Officials from Britain’s overseas territories and Crown Dependencies said they were prepared to cooperate with the latest UK government investigation into tax evasion and avoidance, but some expressed surprise that it was felt necessary.
They pointed to a raft of new regulations, including the Common Reporting Standard – an automatic information exchange regime currently coming into force globally – new and pending additional rules on beneficial ownership registers, and the UK’s Retail Distribution Review, which they argue have transformed the so-called offshore financial services industry over the last few years.
The States of Guernsey’s Policy & Resources Committee, for example, noted in a statement that the EU Council of finance ministers (ECOFIN) had 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 sharing” as recently as December, and that it had also formally “committed to the OECD anti-BEPS initiative, and in 2017 signed the multilateral convention”.
Guernsey had committed to address certain outstanding ECOFIN concerns relating to “economic substance requirements in respect of the analysis of fair taxation” this year, but the OECD’s Global Forum had assessed the jurisdiction’s tax transparency standards generally, and found them to “exceed the required standard”, the statement added.
“Guernsey also meets international standards in respect of the sharing of beneficial ownership information…[and] in 2017 went further [by] establishing a register of beneficial ownership and putting in place arrangements to share this information with UK law enforcement authorities”.
These and other comments from other offshore jurisdictions came as the UK Parliament’s Treasury Sub-Committee last week announced a “Tax Avoidance and Evasion inquiry” into “what progress has been made in reducing the amount of tax lost to avoidance and offshore evasion”, and whether HM Revenue & Customs currently “has the resources, skills and powers needed to bring about real change in the behaviour of tax dodgers, and those who profit by helping them”.
Awareness of the inquiry was heightened by the publication in the UK’s Guardian newspaper, also last week, of comments on the matter by John Mann, a Labour party MP who is chairman of the Sub-Committee overseeing it.
In his piece for the Guardian, Mann noted that the British Virgin Islands, Jersey, Guernsey, the Isle of Man, Bermuda and the Cayman “are on the EU greylist of uncooperative tax jurisdictions”, and added: “We should regard it as a matter of national shame that the crown dependencies and overseas territories that fly our flag give shelter to the wealth of the world’s financial elite.”
The headline of the article was “Tax havens are a stain on Britain – the cleanup starts now”, with the subhead: “We need answers about Crown Dependencies and Overseas Territories that help the wealthy dodge tax owed to society”.
Six questions, deadline 31 May
In a document posted on Parliament’s website, the Sub-Committee investigating the tax haven mater invites comment on six questions, with a deadline of 31 May. The questions are as follows:
• To what extent has there been a shift in tax avoidance and offshore evasion since 2010? Have HMRC efforts to reduce avoidance and evasion been successful?
• Is HMRC adequately resourced and sufficiently skilled to identify, challenge and counteract existing and new avoidance schemes and ways of evading tax? What progress has it made since 2010 in promoting compliance in this area and preventing and responding to non-compliance?
• What types of avoidance and evasion have been stopped, and where do threats to the UK tax base remain?
• What part do the UK’s Crown Dependencies and Overseas Territories play in the avoidance or evasion of tax? What more needs to be done to address their use in tax avoidance or tax evasion?
• How has the tax profession responded to concerns about its role in aiding tax avoidance and evasion?
• Where does it [the tax profession] see the boundary between acceptable and unacceptable practice lie?
‘No safe harbour for rogue operators’
Asked for a comment, a spokesperson for the States of Jersey said: “Jersey is not a safe harbour for rogue operators. We run a professional, well-regulated international finance centre that expects companies using our services to pay the tax that is due in the jurisdictions where it is owed.
“Jersey does not want abusive tax avoidance schemes operating in the island.
“Jersey is not on the EU Code Group’s blacklist, and was confirmed as a cooperative jurisdiction. The Code Group is now working with the island, to ensure that this position is maintained.
“The government of Jersey regularly engages with parliamentarians from across the House [of Commons], including the Treasury Sub-Committee. We are happy to provide information to the Sub-Committee on the island’s robust financial regulation and cooperation with HMRC and the European Union.”
Jersey Finance chief executive Geoff Cook added that his organisation supported “the government of Jersey’s continued cooperation with the EU and other global organisations to meet the highest regulatory standards”, and that the island had “made a written commitment to address concerns relating to a perceived lack of legal substance requirements that could lead to profits being registered in Jersey that do not demonstrate real economic activity”.
Anthony Travers OBE, a senior partner with the Cayman law firm Travers Thorp Alberga and chairman of the Cayman Islands Stock Exchange, said Treasury Sub-Committee chairman Mann had, in his Guardian comments, “shown himself to be hopelessly ill-informed about the transparency initiatives which are already in place, and with which the Overseas Territories have complied”.
“Enquiries about tax avoidance should be directed to the EU jurisdictions involved, and references to the Panama Papers will be found to be relevant solely to the Sub-Committee’s investigation of Panama, to which its efforts should more meaningfully be directed,” Travers added.