Friday, July 23, 2010

letter to JEP. 23/07/10

Letter to the Editor of the Jersey Evening Post

23rd July 2010

Why do the States favour non-resident companies on tax

while still pretending Jersey is not a tax haven?

Pat Lucas

I would like to congratulate John Clennett, former Treasurer to the States of Jersey, for his excellent Letter to the Editor dated 16.7.2010, in which he explores the root causes of Jersey's fiscal black hole. By pointing out the correlation between the projected deficit exceeding £64 million for 2010 and similar amounts for the following two years with the implementation of Zero-Ten it is perfectly obvious that our economy is in this deplorable mess as a direct result of Zero-Ten.

As far back as May 2005 Richard Murphy of Tax Research UK and adviser to the Tax Justice Network warned in a report prepared for the States of Jersey that this huge deficit would occur if our government pursued the Zero-Ten option. At the time he said the new laws underpinning Zero-Ten " not appear to meet the requirements of that Code (the EU Code of Conduct) and might also breach some other EU requirements." The States of Jersey ignored the warning and now, 5 years on, the Treasury Minister tries to blame the global recession for our predicament.

The global recession is not the reason why a Goods and Services Tax was introduced. Neither is it the reason why our Government wants to hike up the rate of GST to 5%. These measures are necessary because the European Union has expressed its concern that the details of the Zero-Ten policy continue to contravene their attempts to remove harmful tax practices. As Mr Murphy advised in 2005 "...this law (the zero-ten policy) reproduces the ring fence that exists under existing Jersey tax law which has largely ensured that only companies owned by Jersey residents have been taxed whilst companies owned by those who were not resident have, in the main, not been taxed. As such this provision contravenes section B2 of the Code."

Mr Murphy also made it clear that "The new 10% tax on the profits of financial services companies is in contravention of sections B1, B2, B3 and B5 of the Code"

It is proposed under this law that only finance companies regulated by Jersey Financial Services will be charged at 10% unless those companies are undertaken through Special Purpose Vehicles. To date those are mainly companies understood to be operating in the financial services but which:-

"(a). are not owned by Jersey residents;

(b). supply services within Jersey but for the benefit of persons not
resident in Jersey;

(c). undertake a very limited range of transactions for which they are
specifically incorporated, each of which may have little or no
economic substance within Jersey despite taking place there;

(d). are deemed not to be resident in Jersey despite meeting all the
normal tests for being so including being incorporated there, holding
all their directors' meetings there and undertaking all their
commercial transactions there."

Why do the States persist in giving favourable tax treatment to non-resident companies while still trying to pretend that Jersey is not a tax haven? Who benefits from this Zero-Ten legislation? Why have warnings about its acceptability to the EU been consistently ignored? Why have those who have tried to advise Jersey to opt for fairer and more sustainable tax options been referred to as "not friends of Jersey"?

In 2005 we were advised that:-

Individually and in combination these factors ensure that the new law
will fail tests B1, B2 and B3 of the Code. The discretion granted to
the JFSC to deem any activity undertaken by an SPV ensures that
the new law will also fail test B5 of the Code.

It's time to wake up Jersey! Let's take heed of what is happening and stop kidding ourselves. Our deficit is a consequence of the choice taken to adopt the Zero-Ten policy. So much easier, isn't it, to blame the global recession than to face up to the fact that our present tax system is not only grossly unfair but, for that very reason, is most unlikely to meet the requirements of the EU Code of Conduct.

Another sticky topic which our government seems reluctant to face up to.

Thursday, July 15, 2010


Working paper from the Kent Business School

by John Christensen and Mark Hampton


Tuesday, July 13, 2010

(due to technical reasons I have had to post this comment as an article,blogmaster . 13.07.2010)
Anonymous said...

Clearly Jersey does not have a functioning democracy and this was shown at the recent by election for Senator. About 15,000 people voted; of these about ten thousand voted for the Establishment, and “elected” Le Gresley, whilst five thousand voted for the “progressives”. The level of abstention says it all; 75% of the electorate did not vote. That is not a functioning democracy and those elected under such a system cannot really claim very much legitimacy. That 40,000 did not vote is a sad indictment of the system.

Did they all not vote because they are basically content with their lot and with the existing political set up? I would argue that there is a great deal of cynicism about government and although there is a desire for something better, they do not know how it can be achieved. Many have given up waiting for change; others have simply been ground down by a political machine that resists reform and modernization.

The essential reason is that capital, in the form of the finance industry, has captured the island economically and politically. But, you say Banks don’t have votes. However Banks don’t need votes when they own politicians. Jersey, you see is a Bank; and Banks are not democratic institutions. Capital has no need for any other form of government than that which already exists. It functions quite adequately; prioritising the interests of finance at all times. Thus new innovative legislation favouring finance comes through without dissent – protected cell companies; egaming etc. The latter was sold with the official propaganda that in its wake would follow higher speed internet connections for average joe. Meanwhile social legislation struggles. Indeed legislation on discrimination has just been axed as part of the initial 2% cuts. Is much dissent heard about that “cut” amongst the clamour for saving life guards at Havre des Pas and school milk?

Senator Le Gresley was “elected” precisely to prevent candidates who support reform and democratisation from being elected. Ineffective and ultimately loyal, he will pose no challenge to the status quo.

There is hope however. The current proposed cuts are provoking a degree of resistance. The Teachers have led the way, albeit in a tentative fashion. Workers are beginning to recognise their interest as workers and the need to protect their jobs. There is a dawning that the government runs the island exclusively in the interests of wealthy non residents who happen to hide their money in institutions that operate out of the island and whose only loyalty is to those clients and their money.

As the programme of austerity begins to bite there will be a period of fear and uncertainty; then resistance will begin. The government is unaccustomed to direct class warfare. To date it has been possible to buy social harmony with economic prosperity. Now there is an assault on public services with plans for cuts, motivated in part from a genuine deficit, but more so from ideology. The government serves the interests of the wealthy and will not raise taxes on its natural supports. It is obliged by virtue of its commitment to running a low tax regime, to keeping corporation taxes low. So low that the state is unable to raise the money it needs to provide essential public services for the ordinary citizen. The government is prepared to sacrifice the interest of working people to keep the finance industry in a low tax environment.

Sunday, July 11, 2010

From: PAT LUCAS 11.07.2010


First, I must point out that Attac is not a political party. Neither is the Tax Justice Network of which Attac Jersey is a member.

These are two non-governmental organisations with distinct brands of their own and whose aims are to research, educate and campaign to further public awareness. Both seek to alleviate poverty through the creation of just taxation systems to fund social goods.

As may be expected we favour certain political philosophies, politicians and parties more than others and are prepared to help them. This is democracy at work. But we are not a party so please do not lump us all together. It’s unfair to all concerned.

In response to the last posting I agree that if we look at the numbers of votes in the recent election Jersey does have a democratically elected government and Francis le Gresley easily topped the polls. No doubt about that. Well done Senator le Gresley.

However, I disagree entirely with the statement that, “…there just aren’t as many unhappy people as (we?) seem to enjoy believing there are?” I wish to make it quite clear that I do not assume that only happy people vote in elections. And I certainly do not relish the unhappiness of others. What we need to find out is who is unhappy and why they’re unhappy about the way Jersey is governed at present. That might give us a big clue as to why so few people vote in elections.

You speak of this environment of spending cuts, rising unemployment, rising taxes and a supposedly growing level of dissatisfaction with the present government structure.

Convinced that they are not heard by the “Very Important Ruling Party” many have stopped voting after years of trying to have their voices heard. They’ve seen their Island taken from them, large parts have been covered in concrete, the tax avoidance industry has taken over from tourism and agriculture and other ventures which might have been given a chance to flourish but have been stifled under the lead weight of finance. Some simply cannot understand how our government works, who to be wary of and who to trust.

At election time there are a few opportunities to listen to the candidates. Anyone can go along to the hustings; some can ask questions, others don’t get a word in either because of lack of time or because they’re not used to speaking up in public. Others can’t do much at all for reasons of their own. After the hustings and the elections there’s usually a decent write-up in the JEP about it. Good. Quite good. But a lot more needs to be done if we are to enjoy the democracy so many deserve.

Why not help people to understand by running programmes on Channel TV and Radio Jersey as a matter of course? The individual candidates and parties might enjoy setting out their stalls during the time leading up to elections. Why not have greater audience participation? We need ongoing debates all year round so that people can hear various sides of the arguments, ask questions and learn as much as they wish to learn in their homes as well as outside. Don’t let’s jump to the conclusion that people would find this boring. It’s up to all of us to make it lively, relevant and interesting and open.

We need more honesty and openness if people are to believe what is said. Surely this is democracy in action?

They wonder why they have to pay tax and why our Jersey businesses have to pay tax to keep the Island going while finance, national and international businesses pay little and, in some cases, nothing at all. They wonder why they are getting poorer and risk losing their jobs while those who have thrown away so much of our Island’s money on mistakes and useless projects are doing very nicely thank you.

You say that the petty bickering among some of the politicians does nothing to inspire the population with confidence. I totally agree with you. We need debate, discussion and relevant research. We don’t want inappropriate bickering.

As for coming up with policies to replace our main source of income I must draw your attention back to our blogsite to Plan B for Jersey

To quote Richard Murphy, “never again can it be said we have not delivered an alternative. Because we have.It is radical. But it has Jersey’s strengths at its core, exploitation of a new market as its focus and it is consistent with the state of Jersey finance as it says it is”

Monday, July 5, 2010



From Tax Research UK

Jersey is not a good neighbour


Date: Sun, 4 Jul 2010 21:32:42 +0100
Subject: [Intertax] Plan B for Jersey (or any other secrecy jurisdiction you care to name)

Jersey has just launched a public consultation on the future of its tax system

I have written a submission but show that at the heart of Jersey's problems is the fact that it remains a secrecy jurisdiction - and their market is dying

So I have written a new industrial strategy for Jersey - which is radical and transformative and could make them a lot of money. I have challenged them to become the MOST transparent jurisdiction in the world - the place where honest people will choose to do business because everything will be on public record

They say they have nothing to hide. Plan B says in that case you've nothing to lose and everything to gain by going for transparency.

Until now Jersey was not ready for Plan B - it's crisis was not big enough for it to embrace change.

Now it is - the deficit I forecast five years ago is overwhelming them.

but never again can it be said we have not delivered an alternative. Because we have.

It is radical. But it has Jersey’s strengths at its core, exploitation of a new market as its focus and it is consistent with the state of Jersey finance as it says it is

The only possible reason for not doing it is Jersey’s finance centre really does not do what it says it does,,,, But that’s another issue

Best regards


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