little tax havens out of existence’.
According to the society’s Next Left blog, during the conference Mr Livingstone pointed out that de Gaulle tried to prevent tax avoidance in Monaco by sending tanks to the principality’s border.
Mr Livingstone, 63 (pictured), supported a proposal that half of the money spent on benefit-fraud advertising should target tax avoidance.
‘I suppose it’s a step to invading Guernsey,’ he said.
Fabian Society general secretary Sunder Katwala said the session Mr Livingstone was talking in was held in a Dragon’s Den-style format at its new year conference.
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I imagine if Mr Livingstone knew the full extent on how rubbish we are being at using all these high net worths and fat finance fronts to forward a society based on 21st century ideals then the language and humour would have been far more colourful. Infants in huts, sewage on the beaches, racist senior politicians, fisticuffs leaders, high turnovers of professional staff, Victorian mental health facilities, utter disrespect for the environment, money grabbing pomposity, arms dealers mates, dictatorship spoils’ servicers, minority rule experts, tax dodging entrepreneurs, destructive hedge fund lovers, asset strippers’ hideaways. And that’s just on my street. And whenever anyone DARES to mention that we are backward despite our supposed riches the tumult of abuse and head-in-the-sand ignorance gets plastered all over the media, painting detractors not as critics but as Destroyers of Guernsey, of Stalinist Mass-Murderers, of being a Radical.
The fact is all of those examples I have listed have been reported in the biased organ that is the Guernsey Press. It is not myth, it is a harsh reality. We, as the electorate, are failing our children and their children, by blindly following an ideology THAT HAS FAILED the rest of the world.
We are led by the opinions of tax experts and financiers THAT HAVE FAILED on a MASSIVE scale worldwide. Why should our ‘experts’ be any different? Please stop listening to them.
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Ray
Someone phone the men in white coats.
Sounds like Fast Robert is off on a big one this time !
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Nothing wrong with telling the truth. Actually it sounds very similar to Jersey!!
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Ray
re: Fast Robert….White coat yes, with locking straps, then give him a one way to Cuba. There, he’ll find out what ‘Island Living’ is really like.
Upon reflection though, if living on the island is so bad, why the Haides is he even living on Guernsey??
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Expat – At least Cuba knows that it isn’t a civilised democracy!! Fast Bob is tragically right, Guernsey is a banana republic in a fancy suit.
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See? All I did was repeat news articles from the GP! So the global finance industry hasn’t made a complete hash of things given the free rein? It’s hardly me being a Marxist! Anyway, if the US (what a shining paragon of virtue they are) hadn’t forced a 50 year trade embargo on Cuba who knows? Holding it up as an example of failure only goes to show the crass ignorance of your post.
Who said Guernsey was comparatively bad? All I said was that if Ken Livingstone knew the extent of our abuse of wealth then he would have used more than the word ‘squalid’.
It’s only an opinion Expat80 and Ray, why so defensive? Counter my argument then. Are we not pumping raw sewage willy-nilly, because it’s cheap? Are we not discussing school closures to make it cheaper? Does not the offshore finance industry have a reputation for hiding dirty money, or legitimate money from dubious sources?
One thing is for certain, Cuba’s education and health work extremely well considering the restraints. Here we are continually boasting about ‘deposits’ growing in their billions and we are shutting schools and wards, letting the mentally ill wander about with no hope, and marvelling at the disaffectation of our uneducated youth!
It’s not a question of hating Guernsey (such a cheap jibe) but of wanting it to live up to its expectations. I want it to be better.
No, I tell you what, I’ll stick to having an opinion on the state of Guernsey’s chips, or bitching about a family, or a kennel owner. That’ll be about the right level, yeah?
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I must admit to being a little confused, but he does say something about ‘painting detractors’ but he seems to forgotten to mention decolour !
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Fast Robert
So who on earth would like to live in a place like that? At least 63,000 of us by the looks of things.
If I felt as negative about where I was living as you clearly do, then I don’t think I would be hanging around. You must really look forward to waking up every morning !
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Here here Fast.
If Guernsey wants to have a flat 20% tax rate and all the other competitive advantages then it needs to become and independent state, or country – how on earth can it be morally and fiscally prudent to let something that is (well kind of depending on who says what) part of the UK but has a totally different tax regimine.
Guernsey should do independent or accept the UK’s tax legislation – for one thing it will save lots of money in having the Geurnsey Tax office, and a few Customs jobs could also be dropped for excise calculations on alcohol, fuel, goods etc. In fact you could save a few million in civil servant fees straight off.
Plus you get a free army, free trade with the UK, more access to other benefits, like international departure tax etc.
You can hardly blame Ken – Guernsey harbours an immense amount of tax evaders and criminals of immense wealth.
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David
Without criticism nothing gets better. All I’m using this opportunity to voice my views for is that we are told that we are great, but beneath the GuernseyFinance, Giba and IoD swank, there are deep and old problems that need and have needed attending to. Despite all of our finance sector prestige, despite the influx of highly paid professionals that run the businesses – in turn the island – despite the grandiose statements of ‘surviving’ in dark times, nothing tangible to the everyday Guernseyperson was achieved in the boom. The cash generated filtered upwards to the few (those few may be more than before, but still the minority). The capital projects that were passed were vainglorious, the deputies involved happy to have their names embossed on shiny new walls whilst infrastructure crumbles.
Now we are to be told that the glue of society, the police, the teachers, the administration, the health service are to be vilified for earning a decent pay – mostly without the bonuses – to have their hard fought and paid for pension scrapped because pension managers are inept (how are those hedge funds doing, David?), and for what?
Global reputation? The States seem happy to spend nearly a million a year flaunting our supposed expertise to all and sundry without batting an eyelid, yet when it comes to shutting an infant school for the sake of equivalent pennies, it’s all hard words and bitchiness to the PTAs, trying to make the public look like idiots.
Because our tax strategy has always favoured the wealthy and the big corps, the Guernseypeople are being marginalised. Talk of independence will only further the ‘Monaco-isation’ of Guernsey (where’s that Dominic – he loves Monaco – I wonder why!!!) – a reduction of Guernsey heritage in favour of minority foreign interests.
That suits some, the service industry profits (mainly run by foreigners), the finance houses profit (mainly run by foreigners), but the local scrape-a-livings-but-happy-as-long-as-their-working-honestly folk, the Freds and the like, are taxed out of the equation, their land is taken or restricted, and they are forced to do something they don’t want to. Same with school leavers and returning students.
If that is your idea of freedom then it seems at odds with certain core interpretations of the word.
We are at the whims of the global finance markets. They don’t look very healthy to me, except for the vulture funds and the secret trusts side – something that we do well, no? As the population increases: Education is pointing at aging demographics for school closures – so the increases are all outsiders profiting on our generosity, then more pressure is put on society. At this rate we will turn into a suburb of the City. Hardly what your average Guernseyperson would want.
I don’t have any answers, but I am allowed to criticise, unless you, like Ray and Expat80, would rather I was institutionalised like the dissidents in Cuba? The whole insult mimics the black shirts of Mussolini. Maybe we are turning into the Corporatist state so beloved of the rich money-grabbers?
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Fast Robert
You say that locals “scrape a living” from the finance industry. Utter rubbish. The finance industry has enabled the vast majority of islanders to have a far higher standard of living than they would have had if Guernsey had no finance industry. The success of the finance industry filters down to many different non-finance businesses, from media houses to travel agents, from shops to restaurants, from the building trades to taxi drivers. It is sheer ignorance to suggest otherwise. Many of those jobs simply wouldn’t exist without the finance industry and unemployment levels would be far higher. Fact.
On the other hand, I fully accept that there is a significant problem for those who earn at the lower end of the scale and who are priced out of many things because of the success of the finance industry. Its a problem and there are no easy answers. But the vast majority of those people have jobs and they have a clean roof over their heads. Would they be so well off in the UK with much higher unemployment and with towns all over the country where people have been unemployed for years, not just recently as a result of the credit crunch ? I think not. In comparison, that sector of the community is considerably better off than their counterparts in the UK. Except in socialist countries there will always be “haves” and “have nots”. Its unfortunate, but’s that reality.
If we can improve the housing situation for a sector of the community which is struggling with it, and that obviously also includes returning students and essential immigrant workers, then things would improve immeasurably here for many, but remember one thing – if the finance industry wasn’t here, what other industry would generate the employment opportunities to enable people getting onto the housing ladder to pay for their own house ? There isn’t one, so don’t think for one moment that things will improve if the finance industry is not protected. What will finance our schools and medical facilities going forward ? There wouldn’t be enough jobs here to generate enough tax revenue even if income tax rates were trebled.
The “freedom” that you clearly seek for the “average Guernsey person” to whom you refer will come at the cost of a destitute and bankrupt island with massive unemployment. Rather a high price to pay, I feel.
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As usual, for some contributors, any criticism of the status quo that does not agree with their own views, is greeted with personal abuse. The answer to a viewpoint with which you disagree should not be “if you don’t approve of an aspect of Guernsey (or Jersey or Birmingham or Paris or wherever it might happen to be) go somewhere else”. The answer should be some evidence supporting the contrary view.
Every Guernsey resident (including those who arrived on the last boat!) is entitled to an opinion without having to suffer personal abuse and verbal bullying as a substitute for rational argument.
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Fast Robert
It is patently obvious that you want better things for the ‘ordinary Guernsey person’ but I can’t see how you can possibly achieve that noble aim by single handedly trying to bring the island to its knees.
We are where we are. We have come to rely heavily on the taxes gleaned from the finance industry ( more so now on the employees earnings than the Corporate tax )
Look up any small UK Town with under 100,000 population. You’ll be hard pressed to find one that has to finance its own Customs / Police / Fire Service /Court system / Prison / Hospitals /Social Services /Leisure Centre /
Airport / Harbours / Oil ships / Marinas / Dairy / Subsidised Bus service /Schools etc etc.
There is only so much money in the pot. Admitedly some of it tends to be wasted but the point is most of the money in the pot comes from the Finance Industry.
Keep on kicking them by all means but one day please end your rant with a workable alternative source of taxable income bearing in mind that you’ll have to allow for a few thousand extra local souls on the unemployment list
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David
If trickle down was as cute as you make out then Guernsey should be completely wealthy with no infrastructure problems as the tax receipts would keep climbing and climbing as more and more people get better wages. If the premise was true then the US would have a tip top society, instead of one that has to give 26 million people foodstamps and with the highest ratio of prisoners per population (mainly, I might add, of uneducated minorities). There is no point holding up the ‘if it wasn’t here we’d all be poorer’ flag. Of course it’s true to an extent, and I have never. ever said that the finance industry should leave. That would be preposturous. What I rail against is the arrogance of the finance set that their house is in order and that they are boon to the world. It is plainly clear, David, that much has gone wrong, to separate Guernsey from those mistakes is churlish. The very same people that have run the world down into a major recession are the still the ones assuring us that they were right all along. Reduce that to our microcosm and the same things are being said by those tax payer funded organisation that want us to bow down and worship at their all giving altars. Madoff? Untouchable credentials, a blatant crook. How many more? How much longer should we be listening to the reasoning given by finance managers on how to run our society?
I don’t disagree with the premise that any successful industry is necessary, wealth generation is a must. But at what social and global cost? All I’m pointing out is that in the last fifteen years of exponential growth and the creation and importation of massive incomes, there’s not much to show for it. Not as much as you seem to think, anyway. Coffee shops and the mushrooming building industry are all well and good, but they don’t advance us as much as decent schools and free nursery care, for instance.
Or a depositors protection scheme.
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Ray, David, finance apologists, do try and remember that there was a Guernsey BEFORE finance turned up!
Sure, it’s before my time, but I hear that the Island seemed to do all right before 1980? Supporting a full public services infrastructure, providing jobs, housing people – irrespective of their social class…
If the equilibrium of the island has been upset in the last 30 years, it’s the big, greedy financier that’s done it. Surely a rationalisation of the finance industry, through international regulation on ‘squalid tax havens’ will contribute towards redressing the balance of the island? We all just have to hope that when that day comes, our leaders haven’t sold us too far down the finance river.
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The insane thing about Fast Robert’s rants is that he works in the industry he claims to despise. Don’t you FR? Time to fess up.
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“but I hear that the Island seemed to do all right before 1980?”
Then you hear wrong Student Bob. In 1980 there were over 1000 unemployed. Not exactly on our knees but finance did fill what was a desparate hole in our finances and employment prospects.
When you speak to the old folk, you will find that most of them have a romantic notion of an island blessed by sun and ripening tomatoes on vines.
As my father was a labourer in those vineries; the work was back breaking, poorly paid and, personally, believe Guernsey is a better place without it.
Sorry to disappoint you.
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Jackie
When have I said that I despise the finance industry? In itself there is not a lot to despise. It has to exist so why not in Guernsey? I’ve never said anything to the contrary. Whether or not i agree with the tax disparity that exists between jurisdictions causing jurisdictions to compete against one another as if they were corporate entities is another matter, along with the whole ideology of tax avoidance and non-transparency. These are global issues that Guernsey cannot hope to act unilaterally without damaging its core, at this time. This position is convenient for those that are making the decisions and an impasse for those that wish to alter this contrived status quo, but it is fact.
There is a dark underbelly to the whole shebang though, which is something that people seem willing to be ignorant about in exchange for a new car and a conservatory.
Me, me, me.
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Ken
Got booted out of London for extorting people with congestion charge and claiming that you were racist if you felt immigration was out of control.
Maybe we should become totally independent of these people.
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Wouldn’t surprise me if Ken had a family trust over here. He’s been married enough times to warrant it :)
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Ken’s attack on Guernsey as a “squalid little tax haven” is predictable rhetoric from a left-wing ideologue (albeit one who has feathered his own nest quite nicely by all accounts).
International finance centres are an easy target for the likes of Ken and such statements have popularist appeal for the majority of people who do not have the slightest idea what we actually do here.
The recent collapse in the global economy was entirely down to bad decisions and illegal practices in certain (limited) sectors of the finance industry and I readily admit that Guernsey is bound to be tarnished by those events.
I would however just like to reiterate a point I have made previously on this blog. The Guernsey finance industry encompasses a huge range of different services and diverse financial products and it is impossible to generalise about what we do and why we do it.
The term “tax haven” assumes that individuals or businesses who do business here are avoiding paying taxes which they are legally supposed to be paying in another jurisdiction. This is not the case – if the UK, US or European tax authorities had any claim to the monies that were passing through our Island we would be legally bound to pay or withhold those taxes. To do otherwise would be to act illegally and we go to great lengths to ensure we do not breach those laws. The fact is that (in the overwhelming majority of cases) those various international tax authorities have absolutely NO claim to the money that passes through our finance sector.
Of course Ken knows this, but why should facts get in the way of good socialist soundbite. If the likes of Mr Livingstone (or the onshore tax authorities for that matter) want to attack our finance sector then they should put forward legitimate arguments as to what – specifically – we are doing wrong, and explain which tax laws we are contravening. If it turns out that we are not contravening their tax laws but that their own tax legislation is flawed, well fine, let them amend their legislation and we will comply with it.
Of course, the recent collapse of the world’s economy does nothing to strengthen Guernsey’s argument for legitimacy. As Fast Robert has intimated, elements of the world’s finance sector brought about this crisis and, as part of that global finance industry, Guernsey will doubtless be tainted by association. But to blame the finance industry in general for the current economic crisis is a bit like blaming all Germans for the rise of Nazi Germany – a lazy argument which ignores the complexities of the situation.
By all means blame those sharks in America who sold mortgages to people who could never afford to repay them. And yes, blame the handful of hedge fund managers who bundled up those mortgages and sold them on to banks as packages of debt. And why not blame the rating agencies who categorised those bundles of debt as ‘low risk’, or even the bank managers who bought them without understanding what they were buying – sure, they are all culpable. But don’t blame the part time mum working in a Guernsey trust company, or an offshore fund manager dealing in equities, or the cashier in your local bank, or any one of the millions and millions of other people around the world working doing an honest days work in the finance sector, many of whom now stand to lose their jobs.
Speaking as an old duffer who actually remembers life before finance, I absolutely agree with Jackie that it was not as rosy as many would like to think. The finance industry has bought far more benefits to our island than losses – and yes that wealth has trickled down, we are extremely affluent and well provided for compared to most parts of the world by any standards.
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Red Ken – never changes and often doesn’t understand what he’s talking about!!
He said “half of the money spent on benefit-fraud advertising should target tax avoidance.”
What utter nonsense.
Tax avoidance is the legal utilization of the tax regime to one’s own advantage, in order to reduce the amount of tax that is payable by means that are within the law. By contrast tax evasion is the general term for efforts to not pay taxes by illegal means.
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Hurrah for Red Ken – have always liked him
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CD
A very good post, thank you.
Not breaking laws does not mean that those laws are there for the good of the majority in the first place. You only have to look at the current ‘cash for laws’ mediastorm to understand that this type of bought favour has ALWAYS been, and an inherent symptom of social engineering by business – indeed it’s not alot different to the feudal system of power through wealth and connections.
What we have witnessed on the global level is a faith in the system based on personal greed, a categoric and unmitigated disaster. Surely part of the ‘bail out’ is re-educating ourselves that ‘economic growth’ does not propogate from magic beans, and that progress is more than attracting rich folk who know how to avoid paying tax.
No one wants to ‘scale down’, but perhaps we should be ignoring the constant aspirational marketing we are force fed – no matter who is selling the snake oil, it will be with vested interests.
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Fast Robert
How can you possibly say that you don’t despise the finance industry ? Your postings over the past couple of years have never said a positive word about the finance industry and you’ve continually castigated it as being corrupt and only there to facilitate tax evasion. You appear to have a very short memory indeed.
As far as the trickle-down factor is concerned you need to open your eyes. Just about every trade or business on the island benefits from the relatively high level of disposable income in the pockets of islanders. Which industry do you think generates that high disposable income ? Shops, restaurants, pubs, nightclubs, garages, hairdressers, travel agents, estate agents, beauticians, taxi drivers, plumbers, carpenters, electricians, gardeners……which industry to you think a large number of their customers work in ? Disposable incomes here are higher than average because wages are generally higher than average (in comparable UK terms), and its the finance industry which pays the higher than average wages. It clearly doesn’t reach absolutely everyone but if you are denying that the finance industry benefits a huge number of people who work outside of it, then I’m afraid you are missing the glaringly obvious.
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CD – you are quite incorrect with your assumptions about Guernsey not being a tax haven.
People invest money in Guernsey to avoid tax payments in other juristictions in the main – why else would someone do it? It can’t be because it is practical (if they live in England somewhere); it is to try and avoid the tax rates in their domicile area.
Tax advisors from independent big 4′s and such like specialise in maximising client revenue (and their own pockets of course) by offering advice to investors in methods to increase their net worth. Obviously evading or avoiding tax is illegal, however it does not do any harm for them to mention the loop hole to clients and to then put the ‘if you did this however you would be breaching the regulations of XYZ or breaking the Tax Act et al’.
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Funny that Ken Livingstone was happy to take money to come over to Guernsey and speak at the local Foreign Exchange Association’s annual dinner a few years ago!
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FR – Red Ken said he ‘supported a proposal that half of the money spent on benefit-fraud advertising should target tax avoidance’.
The problem with that is they would have no legal basis to do anything. I actually think he meant to say evasion, but just got muddled (too many drinks maybe!!).
Darren – You made an incorrect statement, as evading tax is illegal but avoidance is not.
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To be honest I don’t know why anyone’s getting too excited about this whole issue. Ken isn’t exactly popular within his own party, and the amount of influence that he has is, I imagine, negligible. Just let him get back to his life of champagne, fancy dinners and black cabs here there and everywhere, while the average working class Londoner is struggling to make ends meet. A champagne socialist with his nose permanently in the trough, just ignore the clown for goodness sake.
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Just a couple of quick points that Ken seems to forget.
1) the biggest tax haven in the uk is the City of London,created under his watch, with massive tax advantages given to the hedge fund managers who if any one is to blame for the present financial crises must be in the lead seat
2)whilst I no longer live in Guernsey I have family and many friends that do and some of your commentators seem to me to be deluded if they think that the finance industry has not given islanders a level of lifestyle and luxury that would never have been attained through tourism or growing.
I say to fast robert he is free to come and live in the uk (unlike uk citizens to Guernsey) perhaps a spell living in Deptford or Hull might give him a reality check to how lucky and blessed the residents of Guernsey are.
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As we were invaded by the English in 1945 and they have never left I think he should think very carefully about his jokes. As a Guernsey Man I would personaly throw him out.
I think these sort of comments should be kept to their clubs.
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It will always be the same we the electorate will vote for the people who say they will do our bidding and then do exactly what they like. They will spend our money any way they like and they will never listen to a thing we say. Nothing changed there then. And Ken is one of the biggest fraudesters going. Keep him away from us.
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The simple fact is, after you have cut through all the bul***t, that Livingstone is a far left idealogue who believes in a system that allows him to tax others to further his own ends. We do our own thing, thankfully, and what he cannot abide, or understand, is that we have just as much right to decide our own destiny as anybody else. We can show the world a reasonably successful society that imposes less taxes on it’s citizens than he would want. No wonder his compatriots flock to us for financial services and no wonder he’s upset!
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Haha!
Yes of course The City is more ‘squalid’ than Guernsey! Yes of course we have a good standard of living here! But we must do better!
Is it really about lifestyle though? Are we to ignore the more ‘squalid’ aspects of our wealth generating in favour of being able to eat Marks & Spencers ready meals and admire a few cars on the drive? It’s all about trends. The trend during the good times was not to invest in our public services and the trend in the bad times is to make cuts in public services. The end result will be dysfunction. Entirely due to the way tax jurisdictions compete against each other. When bubbles burst it is not the creators of those bubbles that suffer, but the people propping it all up from the bottom.
Just saying PAH to criticisms won’t make some of the real issues disappear.
Our luxurious lifestyle is unsustainable, if you deny that then you are as deluded as you think Ken Livingstone is. For that very fact we must start to pick apart what sustainability entails and I suggest the very core is a strong community pulling together for the common cause.
This lifestyle encourages the opposite.
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Fast Robert – what is the definition of a luxurious lifestyle?
I think you’ll find that the vast majority of people in Guernsey have a “comfortable” lifestyle. There are a few who have a luxurious one – but not that many!
If aspiring to be comfortable is wrong then we’re all in trouble.
And by the way Livingstone, like the Pope, simply doesn’t know what he’s talking about.
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Guernsey has got something to answer for re its finance industry activities its true. We have facilitated (our lawyers and administrators) a lot of the structures of the shadow banking industry that have played their part in the current financial chaos (opaque products, underlying credit advances with little consideration to whether it can be repaid). Ken is a bit on the extreme side though.
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Yes, Gilthead, but do the likes of Sir Fred Goodwin know what they are talking about? Or Greenspan?
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Fast Robert I agree that previous States administrations, when times were good and all seemed rosy, were manifestly guilty of failing to invest in public services and our island’s infrastructure. Now that times aren’t so good we need a vibrant and diverse financial services industry more than ever as a bulwark of our economy so that we can fund airport runways, new schools, new mental health blocks, new waste treatment systems, etc etc etc. What we don’t need is any pious interference in our affairs from the likes of Ken.
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Martyn
If by vibrant you mean transparent, universal attractive and operating with flawless integrity, then I’m right with you. What we don’t need is a continuation of the morally vapid last couple of decades. It won’t do us any good in the long run.
If it were such a good thing for Guernsey as its supporters (and leaders) would have us believe, where the devil are all these facilities that we have needed for thirty years or more?
Where has the money gone? Is it the case that it simply was never there and there’s a great deal of wool-over-eyes-pulling by those that profit from it most?
In the meantime we’ll need to cut the police service down, customs, teachers, medical specialists (although we can see that we have to import locums at vastly inflated costs because somethings just can’t be done away with) to make way for new tax rules for the wealthy and cosseting the business leaders to compete with the other ‘havens’.
Life in Guernsey without finance will shrink beyond comfort. I’m fully in accordance with those that attack my rants on that part. But we shouldn’t be complacent in believing that the sector has our interests at heart. Even at election time Giba were saying hysterically that their members would all leave if ‘anti-finance’ candidates were voted in. Does that prove loyalty to the locals, or a desire to get rich very fast while they can?
That is the attitude I argue against.
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FR – no one has suggested that the finance industry has Guernsey’s interest at heart. Of course it doesn’t. But there again neither does my plumber.
What you (and others) appear to want is a utopian paradise. I’d like that too.
But until that happens I’ll take what I can – like, more or less, everyone else.
Sadly its the world we live in.
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I don’t know why anyone bothers to react to people like Red Ken.
He and his ilk hate any people who have more than they do.
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Agree 100% with Fast Robert.
“Thats just the way it is” or “sadly thats the world we live in” (call the violins for boo hoo Gildhead) isnt good enough for me.
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As always some very interesting discussion points.
I maintain that our finance industry is relatively well run and regulated. I do stress the word relatively – there are of course many things that can be improved, but compared to many other jurisdictions we are streets ahead in terms of our anti-money laundering and anti-terrorism procedures and in our general standards of service and integrity.
I think there are in fact two separate arguments here. One concerns the legitimacy of our financial services industry and the other concerns the ethics of what we do (both are obviously related but if I may try to isolate these two aspects it may make it easier for me to try to explain my own views).
In terms of the legitimacy of our business operations my argument is as follows:
Of course we offer tax planning solutions to our clients, but in so doing we act within the legal tax frameworks set out by the UK, the USA, Europe and elsewhere. Our clients are, in the vast majority, not resident in those onshore jurisdictions and have no duty to pay tax to them. I do not think of this as exploiting “tax loopholes” – there is no such thing as a tax loophole – tax legislation either imposes a duty on a person or a company to pay tax or it does not. Where individuals or companies do not have a legal obligation to pay ‘onshore’ tax then we are able to provide workable structures through which they can legitimately and legally carry out their business functions.
I don’t really give a monkey’s about Red Ken’s opinion, but his ill informed comments are being echoed by many of the leaders of the western world including Barak Obama (for whom otherwise I have the utmost respect). With the global economy on the ropes those major economies need to increase their tax revenues and jurisdictions like Guernsey are being targeted as a potential source of funds.
The arguments against us seem to follow a number of predictable threads e.g. – 1) we are assisting criminals to launder their ill gotten gains; 2) that we are stealing taxes that should rightfully be going to another country’s exchequers; 3) that our activities result in global poverty and the general destruction of the planet; and 4) (coming in as a new entry) that we are directly responsible for the current global meltdown.
As I have said previously, these sorts of arguments take no account of the diverse financial services that we provide; but more particularly – apart from the odd exception which is always held up as an example – none of these arguments has any real basis in truth.
I suspect that if the tax authorities around the world took a proper look at what we do here, they would realise that it is not Guernsey that it as at fault, but rather the quality of their own tax legislation. It would be a very difficult, time consuming and costly job to redraft all of those tax laws so that entities who were not resident in – say – the UK had suddenly to pay UK taxes. A far simpler method would be to propagate the myth that we are, as Ken said, “sleazy tax heavens”. If enough governments around the world can convince themselves that this is the case, then why bother with evidence – they can simply agree not to allow businesses with connections to offshore jurisdictions to operate in their respective countries and bingo, our industry would collapse.
I am not saying this is what is going to happen, but I do think we, as an Island, need to ask ourselves whether or not we want to preserve and protect our primary industry (and I appreciate that there are lot of local people who do not). If we do then we need to start standing up for it and dispelling much of the disinformation that is being spouted by ill informed pundits. There are plenty of external forces working together who would love to close us down – we can either carry on grovelling and scraping and doffing our caps to them (as our current government seems to do) or we can start standing up for ourselves and dispelling the disinformation that is so prevalent. We do not need to apologise for what we do – we just need to ensure that people understand it.
Now moving on to the question of ethics:
As a socialist Ken is obviously going to take the view that any accumulation of wealth by businesses or individuals is wrong and that wealth should be redistributed to the poorer elements of society through the taxation system (whether he puts his own money where his mouth is debateable).
On a broader scale many of our critics will extend this argument to a global scale, suggesting that the flow of money through jurisdictions such as Guernsey is a direct cause of world poverty and the destruction of the environment.
On a micro-scale (i.e. at a local level) many people feel that the finance industry only benefits a minority and that it has eroded our local cultural values.
I am not a socialist, (nor am I you may be surprised to hear a rabid capitalist) – I personally simply feel that socialism in Russia, China and elsewhere resulted in far more poverty, deprivation, environmental degradation and erosion of human rights than free market capitalism. And even now – after elements of the free market capitalist system have caused the biggest economic car crash in decades – I still think that, on balance, I still think free market economics do ultimately result in better prospect for most (but I concede not all). The economy has crashed before and it will recover in time (it is all part of the great cycle of things).
My view is that, as businesses and individuals prosper, so some of that wealth filters down to the rest of society through higher levels of employment. The movement of money through Guernsey may mean that companies and individuals who are not resident in the UK, for example, do not pay UK taxes – but almost ALL of that money will be invested in government bonds, stocks and shares, banks, building projects, commodities and many other investments – which in turn means more jobs, more taxes and the general growth and circulation of wealth around the world.
I maintain that this is as true within Guernsey as elsewhere (although why our government decided to give up most of our income by signing up to zero ten is beyond me – but that’s another argument). I have had the fortune to send my children to Guernsey schools and the misfortune to have need of the Guernsey health service and, compared to just about any where else, in the world they are excellent. There is always room for improvement but it is churlish to think we are hard done by.
As to the destruction of our way of life – well I agree that our booming economy has brought about many cultural changes and not all of them are good – again, that throws open a whole new discussion. May be I should stop there…
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CD
But who says that the information you are basing your ‘truths’ on is told by someone who is telling the truth?
There are many documented academics who believe that the distortions in the movement of capital caused by offshore centres are an essential hindrance to the free market model. These ‘investments’ you speak of are mostly ‘virtual’. Made up instruments that rely on other made up instruments to provide a mythical return. There is no ‘reality’ in many of them. Surely this should be invested back into the communities it was made in?
There is a great deal of difference between a totalitarian government and a social democratic one. You imply that your argument is balanced but then you tar socialism with Stalinist Russia and Maoist China as your examples (you are not the only one – it would seem that the indoctrination of the anglo-saxon world that socialists = the devil has been well and truly all-encompassing). Worse is the US example on Cuba. The US holds itself up as a bastion of the free world and yet for 50 years it has ground down the aspirations of an island.
So lets lose these tags and argue the case for a moral finance industry that does not rely on tax disparity and instead stand on our own small feet on merit. As David will tell you, we are the best in the world, apparently.
Even though the soundest financial advice I read in the papers is not to invest in Funds of Hedge Funds, something we specialise in, I believe. Oh and securitised debt.
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CD
An interesting personal view point.
I don’t think Guernsey stands accused of stealing the tax take of another country. It is the beneficiary of the tax avoidance scheme that retains the monies.
You mention Barack Obama as echoing the ill formed comments of others such as Mr Livingstone.
You will be able to appreciate the views of President Obama if you read the speech of Senator Levin to the US Senate when introducing the bill to deal with tax havens. The facts given within the speech make clear the
The US tax authorities believe that an appreciable number of its taxpayers avoid paying taxes they ought to pay to the us tax authorities. Senator Levin also sets out how some tax havens provides US taxpayers with the wherewithal to avoid tax payments.
As you say tax avoidance is legal. The US disputes the legality of some of the schemes, and deplore the secrecy that prevents it discovering the financial standing of its tax own taxpayers who make use of tax havens.
As you know Guernsey is on the current tax haven list. I assume those who so many commentators accuse of being on a “Jolly” have, in fact, been persuading the US authorities that Guernsey is not protecting the US tax avoider.
On the ethical side there is the view that if someone avoids paying a pound (or dollar) of tax someone else has to make up the payment.As many in Guernsey are discovering, it is those who are less able to pay, who are the one’s who have to make up the tax take shortfall.
Just a little balance to your informative and interesting post
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Stephen
You are mixing up your “tax evasions” and your “tax avoidances” here.
Guernsey is entitled to protect the legitimate tax avoider. It is of course not entitled to protect the illegal tax evader.
The Stop Tax Haven Abuse Act is aimed at the abusive use of tax havens (i.e. tax evasion), aided by secrecy and no ability to exchange information. That’s why Switzerland, Liechtenstein and Cayman are in the front row of the firing line.
And Fast Robert, of course we have world-class skills in fiduciary services, fund administration and captive insurance but they need to be operating in a tax-competitive environment where investments can grow in a gross, tax-free environment, but where all due taxes are being paid by the investors/clients in their own country of residence in accordance with the tax laws and anti-avoidance laws of that country, and with exchange of information arrangements in place to minimise the risk of investors/clients not complying with their obligations. That’s exactly what Guernsey has put in place over the past decade.
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This just boils down to one thing,
the UK cannot join Europe whilst they have ‘tax havens’ so to rectify this situation they must either
force us to declare independance
or
force us to no longer be tax havens.
it is going to happen eventually, it is only a question of WHICH? and WHEN?
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Get out of the UK its finished and now ruled by incompetent dodgy characters.
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David
No, I am not mixing tax evasion and tax avoidance.
The US has concerns that tax schemes seen by the providers as tax avoidance and in their eys’s legal, are not transparent because of the failure of places such as Isle of Man (mentioned in the speech of Senator Levin) and others to provide details of the offshore activities of its taxpayers.
In this instance, what seems to be tax avoidance to one observer might appear to be tax evasion, depending whether you are looking at it from the viewpoint of the gamekeeper ot poacher.
What the Us wants is the information to make its own decsion on whether a transaction is avoidance (legal) or evasion (very naughty).
Given the track record of some of the main players, this scepticism of the US is understandable.
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David
Tax should not be ‘competitive’. The fact that we are indoctrinated to believe that tax is a dirty expense and a symptom of Government meddling is proving destructive. Tax is a necessary tool to maximise the progress of society – when spent in the right way, of course. So any rules that allow tax jurisdictions to compete against each other for the same finite amount of money, then other jurisdictions will see their tax take reduced, to the detriment of their community.
Why should the high net worths and multinationals exploit this inbuilt oversight whilst the rest of the world cannot? It takes money to invest in these instruments. That money creates more money, which then distorts the global flow of capital even further.
Tax havens hinder the free market model and they hinder the social democratic model.
Makes a few people rich for a while, though. Maybe they can buy some stuff when they spend their few minutes in Guernsey and prove that the trickle down really works. (I still maintain that if this theory was a reality then there would be a forever upward trend in the advancement of society – it’s just not really there, is it?)
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Stephen
The amount of US-related business carried out in Guernsey these days (excluding US institutional investors in funds which is really a non-issue even for the US) is negligible. The US has no need to be concerned about Guernsey in this respect. Our challenge though has to be to prove it to them.
New Arrival
Unless I’ve missed something, the UK is already in Europe. Its been a member of the EU since 1973 ! Not sure where you’ve “arrived” from but I’m surprised that you aren’t aware of that.
Fast Robert
Your usual interesting viewpoint, yet again highlighting your sheer hypocrisy in continuing to work in the offshore finance industry when you clearly so abhor it. Strong principles when it suits you, huh ??
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David
Why should I abhor a service? I don’t abhor anything except greed and exploitation. Are you saying that I am hypocritical because the finance industry is greedy and exploitative? A lazy argument as I’ve highlighted. Without the ability to criticise we become a Corporatist state. Do you believe in free speech? I’m not insulting anyone after all.
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OK, so lets take a random hypothetical example:
The Guernsey financial services company I work for are approached by a Canadian oil and gas exploration company – “Fast Robert Oil & Gas Services Ltd” (FROGS for short).
FROGS operates in the Middle East, Russia, Canada, Australia and the USA and employs 7,000 people of various nationalities, 2,000 of whom are not ordinarily tax resident in any one country, they travel the world in the course of their work.
FROGS is a good employer, it wants to ensure the 2,000 internationally mobile workers (many of whom originate from less well off countries) will have a decent pension once they reach retirement age so it wants to set up a retirement plan under trust here in Guernsey. My organisation would act as Trustees and administrators of the FROGS Retirement Plan.
FROGS pays £1 million a year into the scheme and this is invested in low risk funds, bonds and cash to provide a pool from which employees can receive a lump sum pension payment when they retire. FROGS makes the regular £1m contribution to the scheme from its profits (after tax has been paid in on those profits in Canada).
The 2,000 international employees will eventually retire to various corners of the globe and it therefore makes sense for their pension scheme to be based here in Guernsey – they need the flexibility – it may be difficult for example, for a person who eventually returns home to Russia to receive a pension from a U.S. pension scheme.
The other big advantage though is that the pension contributions are invested in offshore funds and the trust fund is allowed to grow free of tax until the employees take their retirement benefits – however they almost certainly pay income tax on those benefits when they receive their pension payment in their eventual country of residence.
This is fairly typical offshore retirement planning scheme and there are many like it in Guernsey.
So – who can explain to me which government is being conned out of their legitimate tax revenue in this case? What ethical boundaries are being crossed? How is Guernsey contributing to the economic collapse of the worlds economies by engaging in this bit of business?
Now, obviously, this is only one example out of the many hundreds of different financial services that we here in Guernsey provide. Our services are as complex as they are diverse and many structures or schemes will have entirely different tax planning objectives – but in a way that is may point – we are constantly being barraged with disinformation about our unethical/criminal/greedy (delete as applicable) financial services industry when in fact – if you start to deconstruct exactly what we do here – these generalised criticisms are usually both unfair and inaccurate.
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CD
Very well put.
Fast Robert
You abhor “tax havens” . You frequently and openly state that. You abhor the “financial services industry” as a whole. Your rantings don’t generally tend to qualify your views in any way. You work in the local financial services industry. You have told us that. Your generalisms tend to state that Guernsey and its financial services industry is rotten to the core.
Call that coincidences if you like, but I call it hypocrisy. Either that or your rantings need to be a bit more specific about which parts of the local finance industry you are in fact comfortable with and to which your rantings do not apply.
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But FROGS wouldn’t behave like that at the outset. It would set up an offshore company to handle the profits on its books and so pay little tax in that jurisdiction.
It would therefore become a net drain on society as it uses resources not being paid for proportionally through tax take.
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Fast Robert
Sorry but you don’t know what you are talking about. Your cynicism and ignorance does you no favours whatsoever. CD’s summary scenario is an extremely common one.
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CD – I freely admit that I know almost nothing about finance and am happy to be corrected on the following by more learned contributors!
Surely the governments that FROGS is depriving are those in which the workers are based? Take the UK for example, workers based there will not include these pension contributions on their monthly salary so their national insurance contributions will be correspondingly lower. I think Gordon Brown called this practice – “the tax dodge of the decade”.
Also, surely by reducing FROGS profits by making these huge pension contributions, the company is avoiding a significant amount of tax in its home country on its profits?
Finally, why would it be difficult for a Russian resident to claim a US pension? By difficult, do you mean tax inefficient?
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Student Bob
Maybe I can help.
The expatriate employees will be paid a salary and benefits in the country in which they are working. In the vast majority of countries that would be fully taxable on the employee, and fully deductible for the employer. Within those benefits, the employer company will be making pension contributions for the employee. The company will normally get tax relief for those contributions, and for the employee it would normally be a taxable benefit. That should all be fairly clear and straightforward.
Because the nature of employees of multinationals is that they tend to get moved around from country to country after 2 or 3 years, its clear that in a 30-year career an expatriate may well accumulate 3-years worth of pension benefits in 9 or 10 different countries, which is not exactly cost-efficient (nothing to do with tax). It would also be a nightmare for that employee to retire back to, say the UK, and have pensions coming in from 9 or 10 different countries, all suffering differing levels of withholding tax in the different countries depending on which countries are involved.
Its therefore far easier for the multinational company to set up an international pension scheme in somewhere like Guernsey, so that everything is centralised no matter where the individual has worked over the years. When he retires, he receives a pension from Guernsey and, of course, Guernsey does not levy a withholding tax on pensions paid to non-residents of Guernsey. That’s the rationale for it. All the benefits are commercial ones and no taxes are being avoided or evaded by the employee or the employer.
It is a fact that in virtually every developed country, pensions actually grow tax-free. The contributions get taxed and the benefits payable sometimes get taxed, but the income and growth in the intervening 30-plus years is not taxed. This is the case in the UK, the US and in most onshore jurisdictions (at least up to certain statutory limits). Again, therefore, the fact that the pension fund is based in Guernsey rather than in, say, Canada, is neutral for tax purposes. Neither the employer nor the employee is achieving any more, other than commercial flexibility and some economies of scale, than he could onshore.
Then, when pension benefits are payable, many countries simply don’t seek to levy a withholding tax on pension benefits payable to non-residents. So, for example, Canada wouldn’t be interested in taxing the pension of a Brit who worked out there for 2 or 3 years 25 years ago. Instead, most countries have double tax treaties which give the taxing right on the pension income to the country of residence of the retired employee.
Now, Guernsey doesn’t have a double tax treaty of the relevant type with the UK, and in any event an international pension plan (for non-Guernsey residents) would probably not be eligible to benefit from a double tax treaty even if there was one. So, the British expatriate who has worked all over the world and used a Guernsey international pension plan, and is now retired sitting in Kent with a £35k a year pension, will pay tax in the UK on the pension that he receives from Guernsey.
So he has benefited from the economies of scale from having a single global pension plan, has benefited from having the pension fund centralised for investment management purposes, but still pays tax in the UK on his pension income in the same way as if he had a UK income. If Guernsey did levy a withholding tax then he would suffer that, and then effectibely get it back when he paid his UK tax on the same pension.
But what it also offers is the chance for the British expatriate to retire abroad, as so many do, to somewhere warmer in his old age, where he will be taxed on that pension income based on the rules of that new country of residence. Yes, it may be taxed at a lower rate than in the UK, but whsy shouldn’t it be ? He’s probably been out of the UK for most of the last 30 years ! He would also be subject to more flexible rules on lump sum benefits than might be available in the other countries in which he has resided. Whereas if a British multinational insisted that all of its expatriate employees had to be members of a UK pension scheme, it would make it very unattractive for them to recruit non-UK nationals who might never set foot in the UK and there would be no logic for them to have a UK pension scheme.
Guernsey plays a vital role in the international pension market for mobile employees for these very reasons. Its pension laws are flexible but certain, and its tax regime is entirely neutral, which is vital when a large multimational might be employing people from 100-plus countries, all with differing forms of pension legislation. It is fair to say that the HR departments of most multinationals favour the practicality of a Guernsey or other international scheme, for obvious practical reasons.
Hope that helps.
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Whilst the example given by CD is admirable in its willingness to paytaxes there are many others such as that described by Senator levin.
“Here’s just one simplified example of the gimmicks being used by corporations to transfer taxable income from the United States to tax havens to escape taxation.
Suppose a profitable U.S. corporation establishes a shell corporation in a tax haven. The shell corporation has no office or employees, just a mailbox address.
The U.S. parent transfers a valuable patent to the shell corporation. Then, the U.S. parent and all of its subsidiaries begin to pay a hefty fee to the shell corporation for use of the patent, reducing its U.S. income through deducting the patent fees and thus shifting taxable income out of the United States to the shell corporation.
The shell corporation declares a portion of the fees as profit, but pays no U.S. tax since it is a tax haven resident. The icing on the cake is that the shell corporation can then “lend” the income it has accumulated from the fees back to the U.S. parent for its use.
The parent, in turn, pays “interest” on the “loans” to the shell corporation, shifting still more taxable income out of the United States to the tax haven. This example highlights just a few of the tax haven ploys being used by some U.S. corporations to escape paying their fair share of taxes here at home”
You can substitute US for any other country.
What tax havens don’t seem to appreciate is that whilst they regard the tax avoidance schemes as legal, others who are loosing the tax revenue don’t always trust the tax avoidance domain’s interpretation and want to decide for itself, whether they would see the tax avoidance scheme, as that – avoidance, or tax evasion.
Student Bob.
A good post. Google Senator Levin’s speech on tax havens. You will enjoy it.
It is true the amount of Uk business in Guernsey is minimal, but it is fact that Guernsey is atill on their list of tax havens.
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David
It happens, David, get off your horse and drink some milk. It’s documented everywhere. That’s what you do if you want to avoid paying higher tax on profits. What’s the point of all the brass plaque companies then? Prestige?
CD’s summary is of course very common, but so is mine.
I really don’t understand why people can’t face up to the reality of business. If you are so certain of the industry’s integrity, why is everything falling apart for the majority?
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Fast Robert
Yes it does happen, but it is not common in Guernsey’s finance industry. Our industry is not built around corporate tax planning of this nature. Our fiduciary service providers almost exclusively focus on private client work, not corporate work. You’ve only got to look at the list of tax haven used by the US’s major corporations a few weeks ago to see that Guernsey, Jersey and the Isle of Man barely feature in that list, whereas Cayman, BVI, Bermuda, Bahamas, Ireland, Luxembourg etc dominate the list.
Hardly any of Guernsey’s fiduciary service providers these days will even consider dealing with re-invoicing companies, commission-receiving companies and other types of trading companies. Why ? Because the risks associated with doing such work are high, because its virtually impossible to justify an offshore trading company without a physical presence, and because its not what we are good at ! The expertise in Guernsey is in personal tax and estate planning, succession planning, preserving and enhancing personal wealth etc., not in corporate planning.
Once again, you are allowing what you read and hear about in external propaganda to take precedence over what actually happens in Guernsey. Listen to the people locally who know what goes on, rather than to the likes of Murphy whose info is at least a decade out of date about what actually happens here in Guernsey’s finance industry.
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Stephen
Again, a similar response to what I said to Fast Robert. Yes – that’s what US corporations are up to, but not here in Guernsey !
Its why we shouldn’t fear opening up entirely to the US in order to get off their blacklists. Guernsey really doesn’t have enough sensitive business with the US to be remotely concerned about.
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David
If the situation is that tranparent, I just wonder why, after the visits to the US by representatives of Guernsey, that Guernsey is still on the US blacklist?
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Stephen
Its because one arm of the US Government doesn’t even seem to know that their own government signed a Tax Exchange Information Agreement with Guernsey.
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