Zero-ten: It is Europe we have to worry about
Thursday 16th December 2010, 3:00PM GMT.
From Richard Murphy, director, Tax Research LLP.
SIR Philip Bailhache (JEP, 14 December) is wrong when he says Jersey’s fight over zero-ten is with the UK. It never has been, and it is not now.
Indeed, until 2009 it is almost certainly true that the UK provided considerable protection for the Crown Dependencies against the impact of the EU Code of Conduct on Business Taxation.
It is well known that Dawn Primarolo MP, who chaired this group for a decade while a UK Treasury Minister from 1997 onwards, took the view Jersey now promotes that personal taxation was outside the scope of the code and as such zero-ten worked despite the continued ring fence created by the enforced distributions of companies being taxable within the personal taxation system even though this was very obviously a blatant ruse designed to undermine the whole purpose of the code.
It was only in 2009 that this position changed in the Treasury, when more enlightened ministers stood back and looked at what they were being asked to support and realised it was akin to blatant and aggressive tax avoidance. They then withdrew their support for the position the Crown Dependencies have maintained. To their credit coalition ministers have supported this view.
Whether or not they did and do, however, is not relevant. It was always going to be the European Commission who reviewed the compliance of the Crown Dependencies with the code and their reviews, undertaken recently and which I have seen, are unambiguous. In terms of overall approach and in respect of three out of the five detailed areas where compliance is required the European Commission has found that the zero-ten systems of each Crown Dependency (including, implicitly, Guernsey) failed to comply with the code of conduct. This was not a UK decision. I stress, the technical analysis was done by EU staff. I have seen their work and the rulings are unambiguous. They have been adopted by EcoFin on behalf of the European Commission as a result.
It is equally unambiguous that the UK must comply with this decision and impose – I stress, impose, even if against the will of the Crown Dependencies – this decision on Jersey, Guernsey and the Isle of Man. But that is not whether or not the Treasury wants to do so; it is because the EU requires the UK to do so because as far as the EU is concerned the Crown Dependencies are, at least for these purposes, part of the UK.
In that case almost all that Sir Philip Bailhache writes is straightforwardly wrong and thoroughly misleading, as is his claim that he is writing in his capacity as a lawyer. I doubt that. I think he is writing as a well-known proponent of Jersey becoming independent from the UK. No doubt in that context he would like a constitutional fight with the UK, but it’s one he can’t win, and nor can Jersey. That is because the costs of independence will be far higher when Jersey’s inability to manage its budget – which has now been ongoing for several years – becomes more starkly apparent as events develop over the next few years and Jersey needs every friend it has got to bail it out.
The reality is then that, as I predicted in 2005, Jersey has created a tax system which was always and very obviously going to fail to meet Europe’s requirements. I knew that at the time because unlike Jersey officials I went to Brussels and bothered to ask them. In which case it is now time for Jersey to stop laying down smoke screens and accept the truth which is that this is the time for it to stop abusing international rules on tax and get on and comply with them.
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As per usual the infamous TJN rumour mongerer has to have his say and whats all this ‘we’. I think matters should be put on hold until the debates between our treasury and the UK treasury have been resolved before listening to anymore 0-10 propoganda and thats especially from Richard Murphy and his now well known TJN anti-Jersey Finance organisation.
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But . . . but . . . but . . . Phil says its correct! Surely this must be the case? How dare Europe question the Tax structure of this tiny little rock . . . Life Enriching? Certainly for the select few company directors.
Roll on the elections.
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Jamie offshore finance centres are siphoning off valuable tax money from countries all around the world. This money would go towards more schools and hospitals and other important infrastructure.
I am sure if you asked the majority in these countries if they would prefer more tax money to be spent inside the country, or for it to go offshore, they would opt for the first option, wouldn’t you?
As far as I am concerned it is both morally and ethically wrong to be engaged in this business.
When 0-10 bites the dust, as I believe it will, then no doubt the establishment and their supporters will be spinning like chickens in a tumble drier.
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It would appear that Richard Murphy, director of the important sounding Tax Research LLP, is a one man band, with a gripe against anyone paying less tax than himself!I googled him and his Tax Research LLP on the net and waded through a number of his self made videos, some dating back to 2007. He is perfectly entitled to air his views,which are against independent taxation policies, which have been in place for hundreds of years in Jersey and the other Channel Islands, before the EU and the dissolution of the Privy Council was ever thought of.However he is not a representative view, just one man with a gripe whom seeks to undermine our constitutional independence and the valid points put forward by our former Baliff.
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Do we really need to wade around amongst the views of the former Bailiff, Treasury Minister and Richard Murphy to get some sense on this matter? What has happened to investigative journalism? Is the JEP incapable of getting on the phone to the relevant authorities and then reporting objectively what the position is? This is a massive issue and it ought to be given much higher priority.
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I was interested to see that according to Facebook friends of Mr Richard Murphy we have a Deputy Montfort Tadier. Perhaps the JEP should do an interview with the Deputy on 0-10 and the finance industry in general which Mr Murphy evidently from his blog detests?
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Jersey has a right to set its own taxes to fit its own agenda, and besides if people seek a better tax arrangement away from places such as the UK because they feel sqeezed then its their fiscal policy at fault not ours.
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Investigative journalism should start with asking what Deputy Montfort Tadier’s friendship with Richard Murprhy is all about and does he agree with his negative views on an industry that employs 12,700 people here which includes my duaghter?
It would be a good question to start from because otherwise I find this Deputy incredibly childish and embarrassing to listen whenever I find the energy to tune into States debate on the radio.
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yes no 7 and countries have the right to impose restrictons on their companies and individuals doing business with jurisdictions which they consider having harmful tax regimes. If Jersey is blocked from EU markets for instance, what effect do you think that will have?
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Do you seriously believe the EU would block Jersey from EU markets because it has its own tax system and the EU doesn’t like it being so low? But also look at this another way, how much business does Jersey introduce to the UK as a middle man from investors outside of the EU?
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No 10. of course it would. It is not about taxes being low, the current 0 10 regime imposes zero tax on the profits of non-Jersey owned Jersey trading companies, but taxes Jersey-owned Jersey companies 20%. (higher than the Irish corporation tax rate, which it does not consider harmful)The whole point is that the EU does not like tax rates being different only because of the residence of a company’s beneficial ownership.
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After learning that Chris’s ‘duaghter’ (#8) works, or is employed in, in the finance industry my views have changed completely.
The industry should be saved at all cost.
Not having any children, that I know about, I normally remain unaffected by the future fortunes of the island.
I am content to know that the geomorphology and the tides won’t change much. Especially if the prosperity declines, there won’t be the money available to b***** them up.
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I doubt Deputy Montfort Tadier’s would be able to understand the 0-10 situation. The island is going through the most difficult times for decades with a great deal of important financial matters to sort out and what is our Deputy doing? Researching how many soft drinks are consumed during a states sitting and any other useless items that will get his name in the JEP. What a waste of £44,000 ish per year. I really hope the couple of hundred voters who voted him in remember his contribution to solving the problems of this island.
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One wonders how many of the electorate, at the time, were influenced by the hype of the HDLG scandal,bodies in the cellar etc., and whether they would still vote the same way.Several deputies were elected as a direct result of the endeavours of two senior police officers,whom are now retired and have managed to avoid censure for their interference in politics.
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I think most people understand the basis of the 0-10 tax position but what they do not understand is the sheer amount of business we get from offshore companies being registered and administrated here from its’ existance.
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15 Jon.
What you say is correct.
Does it justify us having to pay 5% GST to cover it?
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“Does it justify us having to pay 5% GST to cover it?”
If we didn’t have a finance industry it would be 20%, like it is almost everywhere else in Europe.
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17 roger phlegm
Would we even have GST without finance?
If the finance industry had not got its avaricious grasp on Jersey most of us would have been better off.
Far too late now.
We are slaves to the finance industry and when they depart, those of us who are not millionaires will be left holding the baby.
Self interest and greed have won, to the detriment of Agriculture and Tourism.
Before being advised to catch the proverbial boat, I am a married Jersey woman with Jersey heritage going back hundreds of years.
PS Does your name denote you are still at Primary school?
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There still seems to be some confusion over 0-10 and its affect on Jersey revenues as a whole, probably due to miss guided letters from the JDA who have never really understood the finance industry in the first place.
In a nutshell, Jersey makes money from every single registered Jersey Company here one way or another. Registration fees, annual fees, administraions fees etc. So if 0-10 is messed with the Beneficial Owners of these companies could possibly re-allocate to another offshore centre with a more stable political / fiscal system, and then we would suffer the consequences.
It is well known in finance that people like Richard Murphy have been campaigning for years to get us shut down and will attack any financial system we have to get attention, and even with inaccurate statements as proven in the past, so any friends of this man should be viewed with serious caution.
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Jon, you seem to be confused. It is the EU that has decided 0/10 is non compliant. What this means is that Jersey faces being blacklisted by the EU and the OECD if it does not come up with something better. After glowing reports from FATF etc which put us in the premier league of financial centers, any blacklisting would relegate us to mixing with the likes of Nauru, Turks & Caicos etc and pitching for the type of business we’ve been getting rid of for the last ten years.
It’s not Richard Murphy you should be gunning for but those who got us into this mess.
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roger when VAT is outlawed in Jersey 20% GST will actually mean less tax for the underlings to pay.
As per finance it will not be here long term. Just like any other previous Jersey industry it will come to the end of its time. Better to give up riding the wave and search for a new, better one to surf, to prevent personal injury caused by being washed up on the reef.
Susan is right this is going to blow up in our faces.
Jon there is no confusion over 0-10 it has caused a £100M black hole to appear in the tax take. The government is too weak to confront big business prefering to role over and have its tummy rubbed. The rest of us can carry the can for finance and big business with higher and higher GST levels to be introduced as one loop hole after another is closed down.
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Susan, what naive and stupid comments. “Without finance, we’d be better off”. Who else but finance would pay for the schools, the healthcare, the upkeep of the roads, etc, etc… The Island would be a bankrupt basket case if finance was destroyed by our enemies. It’s finance that pays for everything you benefit from!
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Gary, until we get some clear reports on whats going on and who is actually ‘saying what’ 0-10 continues. Speculation on whats / what might have / what could happen is just going around in circles. In relation to Richard Murphy there is pleanty of documented evidence on his blog to show us all he wants us closed down as an offshore finance centre, just look at what he says about trusts for starters.
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I think some people on here are missing the point that finance supplies over half our annual tax intact. This is hundreds of millions of pounds. Take that away and then what will happen ?????
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Dean,24. I don’t think that very many are missing the point by now. Enough of you keep proffering it.
What they are probably trying to say is that if finance went belly up and took away most of those who came with it, the island might return to a state which many previously enjoyed.
We did, in fact, have good schools back then and decent roads, Euan. The health care was reasonable. It is hardly much to write home about now, considering the purported wealth of the community.
The most significant change that finance has brought is inflated salaries which in turn has brought inflated prices.
Great for all those in that paricular feeding chain but not much cheer for the rest. The consequence is social division.
That could explain why the rest want ‘out of it’. They might as well be struggling but happier in a less developed and less populated island.
They won’t get back their utopia but it’s nice to dream.
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Mlle. La Pointe if finance went then who will then pay for all these delightful things you mention when we cannot even afford them now?
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Pete:
‘Mlle. La Pointe if finance went then who will then pay for all these delightful things you mention when we cannot even afford them now?’
Swingeing taxes that only those who really enjoy isand life would be prepared to pay!
I wasn’t suggesting it would be workable. Clue: ‘it’s nice to dream’.
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