Crown Dependencies May Have To Change

[La_Dolce_Vita]

But the issue of social injustice I thought hinged on different things. As an anarchist it is a little tricky trying to understand where this social injustice question really matters for the people who talk about it, maybe the reasons are not all the same.

This is how I see it, and is (as far as I am aware from reading his stuff) the argument that Richard Murphy puts across:

 

We all have a responsibility to pay tax. Conventionally, the thinking is that this responsibility rests on the requirement for citizens to contribute to the social and public services on offer. And you pay YOUR nation's government for these services because YOU will be the one accessing them. This is your SOCIAL responsibility. The government determines how much you pay and that should be that. However, this tax competition creates this situation where people are given the opportunity to reduce the tax they pay and they can do this legally. This act would from my line of thinking be an evasion of responsibility.

 

Now the idea of injustice stems from the fact that it is companies (larger usually than smaller) and people who are wealthy or have incomes above average who have the ability to make use of competitive taxation systems. It is my impression that those of an average or below average income would not be able avoid tax in the same way. And therefore a system of injustice is created whereby the rich save their wealth and possibly make more and the poor remain poor or have to burden even greater levels of taxation.

If this system exists then there is absolutely no reason why the poor should pay their taxes at all. The whole idea of the social responsibility of tax is meaningless when people can decide themselves how much they should pay, which is in effect what tax avoidance is.

 

Now if such a system really does exist then tax havens who benefit the most are just exploiting the ability of the rich to save their money, and are doing well at it. But of course there are many other nations which also operate as tax havens in setting competitive tax rates. It is not the tax havens who are only at fault or are part of the system.

I do think that if I am right about what I have wrote then it would be wonderful if this system could be eradicated, albeit slowly. I don't care one jot whether the ending of the tax haven status reduces the Island's economy to the equivalent of Arran if it reduces this social injustice, but it would have to be slow because people's livelihoods are at stake. But it also means preventing all forms of tax avoidance. But in the current system I don't see how this is possible?

[manshimajin]

LDV my comments aimed to think things through a bit laterally. People like Mr Murphy take a very 'conventional' and UK-centric perspetive of what is 'right' and what is 'wrong'. Oldmanxfella's comment that 'low tax areas are bad' also got me thinking.

 

What is a tax haven?

• A country that does not disclose information to other countries about accounts or business arrangements within its legislature?
  
• A country that has not implemented anti money laundering rules?
  
• A country that has significantly lower business or personal taxes than neighbouring states?
  
• A generally un-cooperative regime?
  

For example is Ireland a tax haven because UK companies relocate there to take advantage of the beneficial tax system? Is it a tax haven because unlike the UK and IOM it only taxes temporary residents on income remitted to Ireland not on worldwide income? Is Luxembourg a tax haven because it has a zero tax rate for many businesses?

 

I think that the UK Treasury is very unclear as to what its objections to the IOM are. My impression is that it is a combination of having Crown Dependencies with lower tax rates than the UK geographically close by, a diversionary reaction to the £500 million KSF funds issue and some vague idea that the Crown Dependencies may not disclose information.

 

If the UK objections are based on lack of information exchange I understand that the IOM complies fully with the EU Savings Directive and has information exchange arrangements in place with a large number of countries including the UK. If it relates to money-laundering then I also understand that the IOM has comprehensive money-laundering controls in place. If it is because we have lower taxes then my other argument applies - don't criticise us for having lower taxes than you - run your country more efficiently.

 

I accept that we all have a responsibility to pay taxes. But I suspect that there is a connection between tax avoidance and the perception of 'value' that is delivered for the taxes you pay. Hence my Finnish example of a very high tax regime that is generally well accepted by its citizens - in contrast with the UK. And tax crime is not just using tax havens but is the black economy that some tradespeople are involved with or non-disclosure of income or social welfare fraud.

[La_Dolce_Vita]

It may very well be that the motivations behind the UK's ambivalent attitude towards the Crown Dependencies is to do with the fact that they have low tax rates. But such criticism would not stand up nor would it really make any sense. The Isle of Man in the current global system is entitled to set its own tax rates. I don't think jealousy of the Isle of Man and Channel Islands has much relevance at all.

 

I accept that we all have a responsibility to pay taxes. But I suspect that there is a connection between tax avoidance and the perception of 'value' that is delivered for the taxes you pay.

 

This again is what I don't understand. If you don't think the public services of your nation are good enough it does not seem logical to pay your taxes somewhere else. Unless you are talking about people who are moving to the Dependencies who will actually benefit from better services.

 

Hence my Finnish example of a very high tax regime that is generally well accepted by its citizens - in contrast with the UK. And tax crime is not just using tax havens but is the black economy that some tradespeople are involved with or non-disclosure of income or social welfare fraud.

 

Oh I would certainly agree that if the government spends people's money in a way that is acceptable then there are no issues, if people think the money is being badly spent then you have big problems.

 

Nobody is saying that the social injustice issue, if that is the main issue, is crime in the normal sense. Though if rich people are able to find ways to pay less tax unlike the majority and people think that it is okay for the rich to be able to avoid tax then it seems to me that benefit fraud should be allowed to take place without punishment.

[triskelion]

If the UK objections are based on lack of information exchange I understand that the IOM complies fully with the EU Savings Directive and has information exchange arrangements in place with a large number of countries including the UK. If it relates to money-laundering then I also understand that the IOM has comprehensive money-laundering controls in place. If it is because we have lower taxes then my other argument applies - don't criticise us for having lower taxes than you - run your country more efficiently.

 

I accept that we all have a responsibility to pay taxes. But I suspect that there is a connection between tax avoidance and the perception of 'value' that is delivered for the taxes you pay. Hence my Finnish example of a very high tax regime that is generally well accepted by its citizens - in contrast with the UK. And tax crime is not just using tax havens but is the black economy that some tradespeople are involved with or non-disclosure of income or social welfare fraud.

The information exchange agreements are of, from a certain perspective, not all that great. At least, that seems to be the opinion of the TJN. Basically, before a country can use a tax information sharing agreement, they have to have evidence of a 'smoking gun' - they already need to have evidence of wrong doing. Conversely, there is a definite privacy argument, whereby I don't see why foreign authorities should have the right to rummage through the people's accounts looking to see if they are up to no good. Demanding to look in every house in Douglas in order to weed out any meth labs. In summary, although the OECD is positive about tax information sharing agreements, those who demand a much harder line against tax havens don't place much in them.

 

The guy from the TJN also claimed that only 1% of all money-laundering cases are actually detected, though there may be reason to think it is higher on the Isle of Man, as he himself admitted the Island is one of the better jurisdictions. Indeed, he branded London the worst, describing it as something like 'the grand-daddy of them all.'

 

I am unconvinced as to the argument that tax avoidance is necessarily linked to the perception of 'value for money.' If that was the case, the UK would be experiencing a severe brain drain, as the better educated and informed moved out. People don't take out life assurance bonds because they don't think the UK Government will spend their inheritance tax well - they just don't want to pay it.

 

It isn't about efficiency either really, in my opinion, its about attitudes towards the state. On the IoM, and in the UK, there is the entrenched idea that all levels of Government should be trying to spend as little money as possible, which isn't really very ambitious. Large capital projects are shunned, but then people complain that they are either poorly managed by inexperienced staff and contractors, or that the work depends on expensive imported skills. In places like Spain and Finland, however, there is a great deal more investment in infrastructure and facilities. Here though, the attitude is much "Better please, but do it for less money.'