Friday, February 19, 2010

Jersey: From the Department of We Told You So

Has Jersey's Evening Post, the island's only newspaper, finally woken from its slumbers? In an article titled "What's in store now that the UK sees any kind of blatant tax planning as unacceptable", commentator Peter Body, a long-standing apologist for tax havenry, concedes "It’s not only banking secrecy that’s dead. Tax avoidance – the industry that helped Jersey become so prosperous – now appears to be on its last legs as well."

Well three cheers for that. TJN has campaigned long and hard against the idea that tax avoidance is legitimate in any circumstances. We regard tax planning based on compliance with government granted exemptions as legitimate, but avoidance, by definition, involves exploiting loopholes that have not been granted. This is why tax avoidance is fundamentally anti-democratic and incompatible with ethical business activities.

Referring to the recent visit by UK Treasury Secretary Stephen Timms, Peter Body continues:

‘Whether you are a corporation or an individual it has become increasingly unacceptable for you to use your resources to avoid your fair share of the (tax) burden,’ the minister said. So all those wealthy individuals and companies that have used complicated tax structures devised by expensive Jersey lawyers, and others, could be in for a hard time."

While we suspect there will be very, very few tears shed for lawyers facing harder times, the consequences for other islanders have been dire. For decades, Jersey's leaders have relied on using favourable tax treatment and legalised secrecy to anchor a footloose industry to Jersey’s shores. With tax avoidance and legalized secrecy under attack, the future looks a great deal less rosy.

What comes next? The island suffers from an extreme case of what development economists call 'path dependency': meaning that its future prospects will be shaped by the recent past. In plain English, the skills base of its labour force is largely geared to offshore tax avoidance and little else. How quickly can its stockpile of socially useless lawyers and accountants be beaten into plough-shares or something equally useful?

As Body concludes in his article, time is not on the island's side: "few people predicted how quickly new tax information rules could be adopted in the past year or so. So it would be a good idea to start planning now for this brave new world."

Sound advice, though we very much doubt that Chief Minister Le Sueur and his current Council of Ministers have the capacity to plot a new route forward, let alone the mix of qualities required to make a dramatic break from the recent past.

And the clock is ticking.


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