Specifically naming the British Virgin Islands, Jersey, Guernsey, the Isle of Man, Bermuda and the Cayman Islands; Mann said that the Panama and Paradise Papers investigations “confirmed what had long been rumoured: tax havens, and the rules of financial secrecy that underpin them, have enabled the world’s financial elite to hide their cash away from public scrutiny, to the detriment of us all”.
“With out public finances strained, it is an insult to diligent taxpayers that multinational firms and high net worth individuals can use a complex myriad of loopholes and accounting gymnastics to minimise their tax bill.”
Mann cited figures from HM Revenue & Customs from 2015-16 that showed that 6% of tax due in Britain was uncollected – the equivalent of £34bn ($48bn, €38.8bn).
Tax haven merry-go-round
Fighting back against the tax haven label is nothing new for the crown dependencies and overseas territories.
Speaking to International Adviser before Mann’s article was published, Jersey Financial Services Commission’s director general, John Harris, said the island’s status as an international financial centre is a “story that needs to be constantly retold and refreshed”.
“The story is that this island has never had formal banking secrecy. In 1999, it criminalised tax evasion, as a predicate offence for money laundering, which is way ahead of most other jurisdictions. That was a clear shift towards greater transparency and cooperation on the exchange of information.
“Since the late 90s, Jersey has been pursuing a policy of maximum transparency.”
Harris also highlighted the island’s early adoption of the Common Reporting Standard and its proactive strategy of adopting bi- and multi-lateral agreements for the exchange of information for tax purposes.
He also spoke about the myriad of national, international and supranational standards that jurisdictions have to meet.
He specifically referenced the EU and OECD, and the organisations having “somewhat differing approaches about what constitutes fair tax competition”.
“Which then, of course, brings the island’s business model into focus”, resulting in the island’s inclusion on the EU grey list.
“The OECD is broadly saying that the island’s tax model and corporation standards are as high as anybody’s and there is a recent OECD review to that extent.
“The EU is saying, ‘well, we’ve still got some doubts about the potential for unfair tax competition’.”
Harris added that the EU “remains to be convinced on one particular aspect about substance requirements”.
On Wednesday, a spokesperson from the States of Guernsey’s Policy & Resources department said: “In December 2017, the EU Council of finance ministers (Ecofin) reaffirmed that Guernsey was a cooperative jurisdiction in respect of taxation, following a screening against principles of tax transparency, fair taxation and anti-base erosion and profit shirting (Beps).
“In response to some general concerns raised by Ecofin in relation to economic substance requirements in respect of the analysis of fair taxation, Guernsey made a commitment to address these concerns by the end of 2018 and this work is ongoing. Guernsey’s standards of tax transparency are assessed by the OECD Global forum and exceed the required standard.”
The spokesperson added that, if was able to assist the subcommittee inquiry, “the States of Guernsey would be happy to supply any details relating to the information sharing that helps HMRC perform its role.”
In an interview with IA in November, Guernsey Finance chief executive Dominic Wheatley said he was “spending a good deal of time trying to educate people” following the release of the Paradise Papers.
“The key issue […] is to make sure that people are aware that there are legitimate things that are done in the international environment which are better done offshore.”
He disputed the amount of money people and governments believe is offshore. “This is where people’s imagination runs a bit riot and they think this money sits offshore when it doesn’t. All the money that comes into the Channel Islands funnels straight into London.
“We are a conduit into London, we are not a holding place. There aren’t big vaults of hidden money.”