An International Back Door?

I watched David Starkey's programme on TV on Saturday about the end of Elizabeth I's reign, when the Court, and special monopolies granted by the Court became corrupt, in what he said we knew very well from our own time by the word "sleaze". It was not that the monopolies were necessarily illegal, as they were granted by the Queen's Court, but the manner in which it was done that seemed to the Parliament of the day to be unethical.

It came to mind when I was reading "Private Eye" - the "In the City" section, which manages to feature Jersey once more in an article that makes some Jersey finance companies look "sleazy".

"We do pay all our taxes in Britain. I am a UK taxpayer, My wife is not a tax exile. My family do not live in the UK. It is somewhat different". So declared an increasingly irritated Sir Philip Green last week as he was quizzed on BBC Radio 4's Today programme about his suitability to advise the government on how to cut waste. The Topshop billionaire was keen to stress just how much tax he and his companies pay, if less keen to talk about how much was paid by his Monaco-based wife Lady Tina. Green pays UK tax on the £1 m-plus salary he gets for running the Arcadia Bhs empire while commuting every week from Monaco - an empire legally controlled by "Lady Christina Green and her immediate family"

Private Eye notes that by keeping Lady Green out of the U.K., and non-resident there, she is liable to the U.K. tax in the same way as her husband is, and this is perfectly legal:

Although there have been no dividends since the £1.2bn payment received in 2005, those offshore structures are a gift that keeps on giving. Last year, when Bhs was merged with the Arcadia group, the £201 million acquisition price tag was paid in loan notes to offshore companies that now receive an enviable 8 percent annually for the next 10 years. These contortions are all perfectly legal because they took place after Tina Green left the UK with her husband and then stayed away for five years to establish non-resident status.

While they are husband and wife, because they are taxed separately, and she is non-resident, this means a considerable sum of money is received by her (and presumably available and spendable by both of them) without having to pay any UK tax.

Totalling more than £422m, almost all those dividends.. went tax-free to his family accounts via companies in Jersey (Green's Global Textiles Investments is based there) and the British Virgin Islands. Had those dividends been paid to a UK-resident individual, the potential tax liability could have been up to £120m.

The takeover of BHS, which involved loan notes routed via offshore companies, also managed to save the Green's tax bill. Because of her status, and being the only director of the Jersey company, there is no tax liability, even though the control of the company is described as being both her "and her immediate family" - which presumably includes her husband.

The Arcadia takeover was executed through another Jersey-based vehicle, Taveta Investments, controlled by... yes, "CS Green and her immediate family". Tina Green is the only director of the Jersey-registered Taveta Ltd, which controlled the bid vehicle. In 2005 Taveta Investments paid a £1.3bn dividend, of which 92 percent - or just under £ 1.2bn - went to the Green family company in Jersey. Had this been paid to a UK-resident individual, the tax liability would have been up to £360m

When matters like these reach the attention of the public, however much good will is done by regulatory inspections of Jersey company affairs, and signing up to Tax Information Exchange Agreements, being on the OECD white list, the perception is that Jersey is a place which facilitates legal tax avoidance.

The perception that comes to light is that this may involve, as in the case of the Greens, a use of offshore company vehicles that while strictly legal and above board, may be of questionable morality, and taints the reputation of Jersey - at least as far as the British public are concerned. They see clever people exploiting a legitimate loophole which is simply unavailable for ordinary people and which to them, as with the writer in Private Eye, is clearly not fair.

There is a gap between what is seen as fair and what is counted legal, and if Jersey is to maintain its deservedly international reputation, it must show that it is taking steps to lessen that gap.

What is a Well-Regarded Journalist?

A Whitehall Commonwealth Development Corporation holding a wine and canapés evening sparked a spectacular public relations disaster. Prodded by Private Eye with a mission to attend the event, e-mails were fobbed, and the Eye was told "you were not invited and you won't therefore be admitted"; the reason for this was given that "only well-regarded journalists" from "proper publications" would be admitted

It's interesting to see that Private Eye finds itself in the same deep gray "no man's land" which the bloggers in Jersey - who can be roughly grouped under the name citizen media - have also found themselves, when trying to attend critical meetings such as those held by scrutiny committees

The bloggers therefore find themselves in good company. From this, it seems very plain that part of the antipathy held by official groups is less to do with "accreditation" or being "well regarded" and more to do with the fact that, like Private eye, they cannot be counted upon to be submissive and servile.

In the event, Private Eye responded by holding its own review outside the event handing out a summary of the CDC's worst excesses to arriving guests. After the Eye team were sworn at by the Communications Officer, the guest speaker Bob Geldof agreed that the press censorship was "fokking outrageous" and after a complete climb-down Private Eye reporters were admitted.

Private Eye has never been part of the press lobby and demonstrates, as it bears repeating -- note to Rob Shipley -- that there is a place for an evidence-based but more vocal media outlet of local news. It is a lesson that should give heart to citizen media everywhere.

Links:
Private Eye, p5, No 1265

An Eye on Terry Le Sueur

"Private Eye" has another go at Terry Le Sueur in this week's "In the City". It notes how depositors in Jersey banks are told they can rely on the Island's regulators and politicians for "competence and integrity".

Then they go in for the kill - looking at the "fiasco surrounding the £106 million" incinerator whose cost may rise by up to £10 million "because the euro-bill was not 'hedged' against a fall in sterling". As they rightly point out, this is not exactly a glowing example of "competence".

But what of integrity? They comment that "it seems that as much as £4 million may have been spent without the necessary approval." They note that the current Chief Minister Terry Le Sueur is being called before a scrutiny committee to explain this - as he was Treasury minister when the contract was signed. About all they haven't noted is that it was signed with great haste - some call it indecent haste - in the dying days of the last Council of Ministers, barely weeks before a new States was elected - which might account for the lack of oversight.

And integrity gets a further battering from officials whom they say "claim they knew nothing about 'hedging' so sought advice from Royal London Asset Management." It seems that Private Eye has contacted RLAM, and reports that "RLAM says that it was never asked to advise on currency risk." It look as if the officials are being "economical with the truth".

It is often said that Senator Syvret's blog and invective does the Island's reputation no good. In fact, it is probably largely ignored, apart from any focus on Haut de la Garenne. It seems that far more damage is being done by the actions of the States Treasury and the Treasury Minister - because this shows how the Island's administration can fail in competence and intregity - and Private Eye rightly asks if this occurs here, why not elsewhere, with the regulation of financial services. It should be noted that they do not actually cite any examples of that kind of failure - yet!

It is to be hoped that Senator Ben Shenton leaves no stone unturned in exposing the misjudgments and mismanagement that caused this fiasco, so that it may not happen again - including the hasty way in which the contract was signed.

The danger is that only one or two individuals will be singled out as scapegoats, whereas the truth is probably more like that revealed in J.B. Priestley's "An Inspector Calls", where there is a chain of events leading to a disaster, and each person is a link in the chain who must accept their responsibility for the mistakes they made, including the Treasury Minister of the day.

Eye on TNJ

Some interesting remarks recently on his blog (http://taxjustice.blogspot.com/).

"It is quite astonishing that the word 'corruption' occurs only once in this 13,000-word survey of tax havens. Tax haven activities promote cross-border crime and corruption. Corruption has a demand side (money-launderers, tax evaders, kleptocrats, fraudsters, and their like); and a supply side: those who provide secrecy and sell the services that exploit it. The general strategy for fighting drug abuse by tackling both users and suppliers is equally applicable to the global struggle against corruption. While The Economist survey stops short of actively encouraging criminal activity, it does so indirectly, by actively advocating tax haven activities. In doing this, The Economist is indirectly encouraging cross-border crime, and corruption on a global scale."

Private Eye did a good expose of how Tesco used a tax vehicle to reduce tax in the U.K. until Gordon Brown got wise to that (in the course of a year) and then closed the loophole off. There were facts, figures, dates, companies involved etc.

It would be nice to see that kind of attention to detail in the TNJ's blog, rather than rhetorical flourishes. Case studies please?

Recent Attac comments on Jersey on their website

There is a lot of good stuff on the employment law, the minimum wage, and the high cost of housing. However, I would make the following points:

Corrupt governments, companies and individuals in rich and poor countries stealing money from their own people and investing it for their own gain in tax havens like Jersey.

Details, details please. If there is information, it should be stated - in the same way that Private Eye does not hesitate to do, otherwise this is just so much mud-slinging. Private Eye always gets facts, which is why it is so widely read. Otherwise there is just rhetoric, which may or may not be true.

There are few outlets for public opinion in Jersey, but we see ourselves as an important voice for democracy and the rights of global citizens.

Indeed! I am surprised "false consciousness" or the idea that the masses are led by the nose has not surfaced. If people were so concerned about the States, they would readily attend any organisation, and it would generate its own newsletter, which would get wide distribution outside official circles; after all, that is what happened in the Occupation under much more extreme circumstances (and that was not a pseudo-dictatorship, it was the real thing when possession of news sent you to concentration camps!)! The early days of the JADA shows that there is certainly some concern there, but the evaporation of support at the Polls shows that just because an organisation claims to speak for the people, it doesn't mean the people want that voice!

The States of Jersey's political assembly consists of 53 independently elected members, of which 12 are Senators with an island wide mandate, 29 Deputies who are elected on a parochial mandate and 12 Constables who take their place in the assembly as a right of being elected leader of their respective parish. The assembly also has three ex-officio members appointed by the Queen of England who are the Attorney General, Solicitor General and the Dean of Jersey, who is the head of the Church of England in Jersey. They have the right to address the assembly, but not the right to vote. The assembly is lead by the Bailiff and Deputy
Bailiff, who are unelected to the assembly but can vote in favour of the status quo. The Queen also appoints a Lieutenant Governor to oversee her interests in the Island. In our opinion, the States of Jersey Assembly is nothing more than a pseudo-dictatorship, especially as any criticism is not tolerated and rubbished by the local partisan news media.

The jump from "elected" to "pseudo-dictatorship" takes my breath away. At least Chesterton knew how to put together a sensible argument about the deficiencies of "representation" in democracy, but then his excellent arguments apply equally to most so-called democratic governments. I would say the UK had even more of a pseudo-dictatorship than Jersey. As for the EU, with the EU Commissioners not directly elected in any fashion like MEPs, this is even less of a democracy.

Jersey had a gross national income for 2004 of just over £3 billion (€4.47 billion) giving Jersey a gross national income of £29,000 (€43,900) per capita, which is the second highest in the world after Luxembourg.

Interesting, especially as Luxembourg always features in lists of offshore centres too! And at the heart of the EU as well. That could have been mentioned!

Jersey's fiscal policy is going through a period of change. Over the next four years,it will maintain a 20% personal income tax for individuals, and combined employer/employee social security contributions at 12.5%, reduce corporate income tax to 0% and implement a goods and services tax at 3% with no exemptions. Attac&TJN believe that Jersey's fiscal policy impacts unfairly on
citizens from the lower socio-economic classes and is unsustainable in the long term. We have recommended increasing social security contributions to meet the demands of social protection and repealing the goods and services tax and implementing a textbook progressive income tax system.

1. The impact of 20 means 20 will in fact work as a progressive system.

2. Increasing social security contribitions also impacts on the lowest people, and if it becomes two high, it becomes a tax twice, as the monies deducted from income for social security are also subject to taxation, which is surely an iniquitous sitation, and one which would have to be addressed. To use social security as a form of taxation, without limits, is simply to introduce a stealth tax.

3. Lastly, any critique of GST at 3% impacting on the lower income groups is also logically a critique of the entire system of VAT across the EU, because that is precisely what VAT does. Are Attac groups in the UK and France taking the same united stance? It would be nice to know!

Utilising the internationally recognised benchmark of assessing relative poverty at 60% of median income, Jersey currently has 46% of single pensioners, 64% of single mothers and their children living in relative poverty. In addition, 25% of all Jersey homes need support from the States to make ends meet.

I'd like to know where they get their median income figures from! My persistent gripe with the States Statistic unit is that they tend to only give arithmetic means, not medians.

As we have seen from the above narrative Jersey is being run by a pseudodictatorship who are totally committed to formulating and implementing social and economic policies that benefit the rich and cripple the poor from a local to global perspective. Jersey is following the neo-liberal models of the United States of America and the United Kingdom in reducing direct taxation on individuals and companies, whilst raising indirect taxation in the form of a goods and services tax, which will have a detrimental effect on the lower socio-economic classes. Several years ago, Jacques Harel of Attac Saint Malo warned us that the first casualties of tax havens were the indigenous people and especially the poor, and his advice has certainly proved correct.

Maybe I missed something important in this argument. I believe Jersey is looking at GST of 3%, the UK has 17.5%, and France has 19.6 %. Has Jacques Harel something to comment on that? Why is France missing from this list when its indirect taxation is greater than that of the UK? And on the subject of cripplying policies, has France does anything about the corruption endemic in the Common Agricultural Policy, which sucks EU funds into a black hole which the auditors refuse to sign off, so bad is the accounting.

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http://www.ptclub.com/eurobanking.html

Luxembourg

The RTL media empire which developed out of Radio Luxembourg has made entertainment the second largest industry in this rather staid but extremely beautiful principality. Its other claim to fame is that statistically it is the richest country in the world. Although they have taxes, nobody seems to work too hard on collecting them. The largest industry, of course, is finance. Luxembourg's history as a tax haven goes back to its 1929 holding company legislation, but as a founder member of the European Union it is under great pressure on bank secrecy issues and is having to readjust its role to compete with the likes of London and Frankfurt rather than Nassau and Road Town. Nonetheless, for non-EU residents Luxembourg gets our highest recommendation. Everything is super efficient, less snobbish than Switzerland, and personal accounts with internet banking can be opened by ptCLUB through the mail for just $500. In this country banking secrecy is part of the national culture more than anywhere else we know. As a small, rich country it has avoided the socialist problems of Switzerland where some politicians want to abolish bank secrecy. And while the Swiss apply a 35% withholding tax, investments in Luxembourg are tax free for non residents. And where else but in our beloved Luxembourg can you find the biggest banks disguising their plastic cards as guides to global time zones, or providing paper shredders for client use in branches? We recommend you to order a Luxembourg account today by contacting ptCLUB.