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The fall of Jersey: how a tax haven goes bust
- sandworm101 11y agoSo not collecting taxes didn't generate enough revenue to keep things in the black?
- hackerboos 11y agoIt's always frustrated me that Jersey/Guernsey/Isle of Man get away with reaping the benefits of being part of the UK (EU and EEC membership) whilst not actually being part of the UK, undermining our tax system, generally gaining from tax avoidance and evasion on the mainland. These territories need to be given an ultimatum become part of the UK and implement UK tax laws or remain independent and be 100% responsible for their own affairs. Edit: Amazon and Play.com used to operate out of Jersey to avoid VAT being charged on orders [1]. [1] - https://en.wikipedia.org/wiki/VAT-free_imports_from_the_Channel_Islands#United_Kingdom_2 https://en.wikipedia.org/wiki/VAT-free_imports_from_the_Chan...
- raverbashing 11y agoWell, the British Overseas Territories have a similar relationship with the UK (Also the Channel Islands are not fully within the EU https://en.wikipedia.org/wiki/Jersey#Relationship_with_the_European_Union https://en.wikipedia.org/wiki/Jersey#Relationship_with_the_E... ) I can only imagine their current relationship with the UK is with their (UK) accord.
- hackerboos 11y agoSorry to clarify - they benefit from the UKs EEC and EU membership, not that Jersey is a member of either the EEC, EEA or EU [1]. [1] - https://www.gov.je/Government/JerseyWorld/InternationalAffairs/Pages/RelationshipEUandUK.aspx https://www.gov.je/Government/JerseyWorld/InternationalAffai...
- arethuza 11y agoI suspect the City gains a lot of benefits from having a few tax havens a short flight away.
- TheOtherHobbes 11y agoYes indeed. And so does the EU.
- hencq 11y agoOf course the City is a tax haven itself as well, but yes, there probably is a lot of pressure/lobbying power to leave things as is.
- rquirk 11y agoThe IoM isn't part of the EU or the UK. As a Manxman living in Europe, I'm fortunate that my mother's side of the family is English or I'd have more trouble with work permits and whatnot. I haven't been able to exchange my Manx driving licence for a Spanish one, for example, since it isn't recognised. As for taxes, people on Mann get screwed over on prices - everything from groceries to petrol is more expensive than the north of England since it has to be shipped in. The tax breaks for residents are less than for corporations too, without the corporate breaks I think there would be less work there in general. Might get rid of the southern English bankers that all moved there in the 2000s if they removed so many incentives so it wouldn't be a complete loss ;-)
- orf 11y ago> everything from groceries to petrol is more expensive than the north of England since it has to be shipped in I can assure you that the North is one of the cheapest places to live in the UK. I could rent a huge, 4 bedroom house in some places for less than I'm renting a single room in London. Out of interest how much is petrol/groceries? What popular UK brands do you have over there that could be compared?
- Xophmeister 11y ago> is more expensive than the north of England [emphasis mine] The Isle of Man is off the north west coast of England, so he's comparing the prices there with the nearest mainland.
- deleted 11y ago[deleted]
- orf 11y agoOh right, I think it should be 'than England, to the north' in that case though? 'The north of England' is a commonly used phrase to group counties like Yorkshire, Cumbria etc so even with the emphasis I still parse it wrong.
- pm24601 11y ago
- branchless 11y agoSo they can run their illegal tax schemes directly through The City? Or arrange their ledgers so they pay no tax? We need a full reform. This is a small part of it.
- briandear 11y agoStart by lowering UK taxes. That's the reform that's needed.
- vkou 11y agoYeah, capitulating to their demands... I'm sure that won't encourage more tax arbitrage.
- justincormack 11y agoUK corporation taxes are pretty low in global terms and the UK is already an offshore tax haven.
- hackerboos 11y agoNorthern Ireland will soon get its own corporate tax rate of 12.5-13%.
- damieng 11y agoGuernsey and Jersey are independent countries that have an agreement with the crown of England that has been in place for hundreds of years. They are under no obligation to placate your current government or adhere to their wishes. They have their own elected governments that suits them better. Yes they get some benefits from that agreement such as military protection which didn't help them much during WWII where they became occupied by Germans.
- lumberjack 11y agoIs Jersey really powerful enough to create a tax haven? Or is it that powerful people in foreign governments purposefully let Jersey exist so that they can benefit from its existence? Basically, what I'm questioning is whether the tax haven is Jersey's doing at all. Of course they are complicit but I don't think that it's up to them to decide to be a tax haven.
- sandworm101 11y ago>> London and Paris tussled over the islands for almost 300 years. Eventually, however, Pope Sixtus IV intervened and, in 1481, issued a papal bull of neutrality. England and France could wage war, but the Channel Islands, by religious injunction, could not. The result was that Jersey traded unimpeded with both sides, and thus its enchanted inbetween life began. It should be no surprise today's largely secular laws don't know how to deal with 15th-century papal bulls.
- notahacker 11y agoIt's still perhaps a little surprising that this status quo has never been challenged on the British side, bearing in mind the UK has been radically anti-Catholic for most of the period since then, and unusually assertive about establishing overseas territories and colonies. (I suppose the practical answer is that that British rejection of the papal bull would invite the French to interfere militarily or even annexe islands much closer to their own shores than mainland Britain, and frankly any negative side effects of the in-between status historically weren't worth the cost of the warships to guard them)
- sandworm101 11y agoI'd go further with the practicality and say that the British legislature was administering a thousand other colonies at the time (Canada) and just never bothered to address an issue over a crag smaller than many cities.
- TheOtherHobbes 11y agoJersey is effectively owned by the Queen, albeit rather indirectly through her role as Duke (sic) of Normandy. In practice the day to day running of the Channel Islands is left to what's called the Privy Council, but the Queen gets final say. Parliament isn't involved. If the Queen objected strenuously to Jersey's role as a tax haven, it would never have become one. Jersey is one of those edge cases where the feudal nature of the British establishment becomes obvious. Parliament isn't quite only for show, but a lot of wheeling, dealing, and money hiding goes on behind the scenes. Neither the British parliament, nor City regulators, nor the EU have much oversight.
- padobson 11y agoIn a new code of conduct, the EU insisted that all members (as well as those jurisdictions that wanted equal access to its market, such as Jersey) tax local and non-local companies the same. This was the turning point for Jersey, in case you missed it in a fairly long piece. I wonder why Jersey didn't simply raise the corporate tax rate to 1%, and lower its citizens taxes to 1%. They still would have come in far below most of the rest of the world in corporate tax rates[1], but would have wildly increased their revenues. As it happens, they ended up losing their financial industry anyhow. [1]https://en.wikipedia.org/wiki/List_of_countries_by_tax_rates https://en.wikipedia.org/wiki/List_of_countries_by_tax_rates
- branchless 11y agoThis is why Cameron wants to have some "red lines" with the EU. He's terrified they are going to strangle The City.
- wavefunction 11y agoFor those of us that are unfamiliar with the special situation with The City, can you perhaps elaborate a bit? I'm curious to learn more about what you're alluding to.
- digi_owl 11y agoAs best i understand, since Thatcher dismantled UK industry it has been the one thing keeping the nation "afloat".
- wavefunction 11y agoThat's not really what I'm referring to. I understand that you are referencing the status of London as one of the main financial capitals of the world but I'm looking for more about the allusions towards some sort of special tax situation perhaps. Or maybe I'm misreading the allusions.
- branchless 11y agoThe UK controls what Jersey does and lets it do it. They have loads of other tax havens too. Let's hope the rich get what's coming to them and the people of the UK can eventually be free of the cancer that is The City. People all over the world would be better off if The City is crushed.
- vixen99 11y agoAnd what is coming to the wealth creators? I guess you mean the 1% who contribute 30% of income tax in the UK for instance. Just wondering how you're going to make up the deficit (or what cuts you'll make) when they 'get what's coming to them' as you so crudely put it.
- vkou 11y agoAnd here I thought that people actually building widgets in factories are wealth creators... As opposed to having your name on the deed to the factory.
- gozur88 11y agoNot really, no. Without someone willing to risk money creating the factory those people would be poking the ground with sharp sticks.
- vkou 11y agoWithout labour working in those factories, producing goods, those deeds are about as valuable as toilet paper. You're confusing creating value with economic velocity. Mere ownership cannot create value. Mere ownership can change the rate at which money circulates in the economy.
- gozur88 11y agoYou are completely ignoring the value of risk. Labor is just one input among many to widget making. Without somebody willing to take the risk, to sink money he has into the widget building business, it just doesn't happen. This is why capitalism works far better than the alternatives.
- ps4fanboy 11y agoI never understood why countries do not impose huge taxes on money moving in and out of tax havens. I guess there is always another route you can take to disguise the origin.
- song 11y agoSome countries do that. For example in Portugal the yearly tax on real estate is around 0.3% of the price of the house/apartment but if the owner is a country based in a tax haven (and that include countries in the Grey area like Hong Kong), then the tax rate is 7.5%.
- briandear 11y agoWhy? The money doesn't belong to the government. The problem is that taxes are too high. Lower taxes and there's no need for havens.
- vkou 11y agoIn the tax avoidance game, any amount of taxes is too high. Your advice will take the rates right down to zero.
- s73v3r 11y agoYou could cut the taxes in half, and they'd still seek out tax havens. Don't capitulate to their demands. Cut off the ability send money to the tax havens.
- anigbrowl 11y agoYou park your capital somewhere because you like the commercial, legal and financial infrastructure. Insofar as your financial mass distorts economic spacetime for everyone int eh vicinity, it's not unreasonable that you will be asked to pay some of the costs of said distortion. If you stay in a hotel that's only half-full and make your bed before you check out, would you expect your stay to be free? Probably not. I'm being a bit tongue-in-cheek here, but your repeated claims that taxes are too high presupposes some objectively correct level of taxation. In the real world, what happens is that tiny poor jurisdictions set tax rates that would be economically unsustainable but for the prospect of attracting some huge international firm whose revenues are so big that even a tiny percentage of them is a lot of money for the poor jurisdiction, and the extra administrative costs of domiciling the corporation there are less than the difference between the unusually low tax rate and that of a more economically logical place for the headquarters, based on actual factors of production. Why should taxes come down to the level of whatever the poorest country is willing to charge in order to attract itinerant capital? Why not (as we are sort-of in the process of doing) just deny market access to firms that don't want to pay prevailing rates? It's not that I hate capital as such, but as an individual I have to pay some sort of taxes and my international economic movements are somewhat restricted, because of the basic fact that people can impose costs on an economy as well as contribute to it. I'm not enthused about paying taxes on the income I receive in return for my work product, but I recognize that there's a quid pro quo here as I prefer to live in a civilized society and transact business using money rather than live in a cave and subsist on fish or something. I don't care for the idea that having a large sum of capital should exempt one from these rules, in addition to the obvious economic advantages that said capital provides (and which I slightly envy but do not resent).
- lordnacho 11y agoBunch of separate items: - What about Guernsey? Are they screwed as well? How can you write an article about one half of a pair of twins without mentioning the other half? A fund I used to work for had a guy sitting there pretending to make trading decisions, precisely for the tax advantage. - Lived on Jersey for a bit. It was like a little piece of Surrey, on an island. Lots of expensive cars. Nice country pubs, good views in places. Roads are too narrow. A bit like an early version of GTA though: although there are variations, you quickly discover how small it is. - As a finance guy I never realised how bad the Dutch disease got on the island. I did realise there were an unusual number of lawyers and accountants. But I never thought it was as bad as it turns out.
- charlesdm 11y agoMost EU venture capital funds structure holdings through Jersey or Guernsey SPVs as well.
- melling 11y agoThere's a Jersey in England? fuhgeddaboudit!
- irremediable 11y agoThis may shock you, but we also have a York and a Hampshire.
- gozur88 11y agoYou should have named them "Old York" and "Old Hampshire". This way is confusing. "Olde" would be acceptable, too.
- mikeash 11y agoI would like to renew my periodic proposal to replace all names with UUIDs. For example, the York in England could be renamed to E4D24E55-D779-402A-90D4-9EBE41FB2AA4. England itself could become 62F2B833-2462-4F64-A071-2887FF46105A. The "New" York in the colonies could be renamed to D6EE5383-2D68-4CC2-BCED-CDBB2B7661E0. This would eliminate all confusion.
- gozur88 11y agoWe'll have to think up a new tune for Kandler and Ebb's classic D6EE5383-2D68-4CC2-BCED-CDBB2B7661E0, D6EE5383-2D68-4CC2-BCED-CDBB2B7661E0
- yongjik 11y ago...and an England, apparently.
- darkr 11y agohttps://en.m.wikipedia.org/wiki/List_of_places_in_the_United_States_named_after_places_in_England https://en.m.wikipedia.org/wiki/List_of_places_in_the_United... That's just England, not including the rest of the UK.
- 11y ago
- jimworm 11y agoSpeaking of havens, does Jersey have enough independence to become a data haven?
- charlesdm 11y agoThey do. A friend of mine was doing tech stuff (an encryption related startup) there a few years ago. A lot of people in the government, who tend to be quite approachable, do honestly seem to care about this stuff. Tech is one of the industries they're trying to get involved in.
- toyg 11y agoYes, but it's still ultimately under direct control of UK forces. If GCHQ wanted to tap your cables, they would do so in the same way as in Britain.
- charlesdm 11y agoAre you sure about that? I was under the impression that wasn't possible.
- toyg 11y agoJersey is under UK military control, it even has a formal Territorial Army regiment, so it's certainly possible in factual terms. In legal terms I honestly don't know, but after Snowden I thought we agreed that the law is no obstacle for these people.
- jimworm 11y agoOf course they can - if you're talking about tapping submarine cables or other attacks from the "outside". I was asking more about the legal situation, whether they have enough independence to enact laws to prevent the authorities making "inside" attacks such as: * Forcing operators to identify customers * Forbid the operator from telling their customers about anything * Take hardware without allowing it to be destroyed beforehand These things could still happen illegally of course.
- josscrowcroft 11y agoI grew up in Jersey, and for sure there's a lot that I don't like about the place. Still I found this article very poorly-written, poorly-researched, sensational, weighed down by anecdotes, cliches and an exhausting "Poor UK, evil Jersey" pattern. It gets worse as the piece goes on, increasingly opinionated and accusatory. I am not an expert, but I sense that very many factors went into creating the situation there, many of them outside forces, and it's not possible or helpful to caricature an entire island in this way to look for a simple cause and effect relationship.
- lovemenot 11y agoYou were probably already better informed on Jersey than most of us were before reading the article. There may have been significant details left out, but as a broad brush I felt the article probably did a good job of presenting a general picture of the island's economy. Perhaps there are some important specifics that you would like to contribute, rather than just criticising the article's tone.