Darling’s Demands…
Friday 30th October 2009, 2:30PM GMT.
GUERNSEY has been told to tax islanders more in a report commissioned by Chancellor of the Exchequer Alistair Darling.
The Foot Review, while largely positive for the island, will also be seen as further evidence of a UK Treasury with the islands firmly in its gaze.
The independent Review of British Offshore Financial Centres, published yesterday, included an analysis Michael Foot commissioned from Deloitte.
That said there was a ‘compelling’ case for jurisdictions that did not operate VAT or a goods and services tax to consider introducing such a system.
This, it said, would increase their sustainability and broaden revenue bases.
It also said the Crown Dependencies could raise more money from a corporate tax system more aligned with international standards.
The review was carried out in response to intense international focus on offshore financial centres following the global economic downturn.
Mr Foot said the jurisdictions should take all possible steps to prevent the collapse of financial institutions and have a plan in place if a collapse could not be prevented. ‘The smallest economies are particularly exposed to the economic downturn. None of the jurisdictions can afford to be complacent.’
But Chief Minister Lyndon Trott did not agree the island needed to introduce VAT or a GST.
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Some interesting points.
Amongst the strangest is that in 3.23 “Guernsey has also budgeted for a downturn in revenues for 2009, but is again forecasting a modest budget surplus of £9 million”.
Foot then goes on to the forecast deficits in Jersey of £63 million in 2010 and £72 million in 2011.
Can anyone explain the optimism of Foot re States revenues against the figures we have been seeing in the last year and the Jersey figures.
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Basically it seems to be saying that we need to adopt automatic exchange of information asap and sign more TIEAs (tick), introduce a VAT or GST to broaden the tax base (tick), appoint a financial ombudsman (tick), consider our position re a DPS and how we would manage our exposure under it (that will be tough), keep maintaining our high regulatory standards (tick), keep acting responsibly in international tax matters (tick), and don’t get complacent (tick).
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Worth looking at free of charge just to have confirmation of the regulator tick the box, but never mind the content approach.
Interestingly he refers to Guernsey as a tax haven.
Apart from some interesting statistics there is nothing of real interest.
A classic consultants nodding approach report.
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Stephen
You say: “A classic consultants nodding approach report.” Or maybe its simply a report from someone who actually knows what he’s talking about. Maybe it will shut up some of those jumping on Murphy’s bandwagon and who believe his myths. Naturally, he is already discrediting the report because it doesn’t say what he wanted it to say.
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David
I haven’t been to Murphy’s site yet, but it’s clear that the scope is too narrow to fully address the development charities’ concerns.
Anyway, basically, on the two issues I go on about most it showed the OFC’s weakness.
Transparency and beneficial owner info were unsatisfactory.
I’m not quite sure how it ties in with the constant crowing I get, and the rest, but unsatisfactory comments about CDD and information exchange don’t make the attacks on me look very clever. And the assertion that our business has less to do with tax than I have made out. That can only mean large scale avoidance, at best.
I haven’t read the methodology for the ‘tax gap’ calculations yet so I’m not sure how they factored this in, but the fact that UK subsidiary jurisdictions to the Mother-haven have a positive inflow is like saying a baker makes bread.
As for complacency, oh dear.
“Maybe it will shut up some of those jumping on Murphy’s bandwagon and who believe his myths.”
Like the IoM CAP? The IoM said the same thing about him. Like auto-exchange, he’s been banging on about that forever? Which myth?
That locals in Guernsey would not only receive the burden from zero ten, but significant other taxes that would not be levied on the foreign corps would be targeted at the majority non finance worker?
I’m off to get brainwashed. Some more.
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The Landsbanki DAG welcome the news that the latest Foot Report has concerns over the Guernsey DCS. We have asked questions of the GFSC and the Compensation Board regarding the DCS and have still to receive a reply, consequently we haved raised the awareness of bank depositors in Guernsey and recommended that they ask relevant questions of their own respective banks.
In view of the emphasis the Chief Minister places on the value of ‘transparency’ will there be a clear willingness to ensure that the Guernsey public are crystal clear on the interpretation of the DCS and what it could mean for depositors should another bank fail in Guernsey?
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What it is questioning is the Guernsey Depositors Compensation scheme and how inadequate it is.
Three months ago or more , the Landsbanki Guernsey depositors Action Group, submitted a report to the GFSC with a number of pointed questions regarding the scheme. We were referred to an Advocate. We tried the same questions with the new Commission for the scheme and received the same response. Noone wanted to answer the questions, that Guernesy’s DCS was inadequate and totally misleading and unlikely to cover anyone anywhere near the £50,000 quoted.
Now the Foot report is saying exactly the same, so perhaps, The Chief Minister, the GFSC & the Commission responsible for the DCS will sit up and take note and ew will say we told you so three months ago.
FOOT Report extract:
6.15 The liability caps which feature in the deposit protection schemes in the Isle of Man and Guernsey seek to strike a balance between providing comfort to retail depositors and not leaving banks within the jurisdiction facing a potentially unlimited liability. In practice, the liability cap
means that the compensation paid to depositors in the event of a bank failure could be significantly less than £50,000 if payments at that level would exceed the cap.
6.16 The effect of the cap would be to vary the maximum payment to depositors depending on the size of the bank which had failed. Depositors with a large failed bank might receive less than £50,000 because the cap had been triggered, whilst depositors in a small failed bank would be
more likely to receive compensation up to the £50,000 depositor limit.
6.17 Some depositors may not understand the implications of the liability cap. Misunderstandings could potentially result in accusations by depositors that they had been misled. Any jurisdiction within the scope of the Review which currently has, or is considering introducing, a scheme with a liability cap should therefore:
• review its scheme in the light of the Basel Committee’s principles and consider in particular whether the existence of the ’cap’ is or can be adequately explained to depositors, and whether clearer guidance could be introduced; and
• consider whether the future business model for that jurisdiction requires a deposit protection scheme for all depositors or whether the jurisdiction should not be seeking to attract foreign retail deposits. Reduction or elimination of these might allow jurisdictions to provide protection to local residents (who typically and reasonably want to bank locally) without the need for a liability cap.
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As this report must have been in the design and print stage well before the UK hauled in the islands for a ‘rocket’ about zero tax and I note that the report itself is critical of such a position – I wonder if an early reading (pre-publication) among UK government officers triggered the whole thing?
It may be that the EU objector was the UK!
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Another step on the UK agenda to close us down one way or the other. We have jumped through hoops (no doubt to their disappointment)now they are trying a different tack.
I reckon we need more independance right NOW not in 5/10/20 years such is the pace of change.
We can no longer say we set our own taxes when he ‘recommends’ we introduce VAT…
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David
Is it possible your opinion is governed by the disagreement you had with him some time ago? ( I refer to your comment on Murphy on these pages)
Is it possible he might be right?
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And country by country reporting being posited by D&T!
David, please explain the “myths”.
The fact is that Guernsey does not comply with basic regulatory rules. You cannot say you are well regulated if some of it is not well regulated.
We are quite well regulated, EU on-compliant, and achieve the minimium requirements for international cooperation, despite not closing the door on criminals.
Doesn’t sound quite as good, does it?
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RT: “Stephen John| October 29, 2009 at 4:32 pm
“…he refers to Guernsey as a tax haven.”
Surprised?
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David
Clearly the Foot report received the nodding head agreement from you.
What you must remember is that you are looking at things from the Guernsey insider point of view.
Clearly the stance taken by Foot is pleasing to you from your perspective.
I have had the opportunity to read what Richard Murphy has to say and I have to say that from the viewpoint of the outsider the points he makes are by and large fair. In fact I was surprised that he hadn’t come forward with a more robust response.
But then, that is from the outside of the Guernsey financial system’s protective viewpoint.
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Taxator asks if I am surprised by the fact that Foot refers to Guernsey as a tax haven.
I am not surprised but I wonder how that fits with the evidence from Guernsey reps to the Commons Select Committee that Guernsey was not a tax haven.
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Arnald
You say that the report says that “Transparency and beneficial owner info were unsatisfactory.”. You were paraphrasing but I cannot see anything that suggests that this is actually the case in Guernsey.
The report acknowledges that transparency issues arise everywhere, onshore and offshore, and specifically points out that trust business in not subject to regulation in the UK, unlike in Guernsey. Trusts are tax avoidance/mitigation (call it what you like) vehicles in the UK, just as they are here. We know more about settlors of Guernsey trusts than the UK equivalents do.
Which bit of the report are you drawing this conclusion from?
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Is it possible to “move towards greater transparency”?
Surely transparency is absolute?
You can either see through without obstruction, or you can’t.
You say we are transparent. Now you say we are comparitively transparent, whilst comparing us to someing that isn’t transparent.
Do you really know all your clients? Can you saythat for everyone who works here? Because Foot can’t.
Again and again you want to promote the status quo as an acceptable business model. It’s been secret for years, so it must be quite painful, but you see, of the three CDs, Guernsey is the only one ‘considering their position’ on auto-TI-exchange, where as the others have timetables.
Keep believing what you want.
You said we were transparent.
We are not. You proceeded to insult my intelligence. I was right.
If you cannot see that it is unsatisfactory about many basic aspects of our system, then you are as deluded as Trott.
We are a step away from pariah status, and your kind of deliberate ignorance is not helping.
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Stephen John
I am surprised at the use of ‘tax haven’. I am sure that ‘secrecy jurisdiction’ would have been pushed for, and at least that carries a definition, but my view is that ‘tax haven’ makes it sound like we haven’t moved on from the past.
And apart from a few tweaks to laws and 13 unratified TIEAs, that’s where we are.
Yep. Transparent and honest. All the way.
Don’t come here with dirty money, please, but if you do, don’t tell us because we won’t find out.
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Darling’s demands….strange headline but lets do it all. Lets mirror completely the UK tax structure and each year pay the surplus to the people who own Guernsey…the Guernsey people. Surely tax should cover with a bit for a rainy day the needs of the country? We now need politicians to tell these muppets to sort out their own country. Its comical that the UK are telling us how we should have our tax set out.
Do they know what they are talking about?..the proof is their debt, their instability and ecomomical disaster
Fight back…kettle coloured imo so gets some bottle and fight. Start with…Do you know where we are? Do you know the needs of the island? What is the point in squeezing everone for every penny they earn unless of course we need to spend 250k to review the reviews?
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Arnald
15 TIEAs, actually. Might as well be 50 – but will still be labelled as ‘tax haven’ by Foot, Darling, the global media et al.
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Arnald – I am assuming that your post of 1pm was in reply to me.
Why do I make comparisons to the UK? Because if the UK is considered legitimate, and we are equivalent to (or in some cases better than) the UK then the attacks on us are unjustified.
If you don’t think that the onshore commercial world is transparent enough then that is a different debate. But you are not alleging that – you are claiming that Guernsey is less regulated than the norm. I say that we are equal to that norm. I believe (based on my own experience) that we follow best practice. Best practice does and should evolve – and I believe that we are keeping pace with that. There is nothing that I have seen in the Foot report that says otherwise, so how can you claim that it supports your accusations?
Your love of melodrama (how can I insult your intelligence by providing factual statements that you have not refuted?) simply exposes your arguments to be a vacuous conceit. You will always believe what you want to believe and I am not trying to persuade you otherwise, but don’t claim the moral highground when you cannot back up your accusations with factual detail.
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For those puzzled by earlier comments in this story apparently being written before this article was published, the original piece was a holding story which has now been replaced by this Guernsey Press article on the same subject.
The initial comments were based on the posters’ reading of the Foot report itself, and so are still relevant.
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TL
I have never compared. I live in Guernsey. Guernsey is the discussion. You said we were transparent. That was your fact. You said that all beneficiary information is kept in Guernsey. It is not.
Why don’t you think that transparency is best practice? You can’t do because you’ve always told me how ridiculous I am. But it turns out we, and all the others, are not transparent, but because you (as in GsyOFC) believes it is, then that is what is advertised and promoted. Although, you see, it won’t be. That’s why the last few years has prompted calls of “over regulation” “meddling” “bureaucratic nonsense” etc by various white haired execs who remember the ‘good times’.
All of it points to how deep in the not-transparent or “spirit-lacking” morass Guernsey was, in secret from its population.
I have the Foot report that states there is room for improvement in what we already do and the need to bring in measures that I have often posted, based on others’ research and observation. You refuted that as not evidence at the time. Foot has shared concerns.
This was always going to be a friendly document.
If you wanted transparency you would agree with introducing all manner of methods. Because you doggedly hold on to the fact that we’re ‘best’, you think that makes it adequate.
Taxator
Only 1 in force. OK so 15 (was Aus the last one?) coming online in the next few years. Don’t some of them have TP clauses? Why would there need to be TP agreements if there is no abuse of TP, as TL has stated before?
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The subject seems to have drifted. Surely the key issue here is that the UK Exchequer is attempting to dictate our internal taxation policy?
As a small island we have completely different revenue and expenditure requirements to the UK – something which they don’t seem recognise.
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Oh honestly – they were the first into recession and are the only major economy still there. They love to tax and spend but delivery pretty poor services. What have they to teach us?
Maybe the French should commission a report and give some advise to the Brits…… I wonder how that would be received?
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“I have the Foot report that states there is room for improvement in what we already do and the need to bring in measures that I have often posted, based on others’ research and observation.”
which paragraph numbers of the report?
Transparency (while respecting accepted levels of rights of privacy and confidentiality) is best practice and we adhere to best practice.
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CD – Agreed, but I think the confusion is instigated by the UK government, who attempting to infinge the Island’s sovereignty under the cover of a (valid and positive) assessment of Guernsey’s adherence to international standards.
It is one thing to comment on transparency and money laundering. It is quite another to set out a preferred framework for fiscal policy – this is something that is clearly beyond the scope of the relationship.
What is laughable is that the arguments around fiscal policy are so contrived and weak. I suggest that the UK sort their own fiscal position out before hectoring us on ours, which they have no moral or constitutional right to.
This report demonstrates the case FOR independence among the crown dependencies and overseas territories.
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PC
I sent this to the media yesterday
My thoughts on the Foot review. Deputy Dave Jones
While agree wholeheartedly with the Chief Ministers comments that the Islands as a whole and Guernsey in particular have come out of this review very well, that to me is somewhat missing the point. You see, I don’t care what they think of the way our democratically elected parliament runs our islands economy.
In fact, I would ask where the UK gained the right to review us in the first place; our allegiance is to the Crown not the Labour Government. We were not consulted in any meaningful way once again. Sure we were sent the terms of reference for the review a week or so before it commenced but that is not consultation that is a bit like two wolves discussing with a sheep what’s for lunch. We were just told it was going to happen and that was that. The same thing happened at the time of the Edwards report, except on that occasion they just turned up. The arrogance of this Labour government is breathtaking considering that our internal tax affairs are a matter for our parliaments not theirs.
That right has been ours for over 800 years and has been respected by every UK administration for centuries up until that is this Labour Government came to power. One of the points Advocate Perrot was trying to get across at his well attended meeting the other evening. In section 4 of the report they have assumed the right to advise us about whether or not we should have some sort of Sales Tax in Guernsey, again a matter that is none of their business. They have also commented on the fact that we have an absence of other taxes, well yes we do and again I ask what business is it of Gordon Brown or anyone else for that matter. We don’t comment on the lamentable way this present Labour administration runs their economy or the fact that they have brought this once great country to its knees financially or indeed the fact that even though the British people are some of the highest taxed people in the world Gordon Brown has managed to squander billions in British taxes, plunging the country into almost irretrievable debt.
I have been told today that I am over reacting to these comments, I don’t think I am, I don’t believe there are any lessons to be learnt whatsoever from the UK or treasury officials on how to run our affairs and their time might be better spent getting their economy back together instead of spending thousands of their own peoples money on writing reports telling us what we already know and that is that we are significantly better at running our economy than they appear to be.
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Don’t you just love trusts?
Confidential? Away from prying eyes? Absolutely key to all we do.
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They have ruined the UK now they want to advise us?
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Now don’t be silly Doug,
The UK still think of France as Napoleon ruled; then they had to accustom to De-Gaulle
Oh they love France; if they can get property on the cheap: however the French are wise to all their tricks, and for that they now pay dearly.
No my friends, England is in 2009 ; with thoughts in 1809.
As you say they can’t manage their own country, yet try to control others.
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I still haven’t got round to reading the Foot report, so will just confine my comment the term “tax haven” referred to by several posters above.
It is good to know what one is talking about. The term “tax haven” is bandied about by all and sundry usually on a ’tis – ’tisn’t basis.
Cut it short – ask what is meant by the term. Nearly always there is not a glimmer of an indication of a definition.
My dictionary says a tax haven is a state or country with a low rate of tax. I don’t agree. I think a tax haven is a state or country which fixes its tax rates to suit non-citizens.
We might differ, but at least we know why we differ.
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David Jones, whilst I agree that many bad financial decisions by this UK government, sale of gold etc, the root cause of the worst downturn since the great depression has come from the actions and perverse incentives in the Finance Industry. Basket case securitisations which led to the freezing up of the world capital markets, billions of leverage buyouts which never should have happened as they were simply flawed on anything but the most panglossian interpretation of future profits “growth” projections. The offshore financial centres need to appreciate how they helped to facilitate a period that led to the most appalling misallocation of capital which Nouriel Roubani thinks will be nearly $4 trillion. We were happy to get fat on the legal and admin fees of setting up and administering these flawed products. Something people in the offshore centres are happy to gloss over. We were all party of that fraud thay you could turn a sow’s ear into a silk purse.
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Rob Roy
They imported the credit crunch to us not the other way round.
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In that one sentence, Dave Jones, you lose all credibility with any of your other arguments. Your knowledge of the finance system is being given to you by vested interests.
How do you import a credit crunch. The very existence of secrecy jurisdictions led the banks to fear each other’s balance sheets for lying.
We are partt of the problem and all this insular nonsense needs knocking on the head.
It is complicated I admit, Dave Jones, but to spread inaccuracies, again, is damaging Guernsey’s reputation.
Your vision is a non starter. You’re basically advocating making things riskier for the Guernsey public. Should you be unsettling people who already have no faith in the Policy Council? It may sound impressive for those looking for someone to blame for their poor electoral choices, but to claim that Guernsey is unique in not having anything to do with global finance, whilst urging business in the more corrupt corners of thw world shows up a great deal of cynicism.
If you want independence then the recommendations for diversifying the tax base are emminently sensible, no?
Bluster is popular, I’ll admit, and entertaining, but when the chips are down we need some quiet efficiency doing the job.
Move over, Trott, in case you say something you know isn’t true, to the people that voted you in.
I imagine that this advice is starting to sound like a stuck record. Expect Dentistry soon.
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Ah well
’tis to be hoped that Nov 5Th will have some meaning to someone:
S few little rockets might help to get them on their way.
their way is closing on oblivion.
How the proud and the mighty have fallen; when they try their dirty tricks on a small island-
They have no shame, We’ll soon see the Tricolour flying over the palace of Westminster.
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David Cranch
Your working definition of that “a tax haven is a state or country which fixes its tax rates to suit non-citizens” seems to be closer to reality that your dictionary.
Others would also tag the secrecy aspect to the definition as well as stressing it is how things actually work and not how you say it works.
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David Jones
Unfortunately you are showing a serious lack of appreciation of the mechanisms and part we have played in the “shadow banking system” and the “originate and distribute model” of credit origination via amongst other failings, disintermediation in the system and the collapse in lending standards that it encouraged and loss of information from initial credit generation to the final structures that held the loans and securities. Everybody along the chain wasn’t bothered because they were making so much in fees (including our lot) and thought we’d entered some new paradigm. Rather than risk being more efficiently allocated as a result of all these structures, it was actually hidden or ignored due to the opaque nature of these vehicles many of which were domiciled here! Given the level of damage caused across all the industrialised nations as a result of this process, this is just so much more important to address than doing a few money laundering checks or having a few tax information exchange agreements to get on an OECD white list. Our dear Channel Islands stock exchange probaly wouldn’t have survived if it wasn’t for the listing fees from the securities listings from these vehicles.
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Just a thought or two crossed my mind, silly as it may sound.
So Government people MP’S and deputies included are sworn to secrecy on various subjects. I suppose so that the riff Raff like me can’t get to the bottom of various happenings-.
So if one should divulge these items to the general public (undoubtedly to get votes)Are they doing the right thing or are they traitor to the vows they have taken, If the answer is yes the have traitored (don’t know if that’s a word) anyway if they have turned traitor then they should be dismissed.
Just thoughts crossing my silly old head.
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If the statement “a tax haven is a state or country which fixes its tax rates to suit non-citizens” is true then all countries are tax havens.
Let me elaborate. Nissan, a Japanese company partly owned by Renault, builds cars in Sunderland. These cars are exported to European and other markets. And makes a profit which is funelled back to Japan and Renault as a major shoreholder. Also remember Renault is partly owned by the French government.
There are three reasons why Nissan build cars in Sunderland. One is because there is a skilled workforce. Two, logistically its handy and three the UK government and the EU give Nissan thundering great sweetners to be there. Or in other words cash usually in the form of EU grants – which is effectively rebated tax.
Sound familiar? Yep its pretty well what we do here just in financial services.
Therefore the UK, EU are tax havens by allowing a non domicile company to gain advantage by doing business in Sunderland.
Pot, kettle and black spring to mind.
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Rob Roy
What I don’t understand is the industry professionals that say the very same thing.
“Who, me? I couldn’t possibly take any responsibilty over something I don’t understand! So I conclude that it doesn’t happen and you’re a Maoist for saying so!”
Here’s some vaguely good news for Guernsey, not so much for Jersey…
Look who isn’t top…
http://www.financialsecrecyindex.com
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write 100 times
“What I don’t understand is why there are industry professionals saying that very same thing.”
The cat did it, the bad grammar, not the recession, although what it gets up to at night is anyone’s guess.
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Write 100 times– ho ho ho!
why not not tell them all that they are personae non Grata.
Remember the fishing off Newfoundland; the cottage knitting industry. the Pirates.
All because they tried even then to grind us into the the dirt and make us bow to their will.
Well we didn’t then, there were men in our States then, now we have a load of (put your own words here)
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This idea of including new taxes on us is ridiculous, we do NOT answer to Labour, and I think Darling needs to get that in his head. He only want more money to go towards the UK’s huge deficit.
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