Friday, May 08, 2009

Lies, damned lies and tax haven nonsense

Something pernicious is going on in the undergrowth. British tax havens are trying to establish clear blue water between their activities and those of their commercial rivals in Austria, Liechtenstein, Luxembourg and Switzerland. This is based on lies. "We are transparent they say: we do not have banking secrecy and we have signed up to tax information exchange agreements that meet the OECD standard."

Let's nail this nonsense before it goes any further. The British tax havens do not rely on banking secrecy, because they use a far more secretive mechanism for protecting their tax evading clients. This mechanism is called a trust. Trusts are a British common law entity which extend as far back as the Crusades to Palestine. But they have become the basis of highly abusive practices because they are not registered with any public authority and they are not required to reveal any information on public record. Trusts provide the underpinning for the British tax evasion industry, which is probably the largest in the world when you take account of all the British satellite tax havens on the Crown Dependencies and Overseas Territories.

Now we recently visited Jersey, decribed by their public relations officer in London as a totally transparent jurisdiction, and during our visit we asked the Jersey Financial Services Commission to show us their register of trusts. They grinned and said there was no such register. So we asked what information is publicly available about trusts in Jersey. There is no information whatsoever on public record, they replied. Why not, we asked. Because, they answered.

Now just in case you haven't twigged the significance of this, trusts, foundations, stiftung and other such legal entities are the underpinnings of the tax evasion industry. We do not oppose the principle of the trust, but we see no reason why those who seek the benefits of using legal instruments sanctioned by society should not accept the responsibility of placing material information about those legal instruments on public record. Failure to do so creates the secrecy space which encourages tax evasion and other forms of economic crime.

Trusts are the basis of Jersey's tax evasion industry. They are totally secretive. It is virtually impossible for any external authority to obtain information about an offshore trust in Jersey unless they already have the smoking gun which reveals their existence. The idea that Jersey and all the other British jurisdictions are transparent is nothing short of a damned lie, and those who propagate such lies should be confronted with the nonsense they spout.

Journalists please note: trusts are even more secretive than bank accounts and trusts are used in virtually all sophisticated tax evasion structures. When a PR person representing a tax haven claims it is transparent, simply ask them to take you straight away to the office of the registrar of trusts - and see how far that gets you.


Anonymous Adrian Wrigley said...

Trusts should present absolutely no problem for any jurisdiction with fair and sensible tax policies - even if they are anonymous and unregistered.

In the UK, all trusts pay their fair share of Council Tax, Aggregates Levy, Business Rates, Road Fuel Duty, Insurance Premium Tax, parking fees, Tobacco Duty, Alcohol Duty, Value Added Tax, Air Passenger Duty, Vehicle Excise Duty, bridge tolls. Just like anyone else.

In fact trusts pay (directly or indirectly) all the taxes, fees and levies to the government which are based on their real world consumption of goods including land, roads and natural resources.

So where's the problem here?

The problem lies in attempts in some countries to tax transactions - "TransTaxes" as they are sometimes called. Attempts to tax the simple change of ownership or some mysterious accounting measure of "profit". These taxes include Corporation Tax, Capital Gains and Income Tax which reflect the legal, administrative and accounting view of the world. They do not meaningfully reflect the real economy. They are entirely unnecessary, and represent a failed approach philosophically, economically and practically.

Until people start demanding fair taxation based on real-world activity, the current tax farces will continue. The beneficiaries of the present system are the accountants, lawyers, law-makers, wealthy and powerful. And of course think tanks, charities and other NGOs benefiting from the TransTax mess we're in.

In short, tax havens are one of many symptoms of a broken system design. Abolish Income/Corporation/Capital Taxes and the problems vanish!

4:15 am  
Blogger Henry said...


Yes, it is a symptom of bad system design.

4:16 pm  

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