Thursday, April 01, 2010

Jersey Finance and the Hired Gun

Jersey Finance is the militant marketing arm of the tax haven industry in Private Eye's 'septic isle'.

Militant? Well we know they have hired public relations businesses in London to approach journalists and opinion formers to attempt to discredit Tax Justice Network in general and our senior personnel in particular.

Now they're at it again. They have just released a report criticising Christian Aid's recent work on the impact of transfer mis-pricing on developing countries. Their motives for doing this are clear: public opinion has moved firmly against the tax cheating that is the stock in trade of the offshore financial centre in Jersey, and as the senior business correspondent of Jersey's
Evening Post recently commented: “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”

Needless to say, the prospect of an end to tax avoidance is bad news for Jersey Finance and its clients. So the name of the game is 'shoot the messenger.'

Sadly for them, however, their hired gun, Mr Richard Teather (pictured above) has missed the target.

Firstly, Mr Teather has ignored recent research that supports the Christian Aid position, including the
report published by Washington-based Global Financial Integrity in February 2010. This work, and the recent work of Penn State University's Simon Pak, arrives at findings that are consistent with Christian Aid's estimate that the tax losses to poorer countries from trade mis-pricing are as high as US$160 billion annually. Raymond Baker (GFI), Christian Aid's Alex Cobham, and Richard Murphy of Tax Research UK have written a riposte to earlier criticisms of the Christian Aid estimates, which you can read in full here.

Second, Mr Teather is not an independent researcher. He has been retained for several years to advise the Jersey government on their tax haven strategies. His advice has clearly not been useful; for example, we find no evidence that he warned the government that their 'Zero/Ten' corporate tax policy did not meet the standards required by the EU Code of Conduct Group on Business Taxation. For the record, TJN did advise the States of Jersey that their tax proposals would fail, so it came as no surprise to us when they did.

Furthermore, we also find no record of his having advised the Jersey government to cooperate with the EU on automatic information exchange.

This track record is telling: Mr Teather, who teaches at Bournemouth University, is a strong supporter of the weird and whacky notion of tax competition (a political construct that has done immense damage to poor people, especially in the world's poorer countries). The following extract from his book speaks volumes about his extreme position:

While I am not seeking to condone dishonesty or criminal activity, from an economic perspective this is merely another example of tax competition: indeed, it is often necessary behaviour in order to take advantage of tax havens. Without the willingness of some to engage in this sort of activity, tax competition would be much less effective and therefore reduce the benefits that flow from it for the rest of us.

Let's unbundle what Teather is saying here. He is stating, without ambiguity, that dishonest and criminal activity - we think its fair to say he's alluding to tax evasion - is often necessary to take advantage of tax havens. We agree with the logic so far. But he proceeds by arguing in favour of this behaviour on the grounds that it is necessary to render tax competition more effective. This is an extraordinary argument, which reveals Teather for what he is: a militant ideologist of the Libertarian far-right.

Having prospered for many decades from the tax avoiding industry (not our words but those of a senior columnist of Jersey's Evening Post), Jersey's leaders seem hell-bent on discrediting those who campaign for measures to combat abusive tax practices. Shame on them, and shame on their hired guns.


Blogger Physiocrat said...

Why is tax competition a bad thing? Bad tax systems cause wealth destruction, good ones promote wealth creation.

Tax avoidance is a voluntary business in that some countries, perhaps most, choose to have tax systems that are more or less easily avoided.

10:02 am  
Anonymous Anonymous said...

"Well we know they have hired public relations businesses in London to approach journalists and opinion formers to attempt to discredit Tax Justice Network in general and our senior personnel in particular."

Well we don't know. What about some real facts to substantiate this claim?
Otherwise this allegation is just innuendo. And given that there are no facts to support it one has to assume that is all it is.
(And BTW, I have no connection whatsoever with Jersey)

6:29 pm  
Blogger Nicholas Shaxson said...

"Bad tax systems cause wealth destruction, good ones promote wealth creation." Well, yes. But to move from that to "tax competition is a good thing" is a nonsense. Right-wingers in Washington love to peddle the idea that competition is good, therefore tax competition must be good. It's another leap of logic that defies any reasonable analysis. Countries don't "compete" in any meaningful way that is comparable to the ways companies compete. As Martin Wolf said in his book Why Globalization Works, after exploring this question in depth: "the notion of the competitiveness of countries, on the model of the competitiveness of companies, is nonsense." Read more here.

12:08 am  
Anonymous TJN said...

Anonymous (please do leave your real name; sometimes it's a struggle to believe people who say things like "I have no connection with Jersey" - this may be true, but still) - you may disbelieve us, but it's simply true. Evidence of this, along with names, will emerge in due course. Not quite yet, however. Sorry to disappoint.

12:46 am  
Blogger TJN said...


Tax competition is destructive for a number of reasons. Firstly, it over-rides democratic choices. Second, it favours mobile factors of production, causing economic distortions and inequality. Third, it encourages rent-seeking activity.

2:58 am  
Blogger TJN said...


In Autumn 2009 we were told by London-based journalists that they had been approached by a PR company, Brunswicks, acting on behalf of the Jersey authorities. The agents of this PR company proceeded to make a number of derogatory remarks about TJN, including making statements to the effect that our virtual way of operating, and the tiny budget on which our international secretariat functions, indicate that we are in some way not a serious organisation. Journalists have also been told that our director, John Christensen, is motivated by bitterness at not being appointed to the post of chief adviser to the government of Jersey in 1998. In fact John had no intention of applying for that post and had previously arranged a job in London as early as 1996.

Journalists tend not to like being harassed by PR companies in this way, and hence the news quickly got through to us that this was happening. If you stop to reflect on this situation, it's rather ugly that powerful agencies stoop to such underhand tactics against a legitimate civil society organisation.

3:15 am  
Anonymous Jersey Girrl said...


Two important points for you to consider (and I am connected to Jersey!).

In November 2008, in a public document (16084/08), the Code of Conduct Group said: "In order to build on the framework of the Code of Conduct and increase transparency, all new evaluations of the Code Group will have to be sufficiently substantiated taking into consideration all Code criteria, stating arguments and providing data where possible, while remaining within the mandate of the Code Group."

Secondly, in a November 2009 document which is also public (16233/09), the Group said: "On the Zero-Ten Corporate Tax Regimes of Jersey and Guernsey and the New Tax
Legislation of the Isle of Man, the Group was not yet able to finalise its views in the absence of an agreed description."

The Code of Conduct Group is the antithesis of all that TJN stands for, having poor governance and total political interference in its process; and yet you laud it because it appears to be aligned with your kick Jersey policy.

We are being asked to change our tax system based on rumour alone. The Code of Conduct Group has not yet evaluated our system and has given us no reasoning whatsoever as to why it is seen as harmful. No country on earth should bow to such a lack of accountability, openness and transparency; and yet that is what Jersey faces. I think that - shamefully - this is typical of the way that the EU operates, and I hope that our governmnet stands up to it!

The Girrl

12:59 am  
Blogger TJN said...


Amongst the more pathetic human traits that secrecy jurisdictions reveal is this sense that the perpetrators of vile and harmful activities are somehow the victims. Your reference to our "kick Jersey policy" exemplifies this. You have been reading this blog for long enough to know that TJN takes on all secrecy jurisdictions, including the USA and UK, and we do so without fear or favour.

Turning to your point about the process of the Code of Conduct Group, TJN is critical of its lack of transparency and accountability.

12:42 pm  

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