July 4, 2009
A Novel Idea
The Cayman Islands like to deny that they are a tax haven. Sure, they have 80% of the world’s hedge funds based with them, and one building in George Town has 18,000 companies registered to it . But those things don’t count, right?
Jersey, another ‘not a tax haven’ (despite operating extensive secrecy laws and imposing zero rates of corporation tax) repeatedly insists that it is a “well regulated, transparent and co-operative jurisdiction”.
I once heard Lyndon Trott, Chief Minister of the States of Guernsey, affirm with great conviction that Guernsey is not a tax haven.
Of course, “tax haven” is a crude term. “Secrecy jurisdiction” is better. This is because low/no tax is only one of the pull-factors that attracts tax evaders, criminals, terrorists, irresponsible corporations and corrupt self-serving national leaders to these boltholes for hot money. More important is the systematic secrecy in banking and trust law that allows all sorts of things to go on that a properly regulated jurisdiction would prevent for the good of its general population (albeit to the chagrin of some in minority wealthy elites).
Yet whenever a territory is accused of being a secrecy jurisdiction, the response is always outraged denial. Clearly it’s understood that being a secrecy jurisdiction is nothing to be proud of. No matter whether the accusation comes from the Tax Justice Network, the Organisation for Economic Co-operation and Development or the President of the United States, denial is the default and automatic response.
So here’s a novel idea. How about the territories repeatedly fingered as secrecy jurisdictions come up with their own definition of what a secrecy jurisdiction is – and why they are not one.
But there’s a catch.
The definition has to allow for two things. Firstly, the jurisdiction in question has to be able to explain why it is not a secrecy jurisdiction, under its own definition. Secondly, the definition has to simultaneously be able to finger other territories as secrecy jurisdictions.
There’s a very simple rationale for this. It’s easy to say “we are not a secrecy jurisdiction” if the underlying position is that there are no secrecy jurisdictions. But if that’s the position, then others are justified in replying: “yes there are such things as secrecy jurisdictions – and by our measure, you are one of them“.
By contrast, it is altogether more instructive if a territory can exempt itself whilst incriminating others.
So what I would like to see is the territories typically fingered as being secrecy jurisdictions explaining why they are in fact not such – but why others are. If they can’t do this, then they should stop denying the charge when others level it.
A novel idea, no?
So come on Cayman, Jersey, Guernsey, the Isle of Man, Belize, Panama, Switzerland, the City of London, Delaware, Turks & Caicos, the Bahamas and all the 60+ rest of you, what do you say?
Hat tip to Richard Murphy for the post that got me thinking.
EDIT: Similar thoughts from the Tax Justice Blog, here.
Indeed, as a Tax Justice Blogger pointed out to me this morning, for the light-hearted among us it may be simplest to skip all the complex definitional stuff and just go for this: “a tax haven/secrecy jurisdiction is a jurisdiction that denies being a tax haven or secrecy jurisdiction.”
Tax Research UK » I’m not a secrecy jurisidiction - but you are said,
July 5, 2009 at 8:56 pm
[...] Paul Sagar says: [W]henever a territory is accused of being a secrecy jurisdiction, the response is always outraged denial. Clearly it’s understood that being a secrecy jurisdiction is nothing to be proud of. No matter whether the accusation comes from the Tax Justice Network, the Organisation for Economic Co-operation and Development or the President of the United States, denial is the default and automatic response. [...]
I’m not a secrecy jurisidiction - but you are | called2account said,
July 6, 2009 at 1:00 am
[...] Paul Sagar says: [W]henever a territory is accused of being a secrecy jurisdiction, the response is always outraged denial. Clearly it’s understood that being a secrecy jurisdiction is nothing to be proud of. No matter whether the accusation comes from the Tax Justice Network, the Organisation for Economic Co-operation and Development or the President of the United States, denial is the default and automatic response. [...]
Dan said,
July 6, 2009 at 8:24 pm
As far as I can tell, this post is a long winded way of saying that you have absolutely no idea how to properly and satisfactorily define what a tax haven is. I can’t think of any other reason why you’d attempt to justify such a convoluted burden of proof.
Having said that, and looking into the matter, it really does seem as though there just isn’t any good way to characterize tax havens apart from “places where the tax rate is lower than lefties/officials would like it to be.” According to the OECD, “some tax practices are anti-competitive and undermine fair competition and public confidence in tax systems” – which, note, leaves us exactly no clearer to understanding what qualifies as one.
Paul said,
July 6, 2009 at 10:03 pm
Dan,
as far as I can tell, the following three things are true
1. You don’t know much about the tax have/SJ issue. If you did, you would know that whislt there is no accepted definition of a tax haven/SJ, this is recognised by tax fairness campaigners, who none the less have done extensive work to offer a definition, and explain why no definition is complete.
2. You have not bothered to try and educate yourself about this issue before coming on my blog and telling me I’m being long winded, when this is an issue I work on several days a week and you, frankly, don’t know much by comparison. You could have gone and read the Tax Justice Network website and blog, or the Tax Research UK blog, and searched for what they say about tax have/SJ definitions – but you haven’t. Hence you reveal yourself as fairly ignorant on this matter. If you knew the background debate, you’d see why my post is quite a good rhetorical attack on SJs. Oh, and don’t just quote the OECD. Everyone involved in this issue – on both sides – knows that the OECD is a joke when it comes to Secrecy Jurisdictions. Thus again proving that you don’t know much about this debate.
3. You are completely inconsistent. If you were a genuine freemarketer, you would *oppose secrecy jurisdictions*. Mr Libertarian, are you unable to realise that secrecy jurisdictions are *states* (or arms of states), and by regulating for *secrecy* they are interfering with the free flow of information which is essential if your precious free markey system is to run properly. Secrecy jurisdictions are the most obnoxious forms of state – they legislate to consciously subert the free market to arrogate wealth to themselves, distorting information and encouraging practises like false transfer pricing and encouraging capital flight – thus depriving third world countries of the benefits of the free market you claim will be so good for them. You are so unbelievalby hypocritical on this issue: on other threads you’re Mr-opposed-to-state-intervention…but when it comes to secrecy jurisdictions, suddenly you’re all for defending the actions of states. If your precious unregulated free market is to deliver the promised land you claim, then you have to oppose secrecy jurisdictions as much as you oppose the UK state, or any other.
I would recommend you read a book. Try “Capitalism’s Achilles Heel” by Raymond Baker.
Baker worked as in business for over 40 years, much of it in Nigeria. He is a pro-free marketeer. And he opposes secrecy jurisdictions because they are intensley bad for capitalism. I’d say ignore Baker’s part 3 (his foray into intellectual history is poor; he’s way out of his depth), and you won’t like his call that the free market has to be partly regulated…but none the less I think a (supposed) free-marketeer like you should read his book. Never know, you might have to change your mind about stuff.