Monty’s Baguette

A Jersey Deputy is branding the island a 'tax haven', which is "depriving the French Treasury of millions of Euros". Montfort Tadier made his comments to French newspaper Le Parisien. He said Jersey is full of "Sham Trusts", which "solely exist to allow people who don't live in Jersey to escape paying taxes in their own country". "The majority of other countries consider us a tax haven", he said. (CTV News)
 
I think Monty is mistaken when he says, in a CTV interview, that one article is not going to have damaging consequences, and (as an example is given), put a bank off from coming to make offices in Jersey.
 
I don't think it will have quite the effect that Gerald Ratner's sandwich joke will have, but that is a joke which illustrates very clearly how a few badly chosen phrases can cause a tsunami that sweeps everything in its path.
 
As is well know, in 1991, he was making a speech to 6,000 directors, when he made two jokes during the course of a 30 minute speech.
 
"We do cut-glass sherry decanters complete with six glasses on a silver-plated tray your butler can serve you drinks on, all for £4.95. People say how can you sell this for such a low price? I say because it is total crap."
 
"We even sell a pair of gold earrings for under £1, which is cheaper than a prawn sandwich from Marks & Spencer. But I have to say that the sandwich will probably last longer than the earrings."
 
Ratner's world fell apart, and share prices tumbled. He had in fact been making the same joke for years before. But the media got hold of this, and were persuing their own agenda against "fat cat" directors. The Daily Mirror made it a front headline cover, and not to be outdone, the Sun followed suit.
 
Within a matter of days, those few sentences had wiped an estimated £500m off the company's value and turned the profits into a £122m loss, and cost Ratner his job.
 
While not as spectacular, other businessmen have made off the cuff remarks which have damaged their own companies. Example can be found with Woolworths' Gerald Corbett, EMI's Alain Levy, and Barclays chief executive Matt Barrett.
 
So to say that one article is not going to cause considerable damage is very naïve. I certainly hope that it will not, but there is no doubt that it could do so. That kind of outcome has occurred in the past.
 
Montfort himself notes that the French article paraphrases what he says. He says he spoke of "tax avoidance", but in the article, the phrases is "tax evasion", which is illegal.

Let's be clear. The impression the interview in the French paper gives by using the phrase "tax evasion" is that Jersey is complicit in illegal actions which break French tax laws. That's not to say that aggressive tax avoidance doesn't happen, but that is a problem with exploiting loopholes in French tax laws, it is not Jersey saying put money here and you can evade your tax laws. It should be noted that the political scandal (with Jerome Cahuzac).in France is over tax evasion, not tax avoidance; one carries an automatic criminal penalty because it is tax fraud, one does not.
 
The paper obviously is trying to spice up the article, but that makes it very misleading, and potentially damaging. Montfort surely knows the difference, and it is an important difference. Perhaps he could put the record straight, with a letter to the newspaper in question. As it stands, it implies that Jersey is open to business as a locale for individuals wishing to commit tax fraud, which is certainly not the case, and should be corrected as soon as possible.
 
We do not want, after all, for a Tadier Baguette to follow in the same path as Ratner's sandwich.
 
One of the problems with statements like "depriving the French Treasury of millions of Euros", of course, is that they are inherently unprovable. Deputy Tadier could have said hundreds of millions of Euros, and the result would be the same. What we do not get is a calculation which works out exactly the figure involved; instead, we seem to have a figure plucked out of thin air.
 
Now it might be argued that it is impossible to get at the real figure because of the lack of transparency. That's a perfectly viable argument. But if you make that argument, you cannot then come up with a figure, because there can be no basis for accurately calculating that figure. On the other hand, if there are details, a calculation which gives us these millions of euros, let us see it.
 
It might be thought, and my detractors will certainly think, that I am being rather picky here. But part of the problem I find with politicians, and it is certainly not just from those on the left, is the fuzzy lack of detail, which often gets swept away with the rhetoric.
 
Deputy Tadier does has one ace up his sleeve. He cites in the interview with himself and Philip Ozouf on CTV a few cases of aggressive tax avoidance. So that can happen over here, as I think we have all realised, although it is really a case for the UK tax authorities to put their own house in order, as it exploits loopholes in UK tax law, not Jersey law.
 
But can we extrapolate from a few cases to a whole, and end up with millions of euros? I think not, because that involves too many assumptions to be made upon the way.
 
Let me give an analogy. The initial calculations on the witch craze and people put to death in the 16th and 17th century came from a relatively small number of cases. Multiplying this across towns and populations, a figure of around 9 million was reached. But that assumed an even spread of cases, and more detailed and painstaking historical research has revealed that not to be the case. As more places are studied in depth, they are removed from the initial multiplication, and the number in Europe has dropped to around 50,000 people put to death because of witchcraft. That is still a shocking figure, about half the present population of Jersey, but nowhere near as high.
 
That indicates the kind of problem faced with any calculations based on a few cases which have come out into the open.
 
So how can we get a handle on the quantity of data needed to make some kind of judgement? In late 2013,. HM Revenue & Customs (HMRC) were handed a list of 4,388 people based in Britain who hold or have held HSBC Jersey bank accounts. This leaked out, and a few cases of aggressive tax avoidance were published in the UK National press. But there has been silence since. Perhaps the UK was biding its time for the recent agreement whereby they will automatically get that information, rather than making individual requests under TIEAs.
 
For the moment, however, there has been a deafening silence on that story. Is it just the handful of people outed by the National Papers in 2012, or is it more?  And if more, why haven't the UK papers, who have already had leaks relating to this material made any more about it. What one cannot legitimately do is to say that most of those people were avoiding tax; if anything, five months silence suggests that most of them were not.
 
I admire Monty's zeal in speaking out, but I wish he had thought a bit more before doing so. As a result, he has given misleading impression to the readers of the newspaper, partly because the paper paraphrased him - according to his own admission on CTV (and in so doing altered a crucial meaning), and he has given figures for which I have yet to see any detailed means of verifying. Both combined could well be very damaging to Jersey, and convey a very different impression.
 
What can be said on a constructive note? I'd say these things
 
1)      Jersey does not permit tax evasion – the flouting of tax laws that if discovered would put the perpetrator in prison.

2)      The introduction and signing of Foreign Account Tax Compliance Act (Fatca) agreements by Jersey with the UK and the USA are an improvement of TIEAs and will help combat tax evasion.

3)      It is impossible to quantify the degree to which aggressive tax avoidance schemes remove money from foreign treasuries. One of the contributing factors (as highlighted by Private Eye) must surely be how large accountancy firms advice on their own jurisdictions tax regulations, and then use that knowledge to exploit loopholes. Removing that conflict of interests within the UK, for example, would reduce the likelihood of that occurring.

4)      The Jersey government does not approve of aggressive tax avoidance schemes (e.g. Jimmy Carr), but as they are not illegal, they may from time to time appear in the Island. Nevertheless the local finance industry is strongly encouraged by Jersey's Chief Minister not to particulate in such schemes, as they may cause reputational damage out of all proportion to their scale.

5)      The emergence of cases of aggressive tax avoidance (which are none the less legal) suggest that countries such as the UK and France need to tighten their tax laws, or schemes will appear not just in Jersey, but in other jurisdictions such as Singapore, the Cayman Islands etc., exploiting loopholes in UK and French tax laws The UK, for example is bringing in some kind of General Anti-Avoidance Rule (GAAR) to target artificial and abusive tax avoidance schemes. Jersey welcomes such provisions.