BREAKING NEWS - Britain writes to its tax havens
Update 2: Richard Murphy has now added his analysis here.
We have just received copies of letters to the British tax havens from No. 10, Downing Street (for non-British readers, that's the British Prime Minster's office.)
- (from the Jersey letter) "As international efforts on harmful tax practices start to refocus on the issue of tax avoidance, it will be vital to the interests of the Crown Dependencies that they can readily meet any new international standards which emerge." (our emphasis)
TJN comment: this is by far the bigger issue over and above tax evasion, because tax avoidance has been the veil behind which a vast industry has developed with tax havens as their focus. This is a strong signal to the tax havens that avoidance will no longer be treated as a legitimate activity. Prepare your Plan Bs.
- (from the Jersey letter) I welcome the progress which has already been made by the Crown Dependencies in meeting the OECD target of 12 TIEAs. This standard should be seen as an indicator of commitment to the principle of tax transparency. I think it is particularly important that the Crown Dependencies continue to set the pace in this process and put clear water between themselves and those jurisdictions which only just meet the international standard. If genuine progress in agreeing, implementing and abiding by these agreements does not continue to be made I will encourage the G20 to look at this issue again until all abide by the highest standards.
TJN comment: that last sentence is rather strong medicine, in diplomatic terms. We say to the tax havens: don't just sign agreements with minor jurisdictions like Greenland or the Faroe Islands, in order to fluff up the numbers. Start serious negotiations with serious major developing nations, and make it clear that you are commitment to implementing the agreements without putting up artificially high judicial barriers. TJN will continue to pursue the line that a real commmitment to tax transparency will entail signing up hook, line and sinker to a reformed version of the EU Savings Tax Directive. No witholding taxes, no secrecy exemptions for trusts, and so on.
- (From the BVI letter,) "Given the developments at G20 and, in particular, the identification of a tool box of sanctions which will be applied against those who do not meet the international standard, I urge you to achieve the standard of 12 TIEAs or equivalent before the UN General Assembly meeting in September. "
TJN comment: and that is just the starting point. We note that in the final paragraph, Brown reiterates the point about tax avoidance. Note, also, that the time reference point is the UN meeting, not the next G20. This is good - the United Nations is the body with the right global legitimacy to take this on - it is not a narrow club like the OECD or the G20. Read more here.
- (From the BVI letter.) I agreed with the other G20 leaders that international co-operation is necessary in a number of areas. One of these areas was on improved co-operation in the exchange of tax information, and ensuring that all jurisdictions meet internationally recognised standards on tax transparency.
TJN comment: this reinforces the case for TJN's position that this is a high, if not the highest, priority. The British Prime Minister confirms that here.
- (from the BVI letter.) It is particularly important that all Territories build on the current momentum and work towards meeting the international standard swiftly on the basis of agreements with the major nations represented in the G20, the EU and the OECD.
TJN comment: note that the British Premier is not choosing between the EU and the OECD model here in terms of international standards. We insist that the required standard is a full multilateral, automatic, all-encompassing exchange of information arrangement. See more here.
The letters also mention the Foot Review, which is supposed to be reporting on Britain's Crown Dependencies and Overseas Territories by the end of this year. This review needs to be very ambitious in scope, looking at how this issue not only affects Britain directly, but also looks at how it affects the global economy, which is in Britain’s long-term interest. Foot must also focus on regulatory issues, of course, and look specifically at how individual havens can make a transition to a post-tax haven economy. See more on this here.
A last point. The above letters are words, and we cannot take anything for granted. We hope Brown will follow up forcefully. We will be watching.