The finance industry has given a lot to this Island
Monday 20th June 2011, 3:00PM BST.
From John Boothman.
I SUPPOSE, in these troubled times, we should welcome a little light relief wherever it comes from – even the veteran anti-tax haven campaigner John Heys (JEP, 9 June). And he certainly deserves some credit for managing to squeeze so much nonsense into so few paragraphs. But there, I’m afraid, the praise must stop.
Mr Heys now states – presumably through gritted teeth – that ‘the finance business is a great asset to our economy’. But readers with long memories will recall that for many years he was a pillar of Attac Jersey – an affiliate of the Tax Justice Network – who once threatened local bankers with ‘resistance you never imagined both from the floor and from the streets’, while deriding ‘the old excuse of how much finance has contributed to the economy’. This sounds to me less like a real change of heart than a cynical deceit.
The TJN likes to pretend that it is not opposed to offshore financial centres as such, but only to the nefarious goings-on that supposedly take place there. In Mr Heys’ version this translates into an assault on tax evasion, the illegal failure to declare income or gains on which tax is due. Most reasonable people would agree that tax evasion is abhorrent, but as he well knows the TJN goes far beyond this, attacking the entirely legitimate use of differential corporate tax rates to lower the overall tax burden on a client or business transaction. Its long campaigns against the Island’s offshore company regime, and the zero-ten regime that replaced it, are clear evidence of this and indeed the TJN seldom differentiates between condemning avoidance and evasion.
For Jersey, though, the distinction is vital because its efforts in the last twenty years have been directed towards shifting the finance industry onto higher moral ground – firstly by weeding out undesirable clients, and bearing down heavily on the laundering of illicit funds; next by extending these safeguards to fiscal offences; then by improving and strengthening regulation across the board; and finally by moving away from aggressive (though still legal) tax avoidance schemes altogether, towards less controversial areas of business. The success of this transition has been repeatedly, albeit sometimes grudgingly, acknowledged by dispassionate bodies of global importance, including the UK Treasury and the International Monetary Fund.
The finance industry of today therefore bears little resemblance to the same industry in the 1970s and 80s. Yet this transformation is ignored by the TJN, and by its supporters like Mr Heys and his moderate friend Ted Vibert. For them, despite a few hollow protestations to the contrary, any stick is good enough to beat a Jersey banker.
The TJN is fond of quoting gigantic numbers intended to illustrate the damage caused by offshore centres – Mr Heys mentions £90 billion – but most independent observers regard such figures as fanciful. Another widely perpetrated myth is that greedy Jersey institutions are leeching potential tax revenues from already impoverished countries, particularly in sub-Saharan Africa. In fact Jersey does little or no business in less developed countries, for the simple (and surely obvious) reason that wealthier markets offer more attractive opportunities.
Moving on to politics, Mr Heys surprisingly alludes to the infamous 2005 manifesto of the Jersey Democratic Alliance, which he says ‘would have been an absolute boon for Jersey’. Mercifully, this theory was never put to the test as the JDA received a thrashing from voters at the ensuing election. In the circumstances he might have done better to keep quiet about that particular episode. Of course, Mr Vibert – now standing as an independent candidate – may have more luck this year. Time will tell.
It pleases Mr Heys and Mr Vibert to paint me as a sycophantic apologist for the finance industry, but this is quite wrong – critical friend would be nearer the mark.
In the past it had plenty of faults, and some of them remain. It is not given to man-made enterprises to achieve perfection, here or anywhere else. But the industry has given a lot to Jersey, as well as working hard over many years to correct its own shortcomings, and to learn from its mistakes.
I wonder whether Mr Heys and Mr Vibert can say the same?
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l applaud your support for the finance industry.
the finance industry are the movers and shakers of world economy quietly behind the scenes setting politicial policy. Now step back and look at the world in every relationship including world finances. Are the unions responsible for the all of it or has it got something to do with the movers and shakers. It is not what is said that changes society but what leaders do.
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Glencore is under the microscope for alleged transfer pricing abuses re its Zaire operations. A company with its top holdco based here and an IPO which some of our top legal firms got involved in. “File on 4″ the well respected BBC Radio 4 investigative programme flagged up the Channel Islands as being used for such abuses and that was barely a year ago. It happens, Mr Boothman, probably more than you care to think.
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I would never describe the finance industry as movers and shakers.
Shakers maybe but movers never.
Currently they are doing the frightened rabbit caught in the headlights act over the Greek debt crisis.
Not to worry though as the IMF, ECB and EC will bail them out of their mess with a big wodge of tax payers cash.
No alternative really, if the Greeks go over it could pull the Spanish banks over with them and who knows when the dominoes will stop falling?
2007 was the beginning, there is still plenty more subprime, wonky debt and God knows what parked on bank’s balance sheets worldwide.
I wonder how much yummy high yielding low grade debt is parked in Jersey or is it all AAA stuff?
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The finance industry was fine when it was smaller and employed Jersey people, including school leavers.
Now it seems to employ people from everywhere EXCEPT locals.
As said in 4 – who knows what is hidden in those banks in town – what about AIB bankrupt, wholly owned by the Irish Government propped up by the IMF and the ECB – not sure why they are still allowed to be in Jersey.
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Mr Boothman,
How did this chap manage to launder millions through Jersey as recently as he did without one of our highly trained finance workers flagging the transactions as suspicious?
A WEALTHY Indian businessman who laundered millions of pounds of money through Jersey bank accounts has had just over £26.5m confiscated.
Raj Arjandas Bhojwani, who owns three homes in three countries, was sent to prison for six years in June 2010 after being found guilty of laundering $43.9m – the
proceeds of corrupt Nigerian vehicle deals – through Island bank accounts.
The confiscation order was made by the Royal Court yesterday and Bhojwani was also ordered to pay a ‘substantial’ contribution towards the cost of the prosecution, which was described as Jersey’s biggest ever money laundering case.
Discussions are now expected to take place with the government of Nigeria about returning some of the confiscated money.
Read more: http://www.thisisjersey.com/2011/06/08/26-5m-taken-from-corrupt-businessman-2/#ixzz1Pv8fXnEB
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The finance industry is nothing but a winner!
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That is pretty easy.
High net worth individual with homes in several countries, doubtless there were impeccable references from solicitors, accountants, business associates, etc.
Passport photocopied, boxes ticked, etc; KYC complete.
Doubtless there was a thick layer of false documentation laid over the dodgy cheques, briefcases of used $100 bills floating around in Nigeria.
If you are going to steal £26.5 million then you can make up loads of paperwork to hide the money, in fact finance professionals in some places will actively help you.
By the time it reaches good old Jersey it is real clean green so it can be invested anywhere in the world with no questions asked.
There are hundreds of millions of dollars, maybe over a trillion a year from drugs, arms, kickbacks on contracts, government money for paying agents, Somali pirates, Iraqi government fraud, etc.
That money goes round and round until it pops up somewhere nice and legal.
It is only a small part of the total financial flows but it is inevitably everywhere.
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Pip,
You need a better understanding how power is held and delivered.
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“Pip,
You need a better understanding how power is held and delivered.”
Running for election in October so you are bigging up the finance industry in the hope of collecting enough votes to win?
AIB does not have any power and neither does Lloyds, RBS and several other banks in the island.
They are state owned vehicles and mere shadows of themselves in 2006.
Jersey; the home of nationalised industries, just not owned by the local state
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Have you taken up Ted Vibert’s offer of a public debate yet Mr Boothman?
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Re 6 and fraud – how did the Belgravia fraud happen? My understanding from watching the BBC programme on this the other month was that there was at least one very dodgy individual involved – who was allowed into Jersey by our glorious authorities. He ripped of Sven Goran Erickson amoungst others and was last heard of in Bahrain.
I thought are authorites were supposed to stop this sort of thing.
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no 12.
There were also problems with 3 east european property funds a few years ago. The Jersey authorities did little apart from try to hush it up.
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The finance industry and tax havens are not just about tax dodgers; they are about “disappearing” millions (allotted to the poor and siphoned off by corrupt leaders) and top-tier financial criminals who, in no uncertain terms, are partly to blame for the latest financial crisis.
Places like Jersey allow illicit money (a large part of which is “stolen” from third-world countries and starving populations) to hop in and out and back in again, until there is so much hopping going on that no-one can keep track of “what’s where”.
Places like Jersey are helping deposed leaders to hold onto their ill-gotten gains. Mainly, because the “loot” is almost impossible to find…seeing as it has been whisked through a complex web of tax havens and thus wrapped “very cleverly” in an impenetrable cloak of secrecy.
And, when the time is right – and those pulling the strings have had a big enough cut -the “loot” will turn up in a beautiful place where these wealthy thieves will be granted impunity and allowed to “shop” in peace.
But, very grudgingly, I have to admit, there are very few people in Jersey who would not be affected by the downfall of this looters’ paradise.
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I agree with what Mr Boothman said in March 2010:
“The Island should be looking to the creative industries to replace the finance industry in future”
“Finance will go the way of cider making and privateering”
http://www.thisisjersey.com/2010/03/11/creative-industries-to-replace-finance/
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Pip, you miss understand me and you are wrong, finance is not state owned the industry owns the states.
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6 and 12. They were discovered in Jersey. Bhojwani is a case in point. It was discovered here, investigated here, prosecuted here, funds seized here, and funds made available to go back to the victim. You think that’s a bad thing? In most other places they would have sat undiscovered.
Jersey’s record of discovery and efficiently dealing with funds found to be tainted is second to none. I’m sorry, I know that doesn’t accord with the leftie Jersey-bashing agenda…
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Pip, you miss understand me and you are wrong, finance is not state owned the industry owns the states.”
Not quite, Jersey is a pit village.
Our pit is a money mine.
If the pit closes the village closes as well.
So any threat of regulation or criticism of the pit triggers a near hysterical reaction on behalf of it’s assorted apologists.
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#5. Then reason they employ all those in-comers is that they don’t want the ordinary Jersey person to know what’s really going on.
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Hmmm, yes Nigel, you’re right, it’s all a massive conspiracy…
Alternatively it could be that many locals are too thick and/or too workshy to work in this complex competitive environment…
Which could it be, I wonder…?
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Pip, therefore who is in control?
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16 Gino Risoli –
Pip, you miss understand me and you are wrong, finance is not state owned the industry owns the states.
This guy is standing for election? might be an idea to learn to spell first. Misunderstand, it’s one word unless you are referring to a lady whose surname is Understand and she is single.
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Sadly I suspect that there is no one on the bridge of the good ship Jersey.
True the States pander to the finance industry more than they should but they have little choice in that matter.
Look at the attempt to cut the budget. ESC is now unlikely to make cuts and I predict that Health will also be spared. The deficit is still looming so what will it be, 12% GST? That could kill any recovery stone dead, stoke inflation and result in a slump in house prices as money is sucked out of the economy and vendors become keener to sell.
We are not out of the woods yet and I doubt that anyone in the States knows where the path is.
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“Alternatively it could be that many locals are too thick and/or too workshy to work in this complex competitive environment…”
How complex and competitive can doing the filing for London be?
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Too true no 24. I know of quite a few of our “Finance Professionals” over here who, as an example, boast about being in the Private Equity business when in fact they are in reality in the office administration and bookkeeping game! 95% of them don’t have the ability and intelligence to make it in the Finance Industry in say London which is why they stay over here or work in other offshore administration centres. And given that we should be grateful that our Finance Administration Industry can provide employment for them.
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Mr.Boothman this so called financial asset is turning into a drain.
Higher moral ground? Something is either moral or it isn’t. Sounds to me like you are trying to justify something which isn’t.
So was what was going on 10-20 years ago immoral in your opinion Mr. Boothman?
As for £1m tax evasion and £1m tax avoidance what is the difference in monetary terms to the tax take of a country? Answer none.
Eaun Mee aka RT I had been led to believe, nay assured, that KYC tests were in place to weed out the bad eggs, so how come some have slipped through the net? How many others are undetected and will remain so?
Do you think the average person in the UK is impressed with some of their major companies going offshore to the likes of Jersey to avoid UK tax? If you do you must be pretty dim.
As Pip has pointed out places like Greece could well bring down the system. Should the PIIGS fail 24% of the UK’s GDP will go down the toilet with them, and Britain isn’t in the Euro. One has to laugh at the stupidity of the rampant capitalistic it will end in tears on its present course.
You are also right Pip that those with a vested interest will fight tooth and nail to keep things as they are even if others lose out in the process.
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#20 Ahhh, the good old “working in finance requires intelligence” line.
I thought that was blown out the water completely by the economic crash, you know, that time it became clear that so many of them were a bunch of over-testosteroned idiots. They might have sat lots of exams, but that’s no replacement for good old common sense, and without common sense good grades are often pointless.
Mind you, I’m biased, because it was the ‘stupid kids’ from our school that ended up having careers in finance.
Anyway, I’ve been told by many finance people that it really doesn’t require any great level of intelligence after all. It’s good to see some honesty among the ranks.
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“the finance industry are the movers and shakers of world economy quietly behind the scenes setting politicial policy.”
Yep. They were one of the overwhelming reasons why the whole planet went into recession! LOL.
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Adrian, in your conversations with the average person in the UK, and on the (probably false) presumption that you want the island of Jersey to be prosperous, please explain to them that the idea of every country and every jurisdiction in the world having identical tax systems and tax rates is nonsensical. Given that there will always be differential tax rates, global companies will organise themselves to take advantage of those jurisdictions where tax rates are lower, in the same way that they will build their factories in countries which offer the most economic terms, or buy their supplies where they can get the best prices. Nothing wrong, illegal or immoral about that, it’s called competition.
You might then explain to joe average that if Jersey was to go down the pan, the capital that flows through this beautiful island and onwards to the City of London will flow elsewhere, to wherever the lowest tax costs prevail. To the other side of the world. And that would make the average man in the UK worse off.
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Just reading in the Sunday papers how Southern Cross the company that runs care homes across the UK cannot afford to care for their frail old pensioner customers yet their multi millionaire company bosses channel their rent through tax havens – such as Jersey.
To me that is morally indefensible.So tell me Mr. Boothman how do you think the people of the UK feel about that?How do you think the people of Jersey like their island to be used in that way?
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Mr Boothman instead of writing letters to the J.E.P justifying the finance industry why dont you try doing what you are paid handsomely for by Jersey Telecom and put pressure on the other overpaid directors and sort out the long runnung problems with broadband in many areas of the island oh and the mobile top up fiasco too !
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#30 John, I read that article in the Times. You ask how ppl in the UK feel about it. I imagine it makes them feel very angry. However, they ought not to be angry with Jersey. The simple fact is that the UK govt. could choose not to deal with the non-dom owned company or could place a direct tax on every deal it does.
Every state is free to set its own level of taxation. There will always be places with higher and lower levels of tax. You can’t blame the haven for tax avoidance. You can only look to the govt. onshore which makes the rules governing how its people are taxed.
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“How complex and competitive can doing the filing for London be?”
If you can make a fortune (and my family income has been around a million a year for several years)for “doing the filing” then presumably you are much smarter than those who do much more complex stuff for a fraction of the take home salary?
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“As for £1m tax evasion and £1m tax avoidance what is the difference in monetary terms to the tax take of a country? Answer none.”
Adrian, you don’t understand basic logic. I would be embarrassed to post such unintelligible claptrap. You could just as soon say:
“What is the difference between claiming childcare relief because you have children and fraudulently claiming childcare relief when you don’t, in terms of the tax take of a country: none”.
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What has the Finance Industry done for Jersey?
How about:
Put house prices out of reach for ordinary working people.
Created a greed culture.
Created wide social division.
Brought Jersey in to disrepute with other parts of the world.
Killed Agriculture and Tourism.
Helped turn Jersey into a concrete jungle.
Been responsible for increased taxes on the less well off to further its profits.
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I can only speak for myself.
It allowed my parents to earn enough to send me to university. I was the first member of my family (on either side) to do so.
It enabled me to return to Jersey to a well paid and intellectually challenging job.
It creates opportunities for locals to work for local businesses and global businesses without having to live in a city.
As a percentage, it employs more locals than any other industry on the Island.
I’m not saying its perfect, but look at other comparable islands without a finance industry: say Anglesey, Alderney, the Isle of Wight. There is nothing there for the younger generation to do.
Without the finance industry Jersey would be a large retirement home with no well paid jobs and no idea of how to fund its health bill. That is the reality.
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N#34 Roger Phlegm
I’m afraid that your analogy doesn’t work in the countries of Australia, Canada and New Zealand, who show no distiction between tax avoidance and tax evasion.
I also understand that the UK (amongst other countries) has been looking at introducing a general anti-avoidance rule in the future – so that weakens your analogy even more.
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Ben #35
Consise, to the point and entirely correct.
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Boothman…was not without ability….but sold out…you know it John…and WE know it…Hasta La Vista baby….
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Gary,
Jersey has its own general anti-avoidance rule, in case you hadn’t noticed.
My point is simple: just because two events have the same effect doesn’t mean they are morally equivalent. Otherwise you could say “what’s the difference between someone dying peacefully and being murdered: none, they both end up dead”.
Avoidance is simply legally arranging your affairs in such a way as to minimise your tax. How you make illegal something that is expressly legal (because if it wasn’t, it would be evasion) is moot.
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Mike I think you are confusing competition with exploitation.
Do you really think that if Jersey moved away from finance that it would make people in the UK poorer?
As far as I am concerned the sooner the uneven playing field of avoidance is done away with the better.
donald in the early 70′s they were saying the same about tourism and agriculture then along came the “f” word. This is now workshipped by more and more people. It has fueled the service to self culture that is destroying the island’s good points one by one.
The reality is Jersey has dug itself an even bigger hole by bringing in loads of people over the last 50 years. Many of these people are now retiring along with the island born babyboomers. This will require yet more immigrantion. It is nothing but a great big ponzi scheme and it will fail once it reaches critical mass.
A short term gain often turns into a long term loss. This is why long term planning is so important. Fail to plan and you plan to fail.
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maybe a local benefit – although i am unsure how positive – but what about the unseen costs to other jurisdictions through loss of tax? the harbouring of skimmed off/drugs/other illegal money from overseas? the vulture funds? etc…
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The finance industry has not actually “given” Jersey much at all. It has grudgingly paid enough dues to buy us better lives than the comparable islands like Anglesey and Wight that someone cited, that’s all.
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Adrian, absolutely, unequivocally, undeniably, indisputedly YES. And to put it as simply as I can, the capital would be invested offshore elsewhere, and jurisdictions on the other side of the world do not invest the same high proportion of wealth into the City of London as Jersey does. Really sorry that you don’t get this, because it is fundamental in understanding the UK’s attitudes to the Channel Islands.
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Roger your analogy of dying peacefully or by way of murder doesn’t fit either. The area of evasion and avoidance is very grey. Yes, in many countries avoidance is legal – but is it dying peacefully? That, I believe belongs to those who pay all taxes due rather than using loopholes in local laws. In other countries, where the distinction is minimal (both being illegal), I suppose you could say that avoidance would liken to manslaughter when evasion is measured by murder.
Re the jersey anti-avoidance rule – those who it is trying to catch pay minimal tax already.
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32.Jonty
I agree with you but Jersey Finance actively promotes itself as a place to avoid tax,for much of its business that is its sole purpose.But i think the UK is getting fed up with Jersey exploiting these loopholes with complicated financial structures.They may be legal at the moment but the UK is increasingly looking at putting a stop to these schemes.Its already started with the closing of the minimum consignment avoiding VAT scam which was originally brought in for the export of perishable goods but has been hijacked by those selling cheap CD’s.Now we have very high level people looking at so called vulture funds operating out of the island to the detriment of impoverished third world countries.Countries are getting fed up of places like Jersey depriving them of funds that should be staying in their own country.Jersey may have a future in financial services but the door of tax avoidance is definetly closing due to protest groups and government interaction
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36.Donald Pond
Without the finance industry Jersey would be a large retirement home with no well paid jobs and no idea of how to fund its health bill. That is the reality.
The reality is Jersey hasn’t always had a finance industry and before it arrived the quality of life was excellent and the envy of many.Nowadays the quality of life is only excellent for high earners
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David what has finance done for Jersey? On the quality of life front it has degraded the island substancially. Finance now has Jersey on the back foot as Jersey has adopted the standing on one leg approach. At least in the 70′s and 80′s it could tell finance to go whistle.
So mike Jersey is so vital to the CoL that it has to stand. What a load of baloney. If it was such a great player as you say it wouldn’t need London would it? It would plough its own furrow and the EU would be a minor inconvenience instead of a major obstacle.
As for the difference between your analogy and mine it is simple, one affects only the taxpayers in the country in which it occurs the other affects taxpaying citizens in another country. Fancy another country putting up your tax bill or having degraded services because of it? You might but others don’t.
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