‘Island should not be lumped in with the less-regulated’
Saturday 21st February 2009, 9:29AM GMT.
GUERNSEY is expected to be included in discussions on ‘tax havens’ at the G20 summit in two months.
When the prime minister was asked if he would be including jurisdictions which came under the UK Crown, including Guernsey, Jersey and the Isle of Man, or such countries as the Cayman Islands and Liechtenstein, Gordon Brown (pictured) said: ‘We have got to look at all jurisdictions.’
Guernsey International Business Association spokesman Mike De Haaff said Guernsey should not be lumped together with other less-regulated jurisdictions because that could damage the island’s reputation.
‘The problem we face is that too often no distinction is made, particularly by the national media and many international politicians, between a well-regulated centre like Guernsey and those with more questionable regimes,’ he said.
‘In fact, one might ask what else Guernsey needs to do to be more cooperative and thus avoid being bundled with less-reputable offshore centres.’
He felt the island was an easy target.
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Gordon Brown doesnt want to be seen as saying my tax haven is better than yours. Makes him look bad with the G20.
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Ex regulator and now management consultant Michael Foot has said that there was nothing wrong with UK regulation.
The same Michael Foot as said there is nothing wrong with GFSC regulation.
Now we are being told through uncorrected evidence given at the Treasury Committee Inquiry into the banking crisis that the FSA seems to have failed to adequately regulate the banks. Even the new Chairman of the FSA has been critical of FSA regulation.
The GFSC has told the Treasury Committee that it relied
“The FSA knew of our concerns in respect of the fact that we did not want there to be any Icelandic risk in respect of the UK bank, with which 25% of the Landsbanki Guernsey assets were placed, and we did not want there to be any dependence on the parent for liquidity, and we got the assurance from the FSA that there was only limited Icelandic risk. We believed we could rely on the FSA because they had greater information and greater influence and, therefore, we were very surprised when Landsbanki Guernsey failed on the FSA”
This unquestioning belief in the oft criticised FSA, plus previous issues between the GFSC and FSA, plus the mass of information about the Icelandic economy and its bank; makes one wonder just how good regulation is in Guernsey…
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Sir,
Guernsey folk do not make any gain whatsoever from being an off shore haven in fact quite the reverse.
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Cynthia
Please elaborate !
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Guernsey SHOULD be lumped in with the worse banana republics where your money can disappear overnight without the government being bothered about it.Frankly, in the current circumstances, it is in the public’s interest that the bigger countries get such centres shut down until they clean their act. They do not deserve the public’s trust and savings.
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Guernsey residents hide their own assets within the island that is why they have an amnesty once in a while, So dont get overprotective about a system you abuse yourselves. The States Tax are unable to control its own residents, yes get Gordon in, hopefully he’ll find it all, some for the UK some for Guernsey
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Mike de Haaff – Have you forgotten Landsbanki???
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Well, let’s face it. As it stands, Guernsey is not up to the task of being entrusted with depositors’ money if people lose their money on deposit.
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I used to regard the type of comment of Mr Erker 8.00am yesterday, as being sensationalist and way off beam.
Sadly, the more we are finding out about the LG fiasco the more I tend to see the sense in his statement.
The Commons Committee evidence concerning Guernsey and LG, plus other information does provide the comments of Mr Erker with some credibility.
The good news is that retail banking is such a small part of Guernsey’s finance business that its loss will not be that significant.
This fact might explain the intertia of the Guerney government in helping the LG depositor!!!!
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The Landsbanki fiasco has, I admit, done much to damage the island’s reputation as an offshore financial centre. However the headline for this discussion concerns the forthcoming G20 debate on “tax havens” which (while related) is essentially a separate subject.
Many contributors to this site (at least the one’s who can string a sentence together) have long been predicting an assault on our primary industry by international governments. I believe that the G20 debate will precede a massive and concerted attack on ALL offshore financial centres by British, American and European governments.
It is true (despite preceding comments) that Guernsey is one of the better regulated jurisdictions in the world and it is frustrating to see us being lumped in with the likes of Antigua. I do believe that our efforts over the past two decades to stamp out money laundering and tax evasion have been overwhelmingly successful. However all those efforts and all that success is meaningless in the face of a concerted effort by global governments and by the world’s media to portray us as little more than criminals.
The British media (and especially, I am sad to say, the BBC) have been spouting some very poorly researched and sensationalist nonsense on this subject recently. They invariably wheel out some so-called “expert” (usually a left wing lobbyist) who explains how 40% of our business activities involve the laundering of drug money – or some similar pack of lies. Then they ramble on about how the British tax payer is being ripped-off and they fill a five minute slot with pictures of people windsurfing while they talk about “the shady world of tax havens” or “the secretive activities of offshore bankers”. They NEVER offer any evidence of how, when or where these illegal activities are supposedly carried out, we are put in the same bracket as poorly regulated Caribbean centres and then condemned by supposition and found guilty by innuendo.
I have written a lot in these pages about how I think these distorted views are unfair and invariably untrue. I do not want to reiterate those arguments again now other than to say that I have worked in the Guernsey finance industry for many years and I have never come across a single case of money laundering or illegal tax evasion. Yes we do assist clients with tax planning initiatives but – under the UK, European or American tax legislation – those activities are entirely legal and legitimate. If, for example, a Guernsey based corporation does not pay UK taxes it is because they have no legal, moral or commercial reason for doing so and the UK has no right to impose those taxes.
The world’s governments know that they cannot interfere with our internal legal and tax systems, we are an independent jurisdiction and we are outside of their control. It is also incredibly difficult and expensive for them to deal with the real problem – the deficiencies in their own tax laws. They are left with one just option, to perpetuate the myth that all offshore financial centres are havens of illegal activity and thereby to unite in imposing international sanctions on businesses who operate from offshore jurisdictions. They will find plenty of allies in a media that savours a “shady tax haven” story and, lets face it, we will find precious few friends.
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CD
A very persuasive argument.
You make a couple of points on which I would like to comment.
1 You say “I have never come across a single case of money laundering or illegal tax evasion” I wonder if this wording is deliberate or a slip. All evasion is illegal.
The problem facing tax havens is that whilst they see nothing illegal about the financial initiatives you refer to, those jurisdictions who lose the potential tax take might well regard the initiative as illegal and an illegal act by their resident or taxpayer.
2 You say “If, for example, a Guernsey based corporation does not pay UK taxes it is because they have no legal, moral or commercial reason for doing so and the UK has no right to impose those taxes”
The US for instance take the opposite stance on this and regard it as dodgy unless proved otherwise where there is no legal, moral or commercial reason for the Guernsey based corporation to be based in Guernsey.. I presume you are referring to UK companies such as Mapeley sans physical presence; rather than local Guernsey trading companies such as Creasey’s
I suspect your fears of an attack on all tax havens will be reality
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CD
Very well put. hard to argue with any of it.
Stephen
Re. your two numbered points:
1. Almost correct – tax evasion is not illegal in Switzerland unless its tax fraud but I do take your point. I think CD was merely emphasising for the less aware readers that tax evasion is illegal.
2. This is only relevant if the company is trading with the UK in a certain way or carrying out a business in the UK in such a way that it becomes liable to UK tax, i.e. through a branch or establishment. Otherwise, generally under anti-avoidance rules the tax liability is that of the beneficial owners of the offshore company, not of the company itself. Likewise the US may seek to disallow for tax deduction purposes a payment by a US corporation to a Guernsey company which appears to have bo substance, but that merely affects the US company claiming the deduction…the Guernsey company itself would not have the tax liability.
Re. Mapeley, I believe it is not a UK company and is actually a Guernsey company which is listed on the UK stock exchange.
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Why is Guernsey, where only one bank has collapsed, apparently so badly regulated whereas the US and Britain, where many banks have collapsed, or would have without substantial government investment, are OK ?
Perhaps they’re just a little bit jealous …..
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David
Agreed that Mapaeley is a Guernsey company. It’s when we ask the quuestion why register in Guernsey that the tax haven aspects kicks in.
The Treasury Committtee that looked into the Mapeley affair said “… on the basis of Mapeley’s own evidence to the Committee it had “structured its tax affairs to minimise exposure to Capital Gains Tax …” Tax avoidance was clearly one of Mapeley’s objectives in the way the deal was structured”
Accepted that such action, at this time, is legal but what the future is for such convwenience registration is debatable.
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Guernsey a well regulated finance centre?
Agreed there was the illusion of sound regulation. However,.on Your Shout after the Foot whitewash of the GFSC the point was made that Foot had been concerned with ticking the boxes and not what was in the boxes.
The same general conclusion is stated on Robert Peston’s BBC blog that refers to the evidence of Lord Turner and Hector Sant to the Commons Committee.
This time it is the FSA who are saying :
“The only role for the FSA at the time – according to [Lord]Turner – was to make sure that the structures, systems and processes of the banks were ticketyboo. So it verified stuff like whether there were a sufficient number of bodies in the risk-management department; or whether the right kind of management and risk information was being gathered and disseminated to the right people; and so on”.
“But it also implies that – again – the FSA got it wrong to a mindboggling extent in another absolutely core area of its regulatory responsibilities.”
At least the FSA can be given credit for belatedly admitting it screwed up big time. And ticked the boxes without bothering to find out what was inside.
Same can’t be said of GFSC.
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I like the little black info box in the business page of today’s press.
TIEA Requirements
Any request to the tax office MUST specify:
-The identity of the person under investigation.
-the period from which the information is requested (cannot be retrospective. UK TIEA not to be ratified before 2010/11)
-The nature of the information
-The tax purpose for which it is sought
-Reasons why the information is relevant to the person’s tax liability
-Grounds for believing thatthe information is in Guernsey
-Name and address of person believed to be in possession of the information
-A statement that shows the request complies with UK law and that the information would be obtainable in the UK
-Confirmation that HMRC has exhausted all other avenues.
Well, well. If this is what it’s to be like in our brave new world of ‘transparency’ what was it like before!!
It proves that these agreements are nothing more than paying lip service to helping democracies progress. We all know how some of the instruments work. Unimpregnable, even by those servicing them, what hope anyone investigating?
It really is no wonder why no cases have ever been reported and why the bosses can say where is the proof.
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WHat more could Guernsey do? Well we could stop facilitating the “shadow banking structures” CDOs,SIVs, Securitisations etc which are used to get round the discipline of onshore prudential capital rules. The amount of damage caused by the slack lending standards those structures encouraged is central to the worldwide financial crisis we are currently seeing. A could name lots of companies/structures set up over here in Guernsey in the above categories.
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