Monday, 24 September 2012

Brighton Bailhache

The Liberal Democrats are stepping up a clamp down on tax avoidance, with the Channel Islands in their sights. At their party conference in Brighton today, Business Secretary Vince Cable will be announcing a crackdown on so-called tax havens.  He wants tougher measures on tax avoidance to become central government policy. The Lib Dems have dubbed the Channel Islands "Sunny places for shady people".  The UK taxman is increasingly looking to reveal the names of British people who stash their cash in offshore banks. This follows comedian Jimmy Carr controversially yet legally using a Jersey scheme to reduce his tax bill - the Lib Dems want to close the loophole. Jersey's Assistant Chief Minister, Senator Bailhache is at their conference, hoping to convince the UK the Channel Islands are not Tax Havens, but well regulated financial centres. (1)

The Liberal England blog takes a calculated swipe at Sir Philip:

Jersey assistant chief minister Senator Sir Philip Bailhache reveals that he is attending the Liberal Democrat Conference in Brighton. As well as engaging in "casual discussions" he wants to meet Tom McNally, the minister responsible for the Crown dependencies, and John Hemming, the Liberal Democrat MP who recently raised his concerns about the governance of Jersey in the House of Commons. In this interview he accuses John of abusing his position as an MP, so that should be an interesting meeting. Meanwhile, if you meet Sir Philip you may want to ask him how Jersey's status as a tax haven can be squared with the Liberal Democrats' belief in fair taxation. (2)

It will be interesting to see if different reports come back. Memory was thought to be like a tape recording, which could under certain circumstances, such as hypnosis, be replayed exactly as it was originally. Now we know that memory is much more malleable, and the computer model for memory certainly doesn't apply to human memory. Memories are constructions which fit our own perspectives on the world, and they may differ in subtle ways, especially when describing other peoples interactions with us, and how we perceive their motivation and manner. It's not necessarily that one is "right" except perhaps in what was said, but the tone of a conversation, and how it appears may differ from one narrator to another.

Senator Bailhache commented: "This will be the first party conference that I have attended and I look forward to using the opportunity to engage with prominent UK politicians on issues that affect both our governments. The UK is our most significant economic partner and it is therefore important that Jersey maintains an open dialogue with the coalition parties."(3)

That is, of course, suitable vague. Although Senator Bailhache is going to talk to John Hemming, so that will be interesting. But "open dialogue" really doesn't mean much, not like "and show that Jersey is a well regulated financial centre". There's a lot of very fuzzy communication out there, and the press release on the Jersey government website does not really go into any specifics. How much "engage with" means is unknown - chit chat over canapes and drinks, or a more formal conversation?

It would be a shame if he didn't get the chance to meet Vince Cable. Here is Mr Cable's take on tax havens:

Furthermore, we want the costs of our current crisis to be fairly shared. 'We are all in it together' is a good slogan. Forget the Tory messengers;  let's apply the message. Cracking down hard, not just on criminal tax evasion but on abusive tax avoidance. Working with our allies to close down tax havens. No one keeps their cash in tax havens for the quality of investment advice; these are sunny places for shady people (4)

That is, of course, a conference speech, so it is playing to the crowd. What is interesting is the way in which it is reported. In this case, it's not memory that changes things, but editors taking conscious decisions to redact the speech in different ways. Metro news reports that:

Tax havens such as Monaco and the Cayman Islands are simply 'sunny places for shady people' he will say in his speech at the Liberal Democrat party conference. (5)

Monaco is mentioned in the original speech, but only in the context of a "mansion tax"; the Cayman Islands do not feature at all. In fact, his section of the speech dealing with tax havens is remarkably devoid of specific localities, which may be why the editor of Metro decided to fill in the blanks. He was partly correct - Somerset Maugham once famously described Monaco as " "a sunny place for shady people", although that was not in the context of tax havens, although it is certainly that quote which Vince Cable is using here. But he is not reporting what Vince Cable said; he is adding specifics that are not in the original.

Interestingly, when down to specifics, Mr Cable is not so critical of the Channel Islands as might be thought:

He explained: "I'm not going out of my way to pick on the Channel Islands or the Isle of Man and actually I've met people from the Channel Islands, and I've been to the Isle of Man, I've talked to them about their particular situation, they weren't the countries that I was particularly singling out - there are others farther afield that are much worse. But every country in this business that is trying to undercut countries like ours by attracting individuals and companies through tax avoidance loopholes - we've got to have careful scrutiny of what they're doing."(6)

That's the problem. Not the general business of Jersey, which may well be, as Sir Philip says, "a well regulated financial centre", but the rogue elements like the K2 scheme invested in by Jimmy Carr. The question is - how widespread are those rogue elements? When Panorama came over in 2009 on an admittedly determined attack on Jersey as a tax haven, they didn't look at the glowing IMF reports, but attempted to bank millions of pounds instead:

A journalist from the BBC's current affairs programme, Panorama, went into Lloyds TSB Offshore in St Helier posing as a customer wanting to deposit millions of pounds. It is believed that the programme, to be screened tonight at 8.30 pm on BBC One, will show that their reporter, who said he did not want to pay UK tax, was told to invest the cash in such a way as to dodge the UK taxman. (8)

That's the main problem - any glowing reports are wiped out by a single burst of bad publicity. It's about time we put our house in order more proactively so that we can be able to hold our heads up as well-regulated. I don't wholly agree with those who say that Jersey's finance industry is engaged almost 100% (or so they imply) in tax avoidance, but neither do I believe the system is as well regulated as it should be. I suspect there are still some rogue elements, skeletons waiting to come out of the closet. We need a culture, an ethos, which makes any schemes like K2 seem unwelcome here.



Póló said...

It is very hard to imagine how the Jersey financial sector could be well regulated when (i) Jersey's political and administrative structure is in a mess, and (ii) it may suit the UK to have a homegrown "tax haven" on its doorstep. Note the Cable quote refers to "others undercutting us" or somesuch phrase.

Anonymous said...

That's the problem. Not the general business of Jersey, which may well be, as Sir Philip says, "a well regulated financial centre", but the rogue elements like the K2 scheme invested in by Jimmy Carr.

It's not the problem at all.

The problem in Jersey is that a great deal of business is deliberately concealed from legitimate authorities by various means - trusts, special purpose vehicles, private banking, you name it. It is, quite literally, about presenting a false account.

K2 was self-evidently immoral (at its heart was a contradiction: a loan which never has to be repaid is de facto not a loan and it is dishonest to describe it as such). But the fact that Jersey law explicitly allows sham trusts is ethically no different - except that Paddington would describe it as part of the "well-regulated centre".

That the activity of Jersey's finance industry generally does not serve the greater good of the greatest number, but rather serves the interests only of the seriously wealthy, makes matters considerably worse.