Jersey threatens to break with UK over tax backlash
Island should be ready to become independent, says senior minister after political attacks on finance industry
A barrage of regulatory clampdowns and political attacks on theÂ Channel Islands’ controversial financial industry has prompted one ofÂ Jersey’s most senior politicians to call for preparations to be made to break the “thrall of Whitehall” and declare independence from the UK.
Sir Philip Bailhache, the island’s assistant chief minister, said: “I feel that we get a raw deal. I feel it’s not fair â€¦ I think that the duty of Jersey politicians now is to try to explain what the island is doing and not to take things lying down.
“The island should be prepared to stand up for itself and should be ready to become independent if it were necessary in Jersey’s interest to do so.”
In a Guardian interview, he said strained relations with the UK over the past five years had made it “very plain” that Jersey’s interests were not always aligned with those of Britain.
“I hope that the constitutional relationship with the UK will continue. But if it becomes plain that our interests in fact lie in being independent it doesn’t seem to be that we should bury our head in the sand and say we’re not going to do that.”
For decades Jersey’sÂ tax, legal and regulatory framework has been structured to draw in the financial activities of multinational businesses and wealthy individuals. But a growing backlash has seen politicians in the UK and elsewhere lashing out at aggressive schemes leeching tax revenues from the increasingly stretched public wallets.
FranÃ§ois Hollande swept to power in France last month with a manifesto pledge to stop French banks operating in tax havens.
Meanwhile, Barack Obama has introduced draconian anti-avoidance laws that from next year will require financial companies around the world to report to US tax authorities the details of assets owned offshore by wealthy Americans. Failure to comply will result in punitive taxes.
David Cameron took the unusual step last week of condemning the personal tax affairs of the comedian Jimmy Carr, who was found to be using a controversial avoidance structure involving a Jersey trust company. The prime minister said it was “morally wrong”.
Jersey’s chief minister, Ian Gorst, has attempted to distance the island from this type of activity: “There is no wish or need to accommodate or give encouragement to those who seek to involve Jersey in aggressive tax planning schemes to avoid UK tax.”
But his views are understood to have sparked heated debate among the islands’ senior politicians, with the Treasury minister, Philip Ozouf, later tweeting: “I don’t think it’s the place of our government to comment on the moral application of activity which is legal.”
Ozouf has always said he supported the chief minister’s statement.
Jersey is one of five largely self-governing jurisdictions which make up the crown dependencies â€” the others being Guernsey, the Isle of Man, Alderney and Sark. The UK government is responsible for representing them internationally and for ensuring good governance.
In his March budget, George Osborne announced measures designed to claw back tax revenues leaking from Treasury coffers. “I regard tax evasion â€“ and, indeed, aggressiveÂ tax avoidanceÂ â€“ as morally repugnant,” he declared as he outlined initiatives on stamp duty avoidance, offshore pensions and VAT-free websites.
His comments echo those of Treasury chief secretary, Danny Alexander, who last week repeated his claim that “people who aggressively avoid tax are the moral equivalent of those who cheat the benefit system”. He claimed the coalition was doing “more than any previous government” to crack down on avoidance and evasion.
The chancellor has ordered a Treasury team led by Graham Aaronson QC to work up proposals for a general anti-avoidance rule designed to deter the most artificial tax schemes. Action to create fresh avoidance-busting laws was spurred by the court of appeal’s reluctant decision last summer to wave through one of the most egregious tax schemes in recent years.
The scheme, known as SHIPS 2, involved transactions through Jersey and other tax havens, generating a tax loss that 70 wealthy UK residents were able to offset against income and capital gains tax bills.
It was marketed by the Mayfair firm Matrix Tax Solutions, a now defunct arm of the financial conglomerate Matrix Group. The group’s co-founder and chairman, David Royds, has given Â£110,000 in donations to the Conservative party since 2008.
Two interesting items about how banks work – one an article the other a video.Â Both should be checked out to ensure a better understanding of what happens with our money.
Article: RBS IT cockup: This sort of thing can destroy a bank, normally
Video: 2010 Oscar Winner for Best Documentary, â€˜Inside Jobâ€™ (recommended – may take time to load due to it’s length)