Saturday, August 31, 2013

Treasure Islands

A few miles off the coast of the UK are the Isle of Man, Jersey and Guernsey who welcome economic refugees. They are fleeing not from hunger or misery but  income tax. They don’t arrive illegally in leaky boats but by private jet to be received by waiting Bentleys and Rolls Royces. These are the men and women who want to cheat the tax man.

However the recent recession has caused a dip in those islands’ prosperity and Jersey and Guernsey have reduced the privileges of the rich. The result is a budget deficit paid for, not by the multi-millionaires, but by the workers. It is the Robin Hood effect backwards – taking from the poor to give to the rich.

"If we destroy our financial system, we will become a kind of Liverpool, but with a worse climate," claims Manx Prime Minister, Alan Bell. During the last G8 meeting, he promised to participate in the fight against tax fraud and to "take into account the concerns of London and the European Union," but did not commit to anything concrete. The financial sector accounts for a quarter of the Isle of Man’s economy, there is an advantageous corporate tax rate and the highest tax level is 20 per cent, capped at €125,000 annually no matter the amount of revenue declared. There is no estate tax, not even on capital gains – all a boon to the millionaires.

The wages of the 80,000 residents are close to those of the UK, but the cost of living is clearly higher. Rents are higher and food must be shipped in by boat or flown in by airplane. Budget cuts totalling €35m  will affect seasonal workers (five years of residence are required to benefit from health care).  As for raising taxes on the wealthy, that is clearly out of the question. "This is the worst crisis I've ever known, and I'm no spring chicken," says pensioner Norma Cassell

 Jersey and Guernsey are not part of the EU or of the UK. They are neither overseas territories, nor colonies but are British crown dependencies, with their own flags and national anthems. They swear alliegience to the Queen, pay London a fee for services linked to defence and to diplomacy but they make their own laws, especially regarding taxes.

 Jersey alone, holds €600bn of revenues that are evading taxes, hidden in the accounts of some 50 international banks. More than half of the 98,000 residents are bankers, accountants, lawyers or financial advisors. It is like a giant country club in which, to join, you have to live on the island for 11 years, be worth at least €8m and own a property costing at least €2m.

 Those that are not millionaires or do not work in finance are furious at the 3 per cent hike in VAT, aimed at compensating the drop in revenue due to the greater pressure being put on tax havens. "If we were in France, there'd already have been a revolution. It's unbelievable that we, the poor, have to subsidise the millionaires," complains pharmacist Edith Newman.

 ‘If tax havens exist it's because the elites and the governments have decided that they will," says a fund manager operating out of an office on Royal Square. "We are steeped in hypocrisy. Jersey alone provides €200bn in liquidities to the British banking system, a release valve that was very useful during the financial crisis. If States need money, they will get it from pensions and wages, without touching the very wealthy," he explains.

 Globally, there is said to be about £25 trillion sitting in accounts in these tax-sheltered treasure islands.

No comments: