I have had very large numbers of comments from secrecy jurisdictions, and the Isle of Man in particular, over the last few weeks.
So on Friday I wrote a challenge, saying:
But to me there is just one question that really needs answering by these places, and it is this. If they are so adamant that they are committed to fully transparent and accountable financial services why do they steadfastly and persistently refuse to fully exchange information under the terms of the EU Savings Tax Directive, an option that is completely and openly available to them, but which they refuse to embrace?
There is only one possible explanation for their action, and that is the desire of Jersey, Guernsey and the Isle of Man to protect tax evaders using accounts in their domains from discovery by their domestic tax authorities. No other explanation is possible.
Now we know that the EU wishes to extend the Savings Tax Directive to all companies and all trusts, a matter on which I will write more next week after I have made a presentation to the EU Parliament on the issue. This measure is particularly targeted on offshore jurisdictions including Jersey, Guernsey and the Isle of Man.
These three jurisdictions (and others like them) have a choice if we are to believe that they are as transparent, accountable and clean as they claim. They can fully embrace the existing EU STD by committing themselves to full and open tax information exchange and we will call that a step in the right direction. They can then welcome the new STD with open arms, with its extended commitments to full information exchange and say that it will help them eliminate all tax evasion, and we will praise them.
But if they do neither we will know exactly where they stand. You can either be on the side of tax evaders on this issue, or on the side of upholding the rule of law in your neighbouring countries. There is no ambiguity. It is one or the other. Right now Jersey Guernsey and the Isle of Man are firmly positioned on the side of the evaders.
They have a choice. They can change their minds. But will they, and very soon? That is the question to which we need an answer. That is the question that this Commission must pursue. Without a positive answer no undertaking given by any of these jurisdictions has any meaning. I can be as blunt as that.
No one, not one person, has chosen to comment.
Why is that?
Is this the question they dare not answer because it shows what they are really about?
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I will try and give an answer but as I don’t work for the Manx Gov, I can’t really speak form them, but I can give the obviuos reasons:
The current EUSD is pretty pointless, there are so many things it doesn’t pick up on, and there are plenty of holes.
The current figures disclosure is not at all user friendly, and thus adds to the expense of running the business. Now nearly all companies wouldn’t mind the added expenses except that the current EUSD provides little
Then we come on to those countries than did sign on like Cayman. Signing on has proven to make no difference in the eyes of those hellbend to bankrupt and ruin the smaller nations. Those who did sign up are still getting the same old bad press from you and others, like those who didn’t so what was the benefit of all this wasted regulation and money? There is no reason to sign up to it.
PS I like the way you use the words ‘Exchange Information”for the EUSD, is that like the “money exchange” that happens when you are mugged?
Creg
So defeating tax evasion is for you just a bsuiness cost, and to be dismissed if inconvenient? Maybe that says it all.
But if you have problems with the EU STD as it stands (and you’re not alone) answer this one – do you support its expansion, as proposed by the Commission on 13 November to a much broader range of income and all offshore companies and trusts? If not, why not? After all, this is a simple question – are you for or against tax evasion – something which the IoM actively permits by refusing to participate in automatic information exchange at present.
Richard
Creg
I would like to answer your postscript
A person who has been mugged has been abused contrary to the law.
A person who exchanges information complies with the law.
Which side are you on? Surely not the lawbreakers?
Richard
You’ve asked if Creg supports the broadening of EUSD in the hope of an answer so I will, again, ask you:
Do you favour responsible middle class finance under which the middle class save for their future at savings rates that protect their capital from inflation?
If so, and I assume you do as you regularly criticise voodoo economics, then please explain how that can be achieved with the EU using a false measure of inflation (CPI) to underestimate it and so set base rates low (causing banks to pay interest below inflation).
I have posted this question three times now and you have not answered yet. As far as I understand your opinions you advocate companies and families either gambling with their capital on the stock market or watching it wither as governments falsely portray losses (interest lower than inflation) as income.
If the EU were more honest about inflation you would soon see more Brits depositing savings in onshore accounts.
Richard
I do support the extension of the EUSD.
I did not say “defeating tax evasion is for you just a bsuiness cost” please show me where I did?
I also said that the current EUSD is an added cost as it has no purpose as even you know it doesn’t go far enough and is pretty pointless, so what’s the point. It has not stopped you from continually critisising both those that agreed to the EUSD and those that didn’t has it? (in it’s current form is does not stop tax evaision)
The analagy is for your use of the word “exchange”, when all the information is given one way. You’re so keen on branding why not call it what it is “information demanding” and in the case of paying of certain individuals to provide information against the laws of those countries they work in “Information stealing” or just plain “Spying”
Which raises the question – what have “you” got to hide?
If corporations or HNWIs, aka super rich oligarchs, are conducting their financial affairs in a correct manner why the need to hide from the onshore taxman?
Could it be greed and the desire to benefit from onshore infrastructure without paying for it? Of course it is.
Could these opaque tax dodging structures designed to protect the rich from paying their dues also be used by the mafia and organised crime to loot Third World countries?
Over to you
OP
OFC are used for many legal reasons including estate planing, ensuring your family is looked after when you die especially in forced heirship states, to opther methods like legally reducing your tax bill. Our clients do not hide from the offshore tax men, we are a QI and report under EUSD.
As for organised crime, Cayman and the other top OFCs all have more rigorous anti-money laundering regulatory regimes than the U.S. or any member of the E.U. Research into offshore financial centers has consistently shown that OFCs have better legal tools and tougher standards than do most “onshore” jurisdictions.
So the answer to your question is no, not anymore in respectable OFC, it’s more likely in your country. Stop believing fictional novels and government finger pointing, and take a closer look at your own back yard.
DOn’t believe me try and open a Cayman bank account, and see the list of information needed, then compare it at your local branch or in Delaware.
Also I will add that Delaware has around 600,000 registered companies for 865k inhabitants/
Did you hear Mr Obama dicussing that his vice predient was the senior senator of Delaware as he slated Cayman about the number of their registered companies, nope.
Infact according to a FATF 2006 report they found you could open register an LLC there with just a name and address. They even advertise as “The Delaware LLC provides the anonymity that most international jurisdictions do not offer”.
Hell even Brazil is putting Delaware on it’s Tax Haven black list. It all stinks of hypocracy.
Maybe it is time for the US and UK to stand up and admit to being some of the biggest Tax havens and clean up there acts before starting on everyone else. Otherwise it just looks like they are trying to shut down any competition.
Creg
For once we are on common ground.
I named the USA and Delaware in particular as the elephant in the room during the course of the discussion I participated in at the EU Parliament on Tuesday. This problem has to be tackled.
Richard
The Isle of Man has signed or is negotiating agreements with the following countries with regard to the exchange of information: Australia, Belgium, Canada, Estonia, France, Germany, Italy, Netherlands, New Zealand , Spain, United Kingdom, USA, Netherlands, Denmark, Finland, iceland, Norway, Sweden, Faroe Islands, Greenland, Ireland.
Bearing in mind, the Island gets virtually nothing in return and these agreements are very much one sided, the actions of the Manx government completely contradict your comment “Right now Jersey Guernsey and the Isle of Man are firmly positioned on the side of the evaders.” We are also compliant with the EUSD despite what you say.
If you think we in the CSP/TSP industry on the Isle of Man are not well regulated, you try applying for a Financial Services licence. Once you have been through the months of police and bank checks and had every aspect of your business scrutinised in the finest detail, you may wish to change your opinion.
If I had to advise someone how to evade tax or launder the proceeds of crime, I would advise them to stay well clear of the Isle of Man. UK is far more attractive for this purpose!!!!
PJM
We all know TIEAs are a waste of time – without a smoking gun there is no chance of using them
And yes, you are minimally compliant with an ineffective EUSTD.
But you have not answered the question – and please now do so. If you are committed to transparency why is it that you do not require automatic information exchange under the EUSTD.
As all agreed in Brussels on Tuesday – those states that withhold do so solely to facilitate tax evasion. Why do you do that?
When you do that all else you say is meaningless
Richard
So if you agree that we are compliant with the law as it stands then what is the problem?
You can’t critisise the IOM for applying the law as it is presented. When the law changes in due course, the IOM govt will no doubt comply fully.
If people in Brussels are making statements that imply that we are facilitating tax evasion by applying THEIR laws then that is just hypocrisy.
Let me ask you a question…You are entitled to claim personal tax allowances to mitigate your tax liability. I assume you claim these? If so what is the difference between you legitimately applying the law to reduce your tax liability and me doing the same on behalf of my clients?
PJM
Your answers, like so many from those in tax havens, are evasive whilst your arguments are entirely illogical.
You had a choice when applying the EU STD. you could have opted for information exchange. As a transitional arrangement you could have chosen not to. You chose not to. You chose to help those evading tax. That can have been the only criteria that you used in making the choice that was made available, solely as a transitional arrangement, and solely to secure progress on the STD in 2003 in the face of intransigence from those who wished to promote corrupt, like Switzerland, Jersey and the Isle of Man.
As for your logic on my claiming a personal allowance, your argument is absurd. First of all I cannot avoid being granted a personal allowance: it is my legal entitlement to have it and there is no option to waive it. second, to claim that allowance is absolutely in compliance with the law. the government intends that I should benefit from it. tax avoidance is something entirely and completely different. it is getting around the law. since when was getting around the law moral? since when was it indicative of the state of compliance? And as an experienced tax practitioner I can assure you – every time you try to get round the law you take the risk of tax evasion. The dividing line between the two is grey – or the thickness of a prison wall as Dennis Healey put it. my ethic in claiming a personal allowance is justified in that I am fulfilling the intention of the law. your ethic is unjustified because you are seeking to undermine the law. can’t you tell the difference?
Richard
Voice dictated – apologies for the absence of some capital letters
You do have a choice in claiming personal allowances, anyone can pay additional tax if they choose.
I see nothing morally wrong with what the IOM govt have done with the EUSD, they have not broken any laws.
It is the same with tax avoidance (legal the last time I checked). It involves the legimate use of the tax laws to minimise tax liabilities. If the govt. have drafted the tax laws in such a way that there are loopholes, that’s their problem.
If the government are going to use stealth tactics to collect taxes then they should expect people to at least minimise their liability. Look at the recent VAT reduction followed by hikes in duty. Now companies such as haulage firms are worse off becase they can’t claim back duty whereas before they could reclaim VAT.
If the government presented a clear, simple and transparent tax system whereby the individual could see value for money, people wouldn’t be so keen to avoid tax. As it stands, it is overcomplex and only encourages avoidance.
PJM
You reveal how little you know about tax
There is no facility to pay voluntary tax
It is quite clear you have very little knowledge of this, or any related, issue
Richard
You’re right, I’m only an FCCA with 18 years experience, 10 of which working in offshore tax at Director level.
Of course you can pay additional tax, I know UK advisors are rarely creative and have no ability to think outside the box but come on, try a bit harder!!!
How much knowledge, gained from experience, do you have of the offshore industry, and I mean current, post 1998?
The comments you make are typically hysterical and sensationalist.
Are you seriously telling me that there is a money laundering problem in IOM, Jersey and Guernsey and not in the UK are you?
Why single out the Islands when it is clear the corruption just in the city of London far outweighs our entire economies. Please keep things in perspective.
PJM
Absolute rubbish! There is no voluntary payment mechanism
You bring the profession into disrepute by maming such claims
And I am not saying London is better than the IoM – but at least we have accounts published, on line, information exchange, full STD compliance, proper tax information exchange, EU Code of Conduct compliant and so on (domicile excepted – I know – and I am trying to change it)
But you have not tried to answer my questions
I suspect you cannot
So I am closing correspondence with you until you do
Tell me – why is the IoM helping tax evaders by not information exchanging? That was the question. You have not replied
Richard
And yes – I do have experience – including in the post 1998 world, seeking to break up offshore arrangements
And in my experience the abuse goes on
I gave you the answers, why have you not replied
Malcolm
I did http://www.taxresearch.org.uk/Blog/2008/11/28/the-critical-question-that-jersey-guernsey-and-the-isle-of-man-must-answer/#comment-522743
I dismissed your answers – they were not meaningful, and nor did you answer the question, unless saying you’ll continue to support tax evaders whilst you make money from doing so is the answer you were offering
Richard
Your problem is that you see everything as black or white. Your answer in 19 above says it all…..You dismiss answers out of hand without full understanding of the points raised.
I cannot tell why why the Isle of Man chose the option to deduct tax or report, I do not work for the government, however I have no problem with the fact that they comply with EU law as laid before them.
As a licenceholder I can assure you that we are heavily regulated, much more so than the UK.
Until you have been on the receiving end of a visit from the IOM FSC, I really don’t see how you can pass judgement.
The IOM will have dirty money passing through its financial systems, just as every jurisdiction in the world will.
The financial services industry over here does a great deal to discourage criminal activity, including tax evasion. No licenceholder here wants to be in the position of being “caught” facilitating Money Laundering. The consequences for us are too serious! The people who run the businesses over here are on the whole honest and hardworking and will in 99.9% of cases report any tax evasion they come across.
Speaking for our business, we always try to structure our clients affairs onshore in the UK as it really is a favourable tax system if used correctly.
There will be rogue individuals who will slip through regulation and will turn a blind eye to clients tax affairs however this is not a problem specific to the Island.
In summary, the Manx Government do not enourage Tax Evasion, they regulate heavily to stop such practice and lastly the Financial Services industry does a good job of running clean businesses. Just because they don’t sign up for one particular aspect of the Savings Directive that you highlight does not mean the whole Island is corrupt.
We are years ahead of the UK and the US in our regulation, why don’t you highlight that instead of the half-truths you throw around.
PJM
This debate has gone on long enough and the position is clear
You are happy to work in a system where evasion is permitted – massive amounts of evasion – as the UK tax amnesty showed – and that is evidence enough
I close this discussion now since it is apparent that you will not answer the accusation made and, respectfully, I think I have demonstrated competence, and have been subject to UK money laundering inspections, which I am sure are at least as rigorous as yours. In which case I think we can dismiss argument about the particular and leave it as a systemic issue – at which level there appears no one willing, as I said, to answer the charge made
Richard
Richard – I feel bound to rise to the challenge you set.
There is a very good reason why offshore centres do not want to disclose – if you are avoiding tax (note- avoiding, not evading) then disclosure may prompt the relevant Revenue Authorities to investigate and find out how you are doing it. Once they know how you are doing it, they can legislate to stop you. i.e. what they don’t know can’t hurt you, what they do know just might!
Yes, non-disclosure can assist evaders as well and the IoM (I don’t actually know about others) makes it an offence to assist anyone in the evasion of their proper liabilities. I think most of us “offshore operators” take the view that if you can’t do it legitamately you don’t do it at all. Apart from anything else, the penalties of being caught at it far outweigh any gain you might make i.e. evasion is bad business.
[…] As some will be aware, there has been considerable correspondence on this site recently from those from tax havens who have tried to justify the actions of these places. One of these series of correspondence (for they are lengthy) came to this conclusion: […]
[…] As some will be aware, there has been considerable correspondence on this site recently from those from tax havens who have tried to justify the actions of these places. One of these series of correspondence (for they are lengthy) came to this conclusion: […]