We’re not a tax haven, argue finance leaders
Tuesday 10th March 2009, 1:00PM GMT.
GUERNSEY should not feature on Gordon Brown’s blacklist of harmful tax havens, according to States members and finance industry leaders.
This follows news that the Prime Minister is preparing to release a list of unco-operative tax havens before the London G20 meeting next month.
It is intended to counter increasing criticism from jurisdictions that have called the UK an obstacle to a transparent financial system.
Chief Minister Lyndon Trott appeared on BBC Radio Five Live last night to argue that Guernsey was a well-regulated, low tax jurisdiction and not a tax haven.
‘Misconceptions must not be allowed to gather momentum,’ he said.
Deputy Trott (pictured) said he was confident the message would get across, but not complacent.
However, Ernst & Young partner Graham Parrott expressed fears that the UK might have to make an example of ‘its so-called havens just because it needs to be seen to, irrespective of the jurisdiction’s level of regulation and transparency.
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What our leaders and finance experts seem to find hard to grasp is that it simply does not matter what WE think of our set up here in Guernsey. We may believe our finance industry to be transparent and all the rest of it, but if the UK, EU and USA decide that we are a tax haven, then we are a tax haven and unfortunately will have to meet the consequences of this, whether right or wrong.
Gordon Brown is far more interested in staying in favour with the big boys than listening to small dependencies like Guernsey, Jersey or the Isle of Man.
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Guernsey is so a tax haven, secrecy juristiction, whatever you what to term it…this is very bad news for Guernsey and other UK dependencies that are overly dependent on the banking sector!
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Regardless of what we believe we are, either tax haven or financial centre it is what we are perceived to be that matters. For those that think cutting ties with the UK and becoming independant is an answer al la Lord Jones, think again. Once we are independant all EC countries could be directed to tax any aircraft and boat that enters an EC port from a tax harmful area £1,000,000 or whatever. Our charter guarantees us free movement and trade with England and that is priceless.
We should be planning for the worst, i.e. developing other industries, and hoping for the best. However I fear our present government is only hoping for the best.
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Unfortunately the UK press and the TUC seem to think that we are a tax haven and so the UK politicians have to be seen to be responding to that. I suspect that this is all that it is, and that the final blacklist produced by the G20 will not include Guernsey. Of the off-shore jurisdictions, we are one of the leading jurisdications for signing Tax Information Exchange Agreements and we have one of the best records for complying with the standards for transparency set down by the OECD. For us to be on a blacklist now would mean that the G20 had changed the rules – not out of the question, but a dramatic shifting of the goalposts. In fact, it is not low-tax jurisdictions that the G20 is really concerned with, but those with tax and banking secrecy. We do not have that, whereas Switrzerland and certain other countries most definitely do. I would not be surprised to see them become the main target.
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20 percent tax a haven? Maybe they are already planning a Military coup on the basis that we are a threat to National Security.
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TL
But we do provide secrecy. That’s what we do. TIEA’s are useless without knowing who the ultimate beneficiaries are. Lawyers are employed to set up Trust and company structures that span jurisdictions across the globe. The TIEA can only be used by an investigator if this has already been unravelled.
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If a trust, company or any other structure is acting illegally (which includes evading tax)then we in Guernsey will provide the relevant enforcement agencies with whatever information they need.
If that trust or company is not acting illegally and has no duty to pay tax in another jurisdiction why on earth should we disclose confidential information about that entity to another government?
If Gordon Brown turned up on your doorstep demanding to see your bank statements for the last two years you, as a Guernsey resident, would tell him to get lost – it’s none of his business. It is no different for an international organisation that is not resident for tax purposes in the UK.
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Evading is such a harsh word CD. Can’t we call it ‘efficient tax planning’? So, if a trust or company is acting legally and has no tax to pay in another jurisdiction, what is the money doing here? Surely it’d be safer to keep it under the mattress in your country of residence? Take a nice simple family trust with a UK settlor, isn’t the purpose here to limit the potentially nasty exposure to inheritance tax? Isn’t the UK missing out on 40% of this pot (above whatever the limit is now obviously)? How do you define this? Efficient tax planning? Avoiding? Evading?
It’s all semantics at the end of the day. One man’s “low tax jurisdiction” is anothers “tax haven”
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CD
That’s the key though, isn’t it? It’s all legal because those that made the rules were always going to profit from them. If I had set up a series of offsure companies to stream profit or income away from my parent company accounts into the accounts of a subsidiary, who then moved that money in ever more esoteric ways devised by the finance industry and their lawyers, and subsequently recorded tuppence hapenny to the (say) UK taxman, then it would come across as a bit odd, no? So then they would start investigating the trail and it would end up chasing itself in circles, over many years, until it shelves the investigation waiting for a lead. The TIEA here would be useless.
It’s all perfectly legal, but frankly very wrong. These companies or individuals make their profits using (say) UK infrastructure etc, they should therefore pay tax on those profits in that jurisdiction. If they then want to move them elsewhere for ‘safekeeping’ then I don’t see a problem with that. Setting up companies specifically to obfuscate the trail of liability, whilst legal, is exploitative.
You will get those that argue that ‘big government’ wastes taxes. Undoubtedly true, but if everyone hid their dough then those countries would fall apart. Why should it be the preserve of the wealthy and the multinationals who can afford the lawyers and accountants to take advantage of rules made by lawyers and accountants? It just means the burden of society is left on the shoulders of those least able to afford it.
A bit like zero ten. You argue against that, why not let others, in their jurisdictions argue against what they see as a similar problem?
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Reminds me of alcoholics facing up to their addiction at AA meetings.
“My name is Guernsey and I am a tax haven”. There that feels better, doesn’t it?
The long and the short of it is that we have tax that belongs to other jurisdictions and they are looking to collect it in future for their own economy. Imagine if it was Guernsey tax. We’d want it back to fill our very own black hole.
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Trott says we are a low tax place, not a tax haven.
What a nerve that man has, He fails to mention that because of his taxes and and other 10% affair, Guernsey People pay higher price for essential items.
It’s about time we rid ourselves of these people who feed the FAT CATS,
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Tax haven is a pejoritive and political term used by the enemy without and the traitors within
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Some interesting comments above – good to see some well thought out arguments.
Student Bob – no, we cannot call “evading” efficient tax planning.
The points you and Fast Robert have made are good ones though and, if I may, I would like to give you my take on the ‘simple trust’ example.
A UK resident who decides to settle a trust in Guernsey does so because (crucially) under UK tax legislation he is allowed to do so.
You probably know all this, but for the benefit of others who do not –
The UK law on trusts dates back centuries. Knights going off to fight in the Crusades could put their money in trust (i.e. give it to someone else – a Trustee) so that the Trustee could distribute that money to their beneficiaries in accordance with their wishes if they were killed.
In effect, what happens is that the ‘settlor’ gives away all legal title and ownership of his (or her) assets to the Trustees. They are no longer his assets so he is not liable to pay tax on them. The obligation to pay tax shifts to the Trustees so – in the case of a Guernsey trust there are distinct tax advantages because of our favourable tax regime.
The assets are then distributed to the beneficiaries of the trust – in this case as proscribed under Guernsey law.
The beneficiaires will of course pay tax on the money they receive from the trust in the country where they receive the money.
Now I take your point that by doing this the settlor does not have to pay UK inheritance tax, or for that matter capital gains tax, but that it not because we in Guernsey are stealing money from the UK Treasury, it is because UK tax legislation makes it perfectly accepatable and legal for us to offer these services.
Now, I accept that some people may consider this unethical, but that is not the same as it being illegal. My point is that when the UK starts blathering on about clamping down “tax havens” surely they should be looking at the real source of the problem – the fact that their own tax laws allow people to settle trusts in this way.
Gordon Brown and others are talking about attacking “tax havens” – my argument is that what they really should be doing is looking at the deficencies in their own tax legislation.
I cannot accept Fast Robert’s assertion that “it is all perfectly legal but frankly very wrong”. The ethics of any business are of course questionable and open to debate – but to my mind the rights and wrongs of business practice do actually have very firm perameters – those set out by the law. We are acting within those perameters.
As for Zero 10 – yes I do think we have a right to argue against that tax law and to change it -just as the UK (or the USA or Europe) has the right to argue against the flaws in their own tax legisaltion and to change their laws.
We do not however have the right to tell the UK how they should draft their tax legislation just as they do not have a right to tell us how to draft ours.
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CD. Thank you… very nicly explained.
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Unfortunately, CD, most of the Trust business is used to avoid tax. This is mostly exploited by the wealthy who have money to pay the fees and for the advice, and of course money that they don’t need in their day to day existence. This means that the tax take in their home jurisdiction is reduced so public services ultimately suffer, unless taxes rise for those that don’t practice ‘planning’.
I agree that’s that not our fault, but you can see why people want to investigate the procedures, the knowledge of the more devious structures are still only known to a very few people, and why investigative journalists etc are smelling rats left, right and centre.
These business laws are entirely the construct of vested interests, those with the biggest voices and the deepest purses. Many of these ‘parameters’ are not their to enable social advancement or basic free market practices. The perpetuation of ‘secrecy jurisdictions’ just would not have continued if the lawmakers were on the side of people and small businesses.
It is a natural progression from times of yore, when the wealthy were privileged and able to do what they liked, whatever. Mais plus ça change.
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Interestingly, the expert forensic accountant Richard Murphy, believes it is impossible to define a tax haven.
Quote: “As Geoff Cook of Jersey Finance has said:
‘No one can define [‘tax haven’] meaningfully’
He’s right of course. No one can. Which is why we prefer the precisely defined term ‘secrecy jurisdiction’.”
I’ve posted a comment on Richard Murphy’s web site asking, in effect, what the heck are Obama and Brown doing chasing something which they cannot define.
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“My point is that when the UK starts blathering on about clamping down “tax havens” surely they should be looking at the real source of the problem – the fact that their own tax laws allow people to settle trusts in this way”
CD – agreed, this is the key point. They need to change the laws before making a big song and dance about the current situation. UK govt…. yawn. Go away and find someone else to pester.
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CD – Excellent answer. Can’t argue with that!!
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Could some one please clarify something for me, this is a purely hypothetical situation…
I live and work in the UK, I earn money and pay tax to the UK government in the usual way.
I decide to set up a trust (as described by CD), however, instead of setting up the trust in Guernsey, I choose another country, say Germany for instance.
Would the UK government be entitled to take any more (or less) money from me then if the trust was in Guernsey?
I hope this makes sense and someone can correct me or back me up… Just something that confused me…
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Andy.
The trust would be subject to German tax rules and trust laws so you may have to pay German taxes – I don’t know what these are but it is a fair bet they would be higher than those in Guernsey.
However, not all countires recognise trusts or have trust legislation (it is a peculiarly Anglo Saxon idea and they most commonly found in places like Britain, Australia, Canada, the USA etc.) The French have only just got their head around the idea of trusts – not sure about the Germans.
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Fast Robert you say:
“These business laws are entirely the construct of vested interests, those with the biggest voices and the deepest purses.”
They are not, governments make laws, businesses don’t. Businesses make money and if they do so within the law then fine.
If there is an ethical argument against this then governments should identify the problem and change their laws.
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CD
Hmmm and lobbyists do what, and the power of the businessman when a lot of the laws were made were not privy to a minister’s ear?
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Fair point Fast Robert – but lobbying works both ways, not just in our favour. The misinformation being circulated by the so called Tax Justice Network being a case in point.
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And interestingly today Murphy seems to be of the view that G20 won’t actually come to anything on the anti-offshore front.
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Traitors to what exactly, Jackie? The finance industry? I can live with that, after all look at the mess it has put the world in. And offshore finance in particular ripping off countries the globe over. However, if you are suggesting that we are traitors to our island then that is just nonsense. Finance is not more than Guernsey, Guernsey is more than finance.
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Of course we are not a tax haven. That is why everyone is so keen to invest billions in funds here. Keep chanting the mantra and maybe, just maybe, Barack and Gordon might believe you. ROFL!
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>>I can live with that, after all look at the mess it has put the world in.<<
Marcel, you need to understand a few things before glibly throwing around the catch all word ‘finance’.
The bigger players have made a mess of the world with cheap credit, lax regulation and a public drugged up on the never-never.
So, like the jews of Germany in 1932, all the larger bullying countries come up with is sticking the ‘yellow star’ of tax havens on our islands.
Politics of blame and flailing around for the boogey man rarely having anything to do with the facts.
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Say what ever you will; propaganda doesn’t help:
and to sink so low as to bring in the yellow star of Nazi times, is the way frustrated people talk- (had you seen these camps you would be quick to cry your eyes out- I did)
so please do not use such tactics it isn’t worthy of you.
Back to the affair, it can only the a Tax Haven there is no other way to describe it:
‘People bank their money ill-gotten or legal, makes no difference- they do it because of the low interest IE: a tax haven!!
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Gawd help us. I can feel my interest getting lower.
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Jackie
As the dust clears from this current mess it will no doubt be realised that a lot of the problems surrounding securitised debt that became toxic will have originated in the ‘tax havens’ of the world. After all, where would investment banks prefer to hold their assets?
Guernsey will not be immune to the implications of these realisations, even if we can prove that it was nothing to do with us specifically.
The arguments implying that we are ‘under attack’ all centre around the fact we are not doing anything wrong. If, and it won’t happen anytime soon, there is a global concensus to outlaw specific areas of tax ‘planning’, then those arguments imply fully that Guernsey’s industry is only held up by individuals and corps wishing to avoid paying tax. As is constantly iterated, this just places the burden of paying for society on the global poor.
We are not doing anything wrong, but the rest of you can be damned. That is the message that our leaders and our publically funded ambassadors will be spreading to the world.
The grislings are those undermining human development, not those calling for an equality in the markets. Remember, we are free to set whatever taxes we like, that is not the issue, the issue is supplying information about who is using these facilities in order for them to comply with the country of origins tax laws. Obviously these laws need to be looked at the same time as requiring more transparency, but it is certain that Guernsey will be less attractive when more ethical regulatory practices eventually are enforced.
Where does that leave the defenders of our industry? Admitting that secrecy drives profit.
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Remember King Canute’s endeavours? Unfortunately I don’t think we can stop the relentless wave of negative feeling about our tax status from America, the UK and the EU.
We can scream “we’re clean!” as loudly as we like but the financial institutions are going to have to stop using smoke & mirrors.
Perhaps the bankers are here because they like the Guernsey scenery, the weather and the quality of life? Misguided millionaires!
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Jackie you seem to be implying that the Jews were victims. An understandable error given what is taught (or not) as history.
I would draw everyones attention to the headline of the ‘Daily Express’ of March 24th 1933 for an eye opener on what our history lessons have ignored since 1945. I wonder why?
For further education on what is occuring in the world including the causes of the current global economic crises I would draw everyones attention to the ‘Protocols of Zion’ which incidentaly the Zionists claim are a forgery but which stand up to reason even more today than ever before. Read them and decide on their validity yourselves.
The tides are turning against the Zionists simply because the freedom and speed of information and communication afforded by this medium called the internet was not only unforeseen but as yet unstoppable and uncontrollable, thankfully.
I could go on about the zionist links into the ‘Illuminati’ and ‘Freemasonry’ in order to give some idea as to how all this ‘Tax planning’ exploitation of our island has occured but i’ll leave it to interested parties to delve into it via Google or whatever. However what I will say is that if the people of Guernsey wish to reclaim their own politicians then anti corruption laws need to be introduced with punitive penalties. And this time don’t let the likes of John Langlois tell you that there is no need for such laws in Guernsey.
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“Chief Minister Lyndon Trott appeared on BBC Radio Five Live last night to argue that Guernsey was a well-regulated, low tax jurisdiction and not a tax haven.”
That’s as maybe but it does not really matter to entities that are not receiving monies they feel are due. They will have every justification in employing whatever means possible to ensure that monies that should be due them actually makes it into their revenue.
Guernseys’ political and civil service should increase their efforts in contingency planning, especially towards industrial diversification.
Blind hope is a poor hedge fund.
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If it waddles like a duck and quacks like a duck…then it is a duck…i.e. we are a tax haven so call it what you will. There must be millions upon millions of laundered cash in thousands of accounts here in Gsy…Obama & Brown may not do anything but hopefully there are those in the finance industry who will be brought down to earth with a “big bang” and not the BIG BANG these crooks in suits are used to………………….”oh well back to tomato growing”……..
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The crack which shall soon become a canyon.
Your reputation as a safe and well supervised financial duristiction has been forever tarnished Guernsey!
Just read beneath the lines of this article .. And you can clearly see see what happens when you turn your back upon honest Landsbanki depositors who through no fault of their own lose their savings as a result of your authorities poor supervision and/or management of a financial institutions operations on Guernsey soil..
Why now would anyone trust in you?
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This thread is all getting a bit nasty!
Jackies’s point is perfectly valid and if Steven thinks the Jews were not victims then he is in La La land.
Steve the uk….bad luck mate you should see the value of my pension. Perhaps if you hadn’t been so greedy you would have thought about where your money was.
And to all the other “tax haven” haters out there – if you seriously think that knocking seven bells out of the likes of Guernsey will stop people in Africa starving…well I hope you’ll all be very happy with Steven in La La on the planet Zurb.
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