VAT ‘loophole’ subject of leaked treasury letter
Monday 17th August 2009, 2:29PM BST.
ONLINE retailers using the Channel Islands as a base to escape paying VAT on products under £18 could be facing a crackdown, according to a leaked HM Treasury letter.
Yesterday’s Observer reported the potential clampdown on the perceived loophole, saying private letters from Treasury minister Stephen Timms revealed the government now privately believes British companies may be ‘abusing’ rules.
Companies such as HMV, Healthspan and Moonpig have distribution centres in Guernsey that enable them to make use of the rule. The move could have dramatic consequences for them.
Customs officials are seeking to establish a test case supporting their belief that companies are shipping products from the UK to the Channel Islands and then back again so that they qualify as VAT-free transactions.
However, a HMV spokesman said the company was confident it could not be challenged.
‘We hold a significant amount of stock in Guernsey. It is not shipped there upon receipt of customer so we do not “round-trip”. All product is picked, packed and labelled in Guernsey.’
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A method of trading that is unfair to U.K. retailers and should be stopped. The goods are obviously coming from the U.K. in the first place and Guernsey traders are just exploiting a tax loophole. Tax avoidance of tax evasion?
Guernsey denies it is being used as a tax haven but here is a blatant case of tax fiddling by U.K. companies with bases in the Channel Islands, Jersey is also in on the same fiddle. This is not a victim less crime but a loss of revenue to the U.K. which has to be made up by U.K. tax payers.
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Good riddence to an evil scam.
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Puzzled & Gonk – I agree totally, and while we’re at it lets close down the other scamss, such as the entire offshore finance industry!
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After this is rigorously challenged it will be the turn of the online gambling operations set up in Alderney.
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Get ready Switzerland
Looks like a little more business will be coming your way
No matter, as long as it helps the UK retailer
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There are a large number of slow people around. The abuse is exporting UK goods to a non EU destination and reimporting it to scam the VAT relief. If you do that from Switzerland its the same scam. So unl;ess you want lots of cheese and cuckoo clocks then you won’t have much luck in Switerland either.
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Now you’re occupied by tax avoiders.
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Every sale lost in the UK is tax lost to the UK. About time we on the mainland made it clear who’s in charge. Stop abusing our national income and stick to fishing and flowers.
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It’s ruined the music industry and HMV should have known better. Hey ho, sheer greed made them go out there. They (HMV) sold goods lower than dealer price first just to compete with Play. How pathetic was that?. I hope they have to pay back all the avoided VAT. HMV, Play etc ruined music retail in this country. Thanks.
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Puzzled says it’s unfair to UK retailers, but excuse me isn’t HMV a UK retailer? I believe that Play.com the other big player in Guernsey and Jersey was at one time owned by Kingfisher. A few years back who remembers the vast car park of brand new Fiestas at St Sampson’s? Shipped over from the UK then shipped back and sold off after sitting doing nothing for about 6 months so tax ‘avoidance’ has been going on for years. So lets shut down the scams and make a few more islanders unemployed while the greater Banking scams continue unabated.
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The theory that tax competition between jurisdictions is good for business is patently false. Guernsey gets used in these scams because our politicians believe in the ideology.
Taxes are raised by governments according to the minimum amount needed to run a democratically agreed state.
In Guernsey we run the state according to a fixed relationship. Therefore democratic mandates are meaningless. The only choices we can make at the ballot box is how we judge an individuals personal priorities.
That is not democracy.
The problem we face is that the ideology is being questioned. Our tax competitive edge and legal apparatus makes us open to abuse.
Does the public care?
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Ray
The difference is that Switzerland can and will do whatever it wants. The UK holds no sway at all over Switzerland and the Swiss have no need to appease the UK.
Al – I think you will find that the hundreds of Ford Fiestas were actually imported to Guernsey directly from Spain, then used as hire cars for several months until they had done enough miles to qualify as used cars for import purposes. That enables them to escape UK VAT. But they were genuinely used as hire car fleets so they served a bona fide purpose. I always wondered where they went until I passed the Ford garage ar Abingdon in Oxford. Nearby there were literally thousands of Ford Fiestas with Guernsey and Jersey hire car plates on them.
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“About time we on the mainland made it clear who’s in charge.” Brussels and a couple of Scotsmen innit?
Anyway @Pongo, your national income is not nearly enough to cover your national debt and the VAT on a CD isn’t going make a jot of difference.
There is an £18 lower limit for VAT on postal parcels for good reason – think of the cost/benefit ratio of collecting only £2.70 in VAT.
It’s the same whatever the parcel’s origin outside of the EU.
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Arnald
These “in and out” sales have always been an obvious scam and are not defendable, unlike the establishment of investment business here which has as much right to be here as to choose any other jurisdiction in the world. Tax competition is a completely different issue. Why should we impose VAT/GST when our public doesn’t want it?
You suggest that our politicians support this form of scam, but my understanding is that Guernsey has tried to discourage it as it is not good news for anyone other than those directly employed. But there has been nothing that we can do about it and it is up to the UK to change their VAT rules so that there is not a loophole to be exploited.
Businesses foolish enough to rely on this loophole have always risked it being closed.
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TL
Isn’t “in and out” exactly what is involved in our day to day ops for some instruments? Different countries have different rules on how various things are taxed, combine that with legal secrecy and you’ve got tax scams all over the shop. Are you telling me that NONE of our finance business uses these levers?
That would be brave.
But I agree that it’s not necessarily our problem depending on one’s outlook and we can only play the hand we’ve got.
That’s different to Policy Council members that come on here to attack the UK (however hypocritical they are) for wanting to fill these holes in their “corrupt” dealings, and so “force changes” on us. What that says to me is that our senior politicians want us to be free from admonishment whatever we do, however we rip other countries’ taxpayers off. When Guernsey is heavily reliant on this kind of tax chicanery with the UK, isn’t it foolish to defend the very mechanisms that can hide malfeasance whilst pleading misguided moral affront?
Isn’t there a big case of denial going on?
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How about the UK reciprocating by forcing UK online and mail order sellers not to charge VAT or make it to much trouble to claim for Channel Island shoppers. Many UK sellers are OK but many are not and there must be a very substantial amount of our money going in to the VAT coffers.
e.g Symantec – their Norton anti virus is widely used and although you can claim the VAT back it is not easy.
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There are a lot of big words on here. You can’t get a ford fiesta in a jiffy bag and LVCR is goverened by EU law not Switzerland. This is all about CD and DVD and low value consignment abuse.Its over on LVCR guys. Sorry. I’m sure there are plenty of other loopholes you can milk.
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Doug said “It’s the same whatever the parcel’s origin outside of the EU ” Yes you are right. But UK released albums and UK certified DVD’s are not available for import from outside the EU. So your point is ? Lets import Peruvian music….
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TL
I agree totally with your 10.44 post.
Arnald
Your 11.13 post suggests that you truly haven’t got a clue about how Guernsey’s finance industry actually operates.
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Doug says ” There is an £18 lower limit for VAT on postal parcels for good reason – think of the cost/benefit ratio of collecting only £2.70 in VAT.
It’s the same whatever the parcel’s origin outside of the Eu ”
Stop slectively picking bits from EU law. The law also says this relief is not allowed on goods exported and reimported. I wonder why it says that….
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Whether or not you consider this a scam, the fact is that companies like HMV are not acting illegally, they are operating within the legislation set out by the UK tax authorities (namely HMRC).
Surely if anyone should be blamed it should be HMRC for having such rubbish legislation.
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It’s long overdue that we told the UK where to go. It’s patently obvious by their levels of debt,crime and unemployment that they aren’t fit to govern themselves, so what gives them the right to constantly meddle in other jurisdictions business is beyond me. This VAT business is their problem not ours, if they don’t like it, can I suggest they change their laws, oh I forgot they handed over their sovereignty to the EU so they can’t even wipe their own collective backsides without first getting permission.
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Not so swift with the brush off Bongo.
How about ink jet cartridges from the far east, ditto automotive light bulbs and wiper blades, memory sticks etc..
Moonpig print their cards in Guernsey I believe?
Where is the UK released album or DVD actually pressed? Not necessarily in Europe. Don’t they do a lot of this in Turkey?
If there is no ‘in & out’ where is the scam?
@Sheila – rest assured that your VAT is not making it’s way to the Treasury when you buy from the UK. The retailer will be keeping this as they have no obligation to hand it over to HMRC as it is not a taxable supply.
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Arnald
There you go again, throwing around accusations without actually thinking about whether the circumstances that you imagine can happen or not. I am increasingly convinced that you are seeing a bogeyman where there is none, and yet you use fanciful language to make it sound like you know what you are talking about.
So, to deal with your comments:
“In and out” works for goods under VAT rules because VAT depends upon the location from where the goods or services are sold. VAT does not apply to financial instruments and so it does not matter where these are sold or located. You act as if these “in and out” deals are scams operated by the financial industry – but a basic understanding of the tax advantages of using offshore centres will tell you that this does not make sense.
You also mention secrecy. I have asked you before and I will ask you again – please explain one aspect of Guernsey law and regulation which means that we operate secrecy? I can say hand on heart and from personal knowledge and experience that the authorities in Guernsey require more information about beneficial owners of businesses here than their equivalent counterparts do in England. We do not rely on secrecy here. Quite the opposite.
It is too easy to chuck accusations around but you never back them up. Time to put up or shut up.
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Doug your are wrong. Play.com was prosecuted and settled out of court for importing non UK product.The BPI took them on. This scam cannot exist without UK manufactured product exported and reimported. Get your facts right and you’ll win an argument.
AL I agree with you. Some sense on this page.
This growth of this particular scam was due to HMRC failing to police it. You can blame your politicians for failing to do their vresearch as wel. Its not exactly difficult to look up EU law on the web.
As for the idea that Guernsey didn’t promote this scam, I can tell you the Guernsey Government went round actively appraoching UK labels and distributors to set up on the Island. Fact.
As for Beaufort – Look at the little Island telling a country what to do. Hardly the same scale is it. Slightly more complex than your parish council. You also forget that we have an army to fund one that you can call on as well.
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Beaufort said ” oh I forgot they handed over their sovereignty to the EU so they can’t even wipe their own collective backsides without first getting permission ” More rubbish. LVCR is an EU law. Without it you couldn’t abuse it. You should be thanking the EU for all your dirty money.
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@Sheila – rest assured that your VAT is not making it’s way to the Treasury when you buy from the UK. The retailer will be keeping this as they have no obligation to hand it over to HMRC as it is not a taxable supply.
Wow. Sales to The Channel Isalnds of DVDs and CDs from the UK. Big business. Of course you have an option to run your own Island based mail order for Island residents. Sorry what was that “Not enough customers ?” Oh dear!
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TL
I can say whatever I like thanks, TL. I’m intrigued by the industry, that’s all. I struggle with the concept for needing products that are deliberately structured across numerous jurisdictions. The evidence for “in and outs” is everywhere, isn’t it? Cash gets deposited here and then moved elsewhere for the jiggery pokery. Doesn’t it? Or is the whole apparatus based here?
Why is that any different to CDs coming and going? It’s bits of paper with addresses on. Depending what part is addressed where then that’s how it’s taxed, no?
If I’m utterly mistaken then tell me, but why else set up a shell company here? They do that, don’t they?
Are you telling me then that if I were HMRC, I could phone your company up and ask for any imformation you may have about Company X? Or would I have to know all manner of detail that would negate my need to ask you in the first place? I’m not suggesting that Guernsey is unique, we don’t have a constitution to defend for a start, but to casual observers like me, it all adds up to be rather ‘convenient’ if I decided to put some cash into the system without any part of it being disclosed in its entirety.
Just a point of view, TL. You’re the expert, obviously.
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Just to clarify to anyone still not getting it. : The VAT relief was allowed to the Channel Islands BY THE UK through the implimentation of an EU law. The Channel Islands CHOSE to be outside of the EU VAT zone. If the relief is abused, the UK have a duty as an EU memeber state to remove it and stop and market distortion or tax avoidance. Market distortion is basically fixing the market in your favour. This is a bit like telling a naughty little boy that if he eats too many sweeties “We won’t be going to the sweet shop again will we ?”
No more sweeties.
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Arnald : Good points. Who knows what implications the abuse of LVCR has in other areas. I recommend that you read Halifax judgment if you haven’t. It rules that carrying on a business for no reason other than a tax avoidance is an abuse and was a landmark case in recent UK/EU law .
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Arnald, I am glad that you recognise that you are a casual observer. The issue that I have is that your posts make you sound (to the untrained eye) like someone who knows what is happening. If you are going to get indignant and repeatedly throw accusations, then you could at least ensure that you do so after becoming more than a casual observer. You are clearly intellegent and I would like to get into an intellegent informed debate with you, but you are constantly alleging that things happen when they do not.
For instance, in yoru latest post you talk about “in and out” of cash deposits. How does that affect tax??? Tax on monetary assets or investments is based on income. Income happens when these assets are left invested, not when they are moved around. So your allegation that the VAT scam is the equivalent of offshore financial services is misplaced. Just the latest example of you barking up the wrong tree.
I don’t mind you being misinformed but most of the time you act like an expert, and that can cause others to become misinformed if they believe what you say.
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Bongo – actually the exemption was because the UK did not think it cost effective to enforce below that level. They even chose a level that is higher than the minimum set by the EU (about £11 I believe). Of course they are at liberty to withdraw or reduce that concession – it is a matter of the UK setting its rules. It is like complaining that drivers drive at 28 mile an hour when the speed limit is 30, just because it could have been set at 20. Set it to 20 then.
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“Bongo-Slightly more complex than your parish council. You also forget that we have an army to fund one that you can call on as well.”
Would that be the same army that let us down in 1940? As I said, it is EU implemented the UK couldn’t change it as it gave up its sovereignty, it has to ask permission from the corrupt state that is the EU. The same organisation that hasn’t had its accounts audited and signed off for 14 years. Thank goodness for Protocol 3 and the foresight our politicians and the people of this island had in 1973.
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TL – You are right. It was a hash up by UK. They police it. Doesn’t make abuse right though. But then stupid Governments are hardly new. I note Beaufort thinks his will save the world. Look forward to that.
Let you down in 1940…come on! You are are the populist. Didn’t we expend our entire economy and many brave lives and win ? Maybe not…..(you’re still occupied..by tax avoiders)
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Bongo – UK manufactured CD’s and DVD’s or UK Royalty paid CD’s and DVD’s. It is clearly the royalty element of interest to the musicians representatives.
You studiously avoid the other product examples given. Why?
My comment to Sheila had nothing at all to do with CD’s and DVD’s I’m afraid but you do yourself a disservice be belittling my comment. If you are concerned with tax avoidance surely you would have noted that UK retailers may be charging VAT and not handing it over to HMRC in the case of exports to the Channel Islands?
If you feel so strongly on this matter I propose you contact your MP when he gets back from his 82 days holiday.
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beaufort : “As I said, it is EU implemented the UK couldn’t change it as it gave up its sovereignty, it has to ask permission from the corrupt state that is the EU”
Rubbish. The variables in this directive are under control of the member state. They can adjust from 10 to 22 Euros or scrap mail order goods and from a specific destination if that destination is creating market distortions or being used for avoidance and or abuse. Abuse is defined as exporting and reimporting either by post or any other method. Denmark did it.
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TL
If you say so.
OK so let’s change ‘scam’ into ‘legal tax avoidance’, I don’t care.
Bearing in mind why tax is necessary, avoiding it would naturally cause a problem. The fact that a lot of tax is avoided creates a lot of problems.
Am I allowed to say that?
Are you telling me that no tax avoidance on profits and earnings takes place using Guernsey addresses and in fact that there is “nothing to see here, now move along”?
How can you convince me? Your involved. As are the various ‘experts’ that pronounce us great. I’m sceptical that ‘sophistiacted tax planners’ would not use the routes available that other jurisdictions have.
Please explain why an investment would need a myriad of Trust/Cell components placed in say, Cayman, Switz, BVI, and Guernsey? Why? Efficiency or abuse?
Don’t you find it interesting that things appear different to different people?
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TL – It is like complaining that drivers drive at 28 mile an hour when the speed limit is 30, just because it could have been set at 20. Set it to 20 then
You speak with common sense. HMRC are you reading this ? Probably not. Too busy working out pension benefits.
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bongo:-
“Let you down in 1940…come on! You are are the populist. Didn’t we expend our entire economy and many brave lives and win ? Maybe not…..(you’re still occupied..by tax avoiders)”
Er no you didn’t,not on your own, I suggest you read up on your history. The UK was greatly helped(baled out) by the Commonwealth and others including the US, you might have heard of it.( big country to your West)At least we still govern ourselves and didn’t sell out to the EU, I should think the people who made the ultimate sacrifice during WWII must be turning in their graves.
Anyway getting back on topic:-
‘ The VAT exemption is possible because, though part of the Customs Territory of the European Community, the islands are not in the European Union, and are able to trade goods into the EU from outside it.’
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Love it; under control of the EU member state from 10 to 22 Euros, how is the UK going to do that, bearing in mind it still uses Sterling? When is the referendum going to be held so the UK can be told by the EU to vote yes, like in Ireland. There’s democracy in action for you, keep asking the same question until you get the answer you want.
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Pongo
Every sale lost in the UK is tax lost to the UK. About time we on the mainland made it clear who’s in charge. Stop abusing our national income and stick to fishing and flowers.
Go on admit it, your jealous of our beautiful little island hehe.
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I look forward to the Greater Guernsey.
On your sterling point its converted at the rate current when the legislation was introduced so between £7 and £18.You obvioulsy have little knowledge of this so why try and argue it.
This is nothing to do with the EU or VAT. Its about people taking advantage of a relief for a purpose for which it was not intended and scamming the difference. We gave it to you, we’ll take it away. I care little for the EU or VAT. Go and enjoy the beach.
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Blowfart : ‘The VAT exemption is possible because, though part of the Customs Territory of the European Community, the islands are not in the European Union, and are able to trade goods into the EU from outside it.’
More rubbish. The VAT exemption is possible because the UK as a member state chose to impliment it in the way it currently operates on items coming into the UK from outside the EU. It might surprise you to know that some EU laws are optional and adjustable. It could change the arrangement at any time by either reducing it to £7 or removing it from mail order imports from The Channel Islands. Yawn.
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Tax avoidance. That’s a broad church. I can’t comment on other tax avoidance as I don’t talk about stuff I don’t understand, but I certainly don’t want my business undermined by grubby VAT scams like yours if I have to pay VAT. My Government has a duty to protect me. If not damn the Government.
Regarding this comment :
‘ If you are concerned with tax avoidance surely you would have noted that UK retailers may be charging VAT and not handing it over to HMRC in the case of exports to the Channel Islands’
Its illegal to charge VAT and not hand it over, however if VAT is not payable that’s another issue. I can assure you however that if you have a VAT inspection by HMRC and you have been charging VAT illegally and not handed it over they will do you for it. Try it.
Why would I like MPs ? You have the wrong man sir!
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‘You studiously avoid the other product examples given. Why?’
OK back to the blackboard students. This relief is abused if it involves anything exported from the UK to the Islands and posted back. If you want to import Chinese Garden Gnomes good luck. It might surprise you to know that some items are made in the UK and nowhere else, so if you export it to Guernsey and reimport it to avoid the VAT thats a scam.
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Please note however that the relief was originally allowed by the UK to help the Islands. It was intended for local goods (originally it was intended to allow bulbs and flowers to transit customs rapidly…and before thats denied I have paperwork from 1993 written by HMRC saying exactly that) Now its been abused it may be removed all together. You should be angry at your own politicians for allowing that. They pushed this whole dodgy fulfilment industry. Why would anyone want to be based on an Island on the other side of the Channel when the core market is the UK mainland.Its hardly convenient is it. Also if the VAT isn’t that important and you have such a great service, why no book sales ? Could it be there’s no VAT saving so its not worth doing… surely not.
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David/TL etc
Having given your comments some thought, I’ll stop being so directly negative. It is one thing to have strong beliefs, another entirely to talk random nonsense. The fact is I do know how well run business is over here, and there is definitely very close attention spent on proactive good governance and compliance with others.
So yeah, I can believe that the core ideology behind avoiding paying tax into society to make personal gains is a malignancy holding back global development, but I shouldn’t cast aspersions on the motivations of the individuals who do the paperwork.
However, wealth and resource disparity, and the necessary market manipulation and loss of the democratic principle causes war, famine and social breakdown. Dave Jones may have gone OTT, but the UK is stretching thin, and academia consistently points at the use of wealth.
So when the banks go BANG, smug acknowledgement of a superior Grand Theft Everything disguised as
‘the best minds in the business doing what they do best’ and prononciations of the success in attracting wealth here, I think of the trillions spent and make simple connections to see how come things are so bad for such a large majority of people.
I shall put my large and tarry brush away now.
All that glitters is a mare’s nest.
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I don’t like the fact that reputable local (Guernsey) companies that are owned by fully local people employing a lot of local people get tarred with this alleged ‘in out scam’.
There are examples of mail order companies that hold all of their stock well in advance of selling, i.e not shipping over goods, relabelling and sending back out the door. Yes, they use the deminimus ruling but lets not also get this confused in thinking this is a Channel Island only thing. It isn’t. It is worldwide. Do you honestly see Hong Kong traders giving a hoot about this? If the UK government go heavy, all the consumer has to do is a slightly deeper internet search and find the goods somewhere slightly further afield. You can get Cds and DVDs for even less there. Postage is still cheap and quick too! The world has shrunk and I’m all for buying stuff at the cheapest possible price, import or not. Screw the high street! My landlord didn’t care about me when he put up my shop rent 40% in the first trading year.
Someone mentioned Play.com etc killing the music industry – thats total nonsense! From a consumer perspective they made it more affordable! It’s better that its cheaper from them, if the prices went up, no one would pay for anything because downloading is way more prevalent than anyone purchasing music.
The days of the CD are coming to an end, its the greedy record labels fault, not the online stores.
When artists like Prince and Radiohead are giving away albums for free, you know its pretty much game over.
As far as I am concerned Guernsey INC cocked up when they allowed HMV in. Alarm bells are bound to start ringing when big names like that show up. Fulfillment houses are an issue as well. The fact that a former very senior GPL employee set up a fulfillment company is just brilliant!
The debate will continue but there are clearly 2 very different operations in my book.
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Arnald
I certainly do agree that it is interesting how people see things differently – it is that which makes intellegent debate interesting and, often, informative.
For instance, you seem to see an avoided tax as lost revenue, whereas I see it as increased profits for a company which are then spent or invested elsewhere. I guess it comes down to whether you believe that, on the whole, money invested benefits the investee as much as the investor. You appear to focus purely on the investor. For instance, last night’s news featured a short piece about the emergence of Libya from political exile and the development of its economy on the back of new investment into its developing oil industry. If you view the multi-national oil companies as parasites then you could just see the raping of another African country’s mineral reserves. But if you ask a Libyan whether they would prefer to live in poverty in a country which retains 100% of its oil, or live in a developing country which has traded some of that asset in return for getting the benefit of the remainder free of charge, then I am pretty sure that they would prefer the latter scenario. This process is not created by tax avoidance (whether onshore or offshore), but the reduction of tax liabilities of those companies increases their ability to make investments.
I also think that you make a couple of fundamental errors in your assessment of international taxation.
First, you seem to assume that if a company chooses option A over option B, and thereby pays less tax, that the tax payable under option B “should” have been paid and has therefore been “stolen” (for the want of a better word). But that ignores the fact that the company could also have chosen options C, D and E. Have those taxes also been avoided? How can they, given that even if the company had gone with option B as you believe they should, then option C, D and E would not have got their tax either? Offshore finance centres work when there is an option A, B, C, D, etc. and so there is no single country who can legitimately say that their tax should have been paid rather than someone else’s.
Where I do agree with you is that tax should be paid where the money is made. You have previously stated that offshore holding companies are depriving third world countries of tax revenue on money made in those countries, but you have so far failed to explain how this is supposed to happen. If it does happen then I agree with you. My point is that the system (of which we are a part, not a counterpoint) is structured so that this should not happen. If income is generated by a factory in a third world country, that income will be taxed in that country, regardless of whether the holding company is in the UK, Guernsey or any anywhere else.
You second error is to assume that a tax avoided is revenue that is lost forever. Not so. A tax avoided means more profit for the person down the chain, which means more tax for the tax authority which can lay claim to that next person in the chain. The point of offshore centres is that the structures ensure that as much tax as possible is shifted to the ultimate beneficial owners so that they are responsible for their own tax depending on where they are located, rather than having tax being taken at intermediate stages. I expect that you imagine rich UK citizens drawing down money from Guernsey companies and living the high life tax free – but they will be taxed in the UK on everything that they get their hands on, and quite rightly. But if you insist that the structure should be based onshore so that the UK get their tax at the intermediate stages as well, then the Swiss investor who only pays 20% tax in his home jurisdiction would suffer because the portion he receives will be reduced. Why should that be?
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TL, no comment. I don’t think you understand where I’m coming from. You cannot explain why the producing countries are so poor.
You will not mention the facts. More wealth is going at a faster rate from poor to rich. The global finance system is responsible.
Are you telling me that the convenience of secret bank accounts in one jurisdiction coupled with the trust laws of another and the hedge fund laws of another could not combine to create a slippery identity FOR PRECISELY THAT OUTCOME?
You are confident, but you are only looking at business. Life is not business. Screwing people to make more profit is self defeating. Tax avoidance is not meeting your social requirements. Goodnight.
How much Swiss dealing do we have? How does the CCD work?
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No address billionaires in yachts.
Banks gorging themselves on tax payer money.
Investigations showing major institutions abusing tax law.
Someone is doing it.
Do I have a choice of taxable options?
What planet are you on?
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Bongo :-Somebody else that resorts to name calling because they are unable to express themselves eloquently and coherently.
” ‘The VAT exemption is possible because, though part of the Customs Territory of the European Community, the islands are not in the European Union, and are able to trade goods into the EU from outside it.’
More rubbish…..”
No,that is exactly the set up now and is the current state of play.The UK aren’t able to change this decision unilaterally without affecting other jurisdictions outside the EU.
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Arnald – so because the poor countries are getting poorer and you do not understand the offshore finance business, you assume that the offshore finance business is to blame. I am happy to engage in debate but you are not providing anything to debate about. Learn a bit more about it and then come back. It isn’t that hard.
Dog Like Sparky – abuse of the system by some does not mean that the system is at fault. People break laws and get caught, they always will. Do billionaires really spend half their time in international waters to avoid having tax residence anywhere? I doubt it as there are not many cocktail bars in the middle of the Pacific and it is difficult to make more money that way. Banks and taxpayers money has nothing to do with offshore centres. Do you have a choice of tax jurisdictions – it would probably not be financially viable for you, but you can bet that your pension investments are better off for using offshore centres and making your pension worth more (equity slumps aside).
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You spend too much time believing your own hype.
Money originates in real world transactions. It comes out of the those countries having suffered minimal charges due to corporate set ups, it then gets put in a giant fruit machine with odds that can be maniputlated if you have enough clout. When the jackpot arrives it gets moved elsewhere to further mitigate tax. And again and again.
You have no understanding about the real world. Money is finite. It does not come from thin air. Your clients’ investments and subsequent untaxed profits takes money out of society, to be shared with finance through fees. And it stays there influencing pensions (or rather screwing more people) or it is used to impart massive debts on companies whose staff are all sacked, assets sold, and refloated as a brand. That’s not a version of adding value. It’s cynical corporate rape. When Barclays are allowed to dodge billions in tax using instruments that we also offer then you must know that your argument is dead in the water. Bob Diamond’s 30 million means that everyone else has 30 million less. Ultimately all the wealth will be in the hands of a few despots.
Well done. Now get on with your work facilitating poverty.
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TL – Dog Like Sparky has a point though. It is the inability for any vision beyond shiny coins and that handshake for the new client that shatters any illusions for thinking folk. Finance types would be best not to comment on social issues. Lack of grasp.
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Dog Like Sparky – oh dear, there are simply too many falacies in that post for me to even bother picking it apart. I will just say that I think that my grasp of reality is greater than yours, as I know what I see and deal with whereas you appear to see conspiracy and corruption at every turn. You may be surprised to hear that I am a liberal socialist by inclination, a lapsed member of Amnesty International and basically a pretty morally upstanding kind of guy. I am very happy with what I see working at the coal face of the finance industry.
But you will believe what you want to believe, regardless of the fact that it is you that has no grasp of what is going on or of the causes of the effects that you complain of.
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No you don’t. You wouldn’t be doing what you do. You must be the only socialist in living memory that supports the brutal asset stripping of the workers, destroying lives in millions, funded by the idiots that are making you money. It’s an insult. Staggering misappropriation. You still can’t explain why the wealth gap is so large. Come on, socialist. You can have a go at others but you do the same. It’s all industry flannel.
You are all brainwashed if you can believe anything this bloke says. What an unbelievable comment. You condone misery. The banking industry needs serious reinvention to get these self important fools a proper learning. It’s no wonder Guernsey has no friends except the rich and the corrupt. Russian wealth god I wonder where that came from. Gonna make a packet, though yeah. because you’re worth it.
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Oh no i get it TL. You socialise the losses! fair play was being a bit slow there. right now i’ve had a good laugh at your expense i want an answer
explain to me how much real moneygets put back into real social development. lets take the uk as an example. I’ll tell you
-£Trillions.
where is that money, clever boy? not in the factories giving life to communities not in the services providing supprt for the vulnerable not in the infrastructure to make lives more comfortable
its gone in a few t****rs back pockets and its on its way to a tax haven near you to compound and aggravate resource and wealth anger
Socialist my elbow. you’re an apologist for the rich exploiters and abusers.
you don’t care
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TL
A liberal socialist? I’m sure David would have a thing or two to say about that! How do you sleep at night for a start.
I suppose people call Gordon Brown a socialist for remembering about some things, but really and truly you must be bending the truth there.
Please point me in the direction where I can believe that ‘flensing the poor’ (thanks Ed i use it lots) and preserving the wealth of the rich for personal gain is in any way aligned to social development, progression and harmonisation for the good of all?
Hmm?
Swiss secrecy, Guernsey sophistication, Cayman laxity. Does it happen TL? Yes or no.
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The deminimus was set at a level whereby Customs and Excise found administration of the collection of VAT below that level cost more than that received.
It’s been £18 for years. So in real terms has diminished in value. Pragmatically raising the deminimus makes more sense than lowering it.
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The solution is simple from a UK perspective.
Set up a depot on the south coast of England consisting of a portacabin and a couple of containers, staffed by one 16 year old ‘VAT compliance officer’
Imply in the media that the LVCR rules may be being abused and that some packages from the Channel Islands may contain goods above the LVCR value. Announce that in future, all small packages shipped under this ‘concession’ will have to be opened and checked by hand.
There we are – job done. No messing with EU laws …Mr Smith from Birmingham can still order his CD from HMV Guernsey and save himself a couple of quid – providing he doesn’t mind the 4 month delivery times…..
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Mr Beaufort. O ye of faith. We’ll find out soon then won’t we ?
EU Judgement from July this year that defines abuse of LVCR :
‘Whereas commercial undertakings should not be enabled to benefit from the relief by instigating ad hoc activities or by artificially transferring existing activities, thus giving rise to distortions of competition within the common market; whereas, in order to avoid such distortions, the abovementioned consignments should not be eligible for relief from import duties if, prior to their entry for free circulation, they were placed under another customs procedure; whereas, therefore, the relief should apply only where the consignments in question are dispatched directly from a third country to a natural or legal person in the Community’.
That’s sending goods in and out….
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Beaufort
“The UK aren’t able to change this decision unilaterally without affecting other jurisdictions outside the EU”
Not according to the legal advice I’ve seen.
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Hey VATSNONSENSE we don’t all listen to Michael Jackson and Madonna. There are many hundreds of UK labels who’s products are only manufactured in the UK and not available outide the UK in Hong Kong as you say.
How many downloads did you buy recently ? Download sales are a myth. 7% of albums sold as downloads. Music sales dropped 20% since 2005. 58% of music retailers gone bust in UK – VAT scam operators grow. Music sells on hard formats. Why would all these operators exist if it didn’t. You talk rubbish.
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There is certainly an abuse! Not the one mentioned in the story BUT one which has ruined my business in the UK.
Play, 7day and many others ship from Guernsey or Jersey and able to offer lower prices re NO VAT BUT they must be breaking rules. If you order i.e. 10 ink cartridges they send them individually to keep the cost below £18 per item when in fact order was £100+.
Had an order from PLAY for 400 cartridges once and each was individually wrapped. How can legit small companies in England compete with that type of business?
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A question for TL, apologies for keeping it off specific topic.
As a longstanding donor to various Aid and Development Charities I read various studies about International efforts and effects of Aid Investment and Corruption. Are you aware of them and if they are untrue which you seem to in response from above posts, what evidence can you cite? I have tried to use search engines for positive aspects in relation to Aid within the modern financial system and although I could see that accounting services and international deposit taking were made easier there is only American style development of Reagan era supply side theories that include talk about the benefit of the low tax area. U.S. economics is justify-ably worthless. Is what you’re saying something different or are you only talking about your office? I am interested because of Christian Aid and the news about Christian Aid in Guernsey, UK.
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Dog Like Sparky / Arnald
I am convinced by your arguments and think it would be a good idea if we redistributed the world’s wealth then everybody could live happily and freely like they did in the old Soviet bloc. There was no poverty and corruption in those days was there.
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Sparky – yes, because when people make money they don’t invest it in factories and businesses that employ people so that they can have their flat screen TVs their iPhones and their holidays, do they? No, they keep it in their back pocket and count it while cackling madly. Yes, they are all evil parasites. Death to the workers!
Thankfully life is not as black and white as your view of life. It is possible to see wealth generation in action and see that it helps society. I agree that some benefit more than others and that the balance should be adjusted. But wealth generation in itself is not wrong. Your stereotypical view of those involved in the finance industry is laughable.
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All’s fair in love and war as they say and I for one welcome the boost to our economy that the likes of HMV and Moonpig have provided. Especially in the light of the big UK based Internet retailers like Amazon pulling business away from our own traditional High St. retailers and our island economy.
It’s called competition DLS and Arnald and if you don’t like it why don’t you take your basket case views to somewhere like North Korea and set up your own little socialist utopian society?
PS I agree with Neil. The deminimus should be made higher not lower!
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CD
Trolls aside, I deserve that for doing the same.
Suffice it to say that I think that if the inherent distortions and advantages in the system given to the already rich and well connected were ironed out, and a global effort to apportion the success of a company to the people that actually did the work to create the value in the market was vigourously pursued, then getting rich would be a truer indicator for satisfying those human needs for status and influence.
For instance, there’s no value in making personal profit from undercutting one market through exploiting a lack of resources at HMRC. How can that sort of enterprise possibly be a net provider to society as a whole? Once all the shops in the UK are beaten and there’s only one corp left what’s left for the consumer? It’s nothing to do with ‘value for money’ for the consumer. It’s nothing to do with reality full stop. It’s all about making money in the very short term.
We are literally eating ourselves by relying on the game of margins to secure the future stability and social improvements for our successors.
The world doesn’t need to be poor. That Vulture Fund doesn’t have to sue Zambia to make hundreds and millions and put Zambia in further debt for probably centuries. Our pensions don’t have to be invested in a hedge fund that uses that vulture fund’s successful legal case against an impoverished nation as a key growth element.
Would the public really like it if they knew that through pensions they were owning second equity of arms firms, firms involved in exploitation and the destruction of the environment?
No they wouldn’t and they have no way to influence the course of the investment on which success some security achieved.
You talk about communism, I say monopolistic, unaccountable and undemocratic corporate control is as totalitarian as it gets. Freedom? We have rarely been less free as humans but if you’re talking power to the people, then pass me my beret, I’m off to sell the SW outside Admiral Park.
Look at town. All that money supposedly washing about because of ‘low tax’ theories that more disposable income creates more consuming and so employment etc. is not filtering in to the local market. It’s doing the opposite, forcing up the overheads and the cost of living whilst reducing confidence in the decision makers and resentment at their impotence.
I’m off to get a life now. Bye.
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Easy there Mr Bongo.
I will rephrase. Downloading (illegal) is killing the music industry more than the so called VAT scammers. You can only gather stats for legal downloads surely?
And for your information I have yet to download a single track, illegal or otherwise.
Much prefer the hard formats myself and trust me I very much doubt anyone buys as much music as I do! (and no, not MJ or Madonna either!).
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BONGO:
This topic seems to have occupied a lot of your time! I don’t see what HMV and numerous other companies do as being a scam at all. The fact is, the Channel Islands and IOM as an example run their portfolios and finances vastly more efficiently than the UK does. As a result, companies often choose to use this as a trading base to their benefit and the benefit of their customers. That’s just good business sense plain an simple. Oh, and let’s not forget they are working within the rules!
The UK are merely trying to scrape more money from the UK taxpayer yet again, and this time it just so happens that Countries who run their finances efficiently are in their sights as we offer more to a trader.
Of course, the UK Government could always put a stop to their bully boy tactics and pull their socks up. If they weren’t burning cash on local council housing, benefits, and the much abused NHS their residents would be able to happily but their CDs VAT free.
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Arnald – I have re-read much of the above as a result of Sparky’s bizarre tirades against me on this and other threads. He seems to have formed a rather extreme view of who I am and what I may believe in and so I wanted to see whether any of that was justified. Thankfully, I do not think that it is. I took the time to post a lengthy and considered analysis of the situation as I see it and he seems to think that I am some evil exploiter of the world. Oh well, that’s his prerogative.
But the revisit to these posts has caused me to identify where I think we appear to be at odds.
You see the wrongs in the world (the gap between rich and poor, world poverty, wars over oil, etc.) and believe that the finance industry (and in particular the offshore finance industry) is to blame.
I agree that the wrongs in the world are wrong, but I do not reach the conclusion that capitalism is necessarily the cause of that. I am happy to work in the finance industry because I see the faults in the world as being faults of how the system works in part, not in totality. I do not believe that tax avoidance increases world poverty. I believe that it just accentuates the effect of capitalism by putting more money in the hands of those who drive the economies around the world. That effect can work for the good. I believe that on the whole it does work for the good.
I am not going to get drawn into a debate about what the causes of world poverty are as we would be here for days and I have a job to be getting on with. My point is that you point the finger at the offshore finance industry in particular whereas I see that the adjustments that should be made are elsewhere.
What I see on a day to day basis is people putting together companies to invest in developing economies to grow fledgling industries and provide jobs and infrastructure to poorer parts of the world. That would not happen without the profit incentive.
Hopefully the above is seen as considered debate and an attempt to find an understanding, rather than arrogant, master of the universe style, chest thumping which is waht Sparky has accused me of.
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TL
Discussion around the broad church of capitalism is a very different thing. It is the abuse of the underlying drivers of capitalism that needs looking at.
Anyway, I webbed “how can i pay no tax” and lo and behold, a Guernsey based Trust co says this..
“[Trust Co] can remove your assets and income streams from ALL taxation no matter where…”
At what stage in economic theory does it say that capitalism and moral responsibility to the state should be mutually exclusive?
Just one example: If a state democratically decides that all tax loopholes are shut and that firms such as the above cannot service the UK doms, then there will be a predictable backlash from those in the UK that benefit. It is widely accepted that a big proportion of the top companies in the UK pay very little of the tax that should be due on their business. The execs too. They will all say “we will leave.”. If those businesses really did leave what would happen? The UK would die.
Isn’t that using fear to get what you want? Isn’t that terrorism? Are we a bomb to be used to suppress the UK public and condemn them to service cuts and resentment?
The Tories certainly won’t be offering the chance for people to vote on that issue, so it’s only a scenario….but the intent is clear. Guy Hands made the error of allowing it to go public. He would have been willing to lead an exodus. He would have led the ccountry that made him rich, selling of government assets – a gift, basically – to ruin, worried only about a twisted ideology that says his personal wealth is more important than his contract with society.
We cannot be complacent about the level of feeling that this issue inspires, the worse it gets for the poor in the UK, the more they’ll look for a drastic policy. Then we will lose too.
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Arnald – my comments about the entirety of the capitalist system were because you had previously been talking about world poverty. Of course the point that I did not make is that it is (generally) not the taxes of third world countries that are avoided, but the taxes of the developed world, so I do not understand how world poverty comes into it.
But you are now talking about UK tax revenues. The quote from the Trust co should go on to say “but in order for it to work you need to give up all rights to access the assets”. So the assets are given away and will be taxed if they are given back.
I agree that social responsibility and capitalism are not exclusive. I believe in both as I have stated before. The point is that most of the business here has no more link with the UK than with France – so whose society is the responsibility owed to?
“It is widely accepted that a big proportion of the top companies in the UK pay very little of the tax that should be due on their business.” Widely accepted by whom? I have no qualms in repeating what I have said before – if the income is generated in the UK it should be taxed in the UK. But if the UK is letting some countries slip through its net, then it is for the UK to tighten its own net. We cannot write their tax rules for them.
“The execs too.” – please explain how this is supposed to work. A UK resident exec earning money will be taxed by HMRC. They cannot hide the money offshore as it is taxed at source. If they do not declare it then that is a criminal offence. They can move their post-tax assets offshore, but surely you are not saying that they have to be restricted to the UK for that? The government has taken its cut and so it is up to them what they do with it after that.
Now the real scandal is the non-doms who are resident in the UK and paying virtually no tax. They are allowed (or rather encouraged) to stay in teh UK permanently and contribute virtually nothing (in direct taxes) to the society in which they live. Who allows them? The UK government.
I agree that we need to be wise to the opinions that you (and many in the UK) hold, but my point is that I think that they are opinions based on a misunderstanding of the facts – hence my attempts to explain that, in my experience, it is not as you believe it to be.
Guy Hands moves here to avoid tax and there is uproar. Lewis Hamilton moves to Switzerland to avoid tax and people just wish that the World Champion would live in the same country as them. What’s the difference?
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TL
Sorry. I don’t understand.
Accounting practices can do all manner of treatment to profit to reduce its taxable portion. The tax those companies pay is not the 18% they are supposed to pay.
Those PE execs that were grilled by the MPs were paying as little as 5% on their income.
And they didn’t understand what the fuss was about either.
Have you never asked yourself how come the auditors never saw the gaping holes in the financial system in the months preceding the crash? Institutions so important that governments around the world had to prostate themselves with effort and cripple their economies to bail them out. RBS had hours to survive, how big an impact on every single facet of life would that have had? A clue: disaster.
Yet the auditors and the finance genii could see nothing wrong. Now tell me about transparency.
I can’t be bothered to explain the dev world problems. If you can’t see a connection between raw material revenue for the big oil/mining/agri etc businesses, tax paid in that country and the grinding backward development going on, and be bothered to ask the questions what can I do?
It is you that has a faith in the kindness of the greedy. They have a choice to not pay tax. 99% of the world do not.
Oh yeah and I’m a monkey’s uncle if that trust co doesn’t have a way of reuniting those released assets with their owner with a fraction of the tax paid that it’s due over it’s lifetime. Duh. Including all those vital social taxes that prevent the rich owning all the land to do what they please on, only for people to moan when they ‘develop’ it.
Or put cars on it.
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Arnald
There you go again – spouting out at something you know nothing about. A little knowledge is very dangerous.
Who do you think wrote the rules on the taxation of private equity returns – the taxpayer or the UK government ?
Your penultimate paragraph I’m afraid sums you up perfectly. Yes – a monkey’s uncle.
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Arnald – I have set out reasons why, in my view, your accusations don’t stack up. And yet, as ever, you just throw more accusations without explanation and avoid my requests for an explanation of your earlier points.
As for the PE execs, they are a specific category because practice in the PE world was to reward their execs with stakes in their clients rather than with salaries. It was suspect at the time and the govt has quite rightly looked into it. But all of that was onshore and it is just an example of the fact that whatever rules are set, people will try to skirt around the edges. That does not mean that the rules are wrong as regards the issues that they were intended to address.
So we are back to my earlier post – you seem to be complaining about capitalism in general rather than any specific aspect of it. Every time I try to raise specifics you move onto some other vague notion. I am not sure I can be bothered any more.
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arnold you quoted earlier”You suggest that our politicians support this form of scam, but my understanding is that Guernsey has tried to discourage it as it is not good news for anyone other than those directly employed”
The states were activly promoting/encouraging this kind of fulfillment going on in guernsey a few years ago there are brochures to prove it , they wanted them all to come here!
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, i think this kind of practice is what the states wanted and has allowed to happen, the consequences now being that genuine guernsey companies may suffer because of the greedy states.
extracted from commerce and employment section of states website
“Guernsey has a ‘can do’ attitude to business. The Island’s entrepreneurial spirit, its skilled and committed workforce and its outward-looking approach have resulted in many centuries of commercial success.
Government in Guernsey, through the Commerce and Employment Department, is all about helping the island punch above its weight. Small in size but big in its ambitions, Guernsey has worked hard to become the successful place it is today with a quality of life that is the envy of many.
Commerce and Employment is able to help business, whether it’s a start-up, a new entrant or an established player like, for example, the Guernsey success stories of Specsavers or Healthspan
you are interested in establishing a business in Guernsey please contact any of our team who will be delighted to help you make your business a success.
Commercial Relationship Manager: Andrew.Carey@commerce.gov.gg
Telephone No: +44 1481 234567
Commerce and Employment: within Government, close to business, looking to help you.
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David and TL
But you never answer any questions, you just say I’m wrong. Explain to me how, say, inheritance tax on the estate of a structure provided by our services will end up being paid at 40% as per.
Or how transfer pricing rules don’t distort the free market system.
etc
Only two conclusions I can draw: deliberate ignorance because you don’t want to investigate why I would be saying this stuff, or denial.
Anyhow, the abuses are not ours, we play by an accepted rulebook. There is nothing written down anywhere that states we cannot exploit the self interested greed of people that don’t give a damn about humanity and see life as a wealth hoarding exercise.
TL. That is not capitalism. Tescos perfecting a massive distribution system in order to out supply the competition is capitalism. Hiding the profits of that success in a merry go round to inflate undeserved earnings for people that then play with those bits of paper is not capitalism. It’s market abuse.
I agree. Don’t bother responding, because you can’t. It is the philosophy that interests me, the technicalities of your jobs is meaningless against observable truths.
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David
There you go again – spouting out at something you know nothing about. A little knowledge is very dangerous.
I think you should give him a bit more credit re his posts because he certainly does know what he is talking about. Maybe he knows more than you think.
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TL/ Spanky/ Arnald
If you want to be really macro about it then its simples.
Greed is the cause for world poverty.
The finance industry facilitates greed, however being as its not the only industry that facilitates greed it cannot be singled out as the only enemy.
As with everything, to get money, people will tread on other people, this occurs accross the board, not just in finance.
BTW, I’m not socialist or communist, before you accuse me ;)
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The Man
Indeed, but the finance industry is determining policy affecting people in Guernsey, their services and their future. For that reason we must know, as a democratic necessity, the ins and outs of the industry cat’s “movements” in order for us to feel that our vote is cast according to actuality and not blind faith.
Oh, and I don’t really know what I’m talking about. I just read stuff and ask questions.
For instance:
Nationwide, BIG deposit taker for Mortgage loans.
Based in OECD white-listed IoM.
Admitted to HMRC that it cannot accurately provide details of offshore account holders that may also be UK resident.
How is that possible in a white-listed jurisdiction?
The implication that accounts hiding the proceeds of crime may be in a trusted Mutual that seems to have no CCD checks is huge.
And what does it say about “white-listing”?
The reason I continue is because no one answers the questions. As with the Press chasing HSSD it may mean nothing, but silence is evidence, sometimes.
What assurances could we give the UK that our accounts are not similarly compromised except for full disclosure?
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