Your all in one Ritchie post today

The government frequently says that it cannot change the law in the UK’s Crown Dependencies and Overseas Territories as they are independent jurisdictions. As a result it pretends there is nothing we can do about the fact that they are tax havens.

This is not true. Start with the names. They are ‘dependencies’ and ‘British overseas territories’. Internationally, they are ours. We are responsible for them.

And as a matter of fact note that as a result the world thinks, and the law accepts, that we are responsible for their foreign affairs. And since offshore is, by definition, all about foreign affairs because it records transactions that do not have their economic impact in the place that records the event then the offshore tax laws of all these places are wholly within the UK’s responsibility and legislative remit.

Yes, let’s return to our colonial ways! You, bastard grotty foreigners that you are, will simply have to do what we whities say you must.

Interestingly, great uncle was a colonial governor: over the years of Gilbert and Ellice, Montserrat, Anguilla, Turks and Caicos…..and the balancing act was to make sure that that colonialism diminished rather than increased.

There is, inevitably, an urgent call for actions being made on tax havens. One way to tackle their abuse is to impose capital controls on money flows to and from them. This is something I called for in Chapter 18 of The Courageous State. I wrote there:

The measures suggested in this chapter are forms of capital control: they are intended to make sure that capital is accountable wherever it is. This is essential if the inevitable increase in the rate of return to capital that has been a characteristic of the last thirty years, and which has been so harmful to the world economy, is to be corrected. The proportion of the world’s income paid to labour has to increase if people are to have any prospect at all of realising their potential, meeting their needs and even of paying their debts, which in itself makes this a matter of self-interest for capital itself.

Erm, did the rate of return to capital increase? I’m reasonably sure that it didn’t. Rather, that there was an increase in the amount of capital looking for a return which perhaps increased the portion of the economy which flowed to capital but lowered the rate of return to each part of it.

You know, those oceans of cash that companies are sitting upon and earning 0.1% as companies can’t think of how to invest it profitably that Ritchie so complains about?

Not employing more members of the PCS is now corruption:

Failing to provide the resources HMRC needs to tackle tax abuse is in itself a form of corruption

How long before not providing public funding to tax campaigners is corruption?

38 thoughts on “Your all in one Ritchie post today”

  1. Aah, yes, the increase in the rate of return to capital over the last 30 years.

    During which time, the zero-risk return by leaving it sitting in a bank or building society has increased from 6% to 0.1%.

  2. As usual, he’s got everything backwards: having an offshore finance industry is a domestic matter, not an international one, and hence not under the remit of the United Kingdom; and the law change in the Isle of Man he mentioned (the decriminalisation of homosexuality) was an international matter as the island was failing to meet its agreed obligations on human rights.

  3. HE fails to realise that people like him, with their idiotic demands for 99% top rate taxation are the cause of the offshore finance industry in the main – a complete tool.

  4. @Iliam

    It’s the Imperialist view of the world – a domestic issue in Foreign is an international matter for the Colonialist power in charge there.

  5. Or maybe I’m just over-thinking it. Is it just as banal as “a domestic thing happening in Foreign is by definition international because it’s not happening where I’m sitting”?

  6. Why not completely integrate them into the UK? I’m sure nobody could object to travelling to, living in, and claiming benefits in Bermuda being treated no differently to Cumbria.

  7. Could one of the many tax experts (in the true sense of the word, not the self appointed sense of a certain person) who frequent this site clarify something for me?

    If I as a UK born citizen, lived here all my life, decide to up sticks and get a nice tax free job in the middle east or some such, and spend 3 years living there, only coming back to the UK for short visits, does the UK have any right to tax my foreign earned income, even if it never hits the UK’s shores? Or can I pile up my foreign earned loot in a tax haven outside of the UK and therefore outside of HMRC’s clutches? What happens if I move back to the UK after 3 years abroad? Does that change things, or is that money safe as long as I don’t bring it into the country?

  8. Your offshore earnings are tax free as you pay UK tax if you are UK resident only.

    They remain tax free wen you return. You can bring them back into the country and they are still tax free.

    Obviously, any investment earnings from them after return are taxable, whether you bring them back or not.

  9. Direct rule could have some interesting unintended consequences. The Bahamas, for example, has become a favoured destination for migrants from Haiti, a lot of them. If it became part of the UK we would be welcoming many of them, perhaps they might find Islington an attractive location.

  10. So there are perfectly legitimate reason for currently UK resident taxpayers to have overseas tax haven bank accounts then? Particularly in this day and age of expat working all over the globe?

  11. Bloke in North Dorset

    Jim,

    And with globalisation there’s going to be an increasing number of people who will be in a position to use those services.

  12. He’s being ahistorical again.

    Guernsey and Jersey are what’s left of what was independent Normandy, and the connection is the Queen.

    G and J could have been subsumed into England, or later on Great Britain, as the rest of Normandy was subsumed into France. I don’t think you’re allowed to do that sort of thing anymore though.

    Besides, why stop there? Why not Canada or New Zealand?

  13. Ritchie ‘ the offshore tax laws of all these places are wholly within the UK’s responsibility and legislative remit’

    Reality – ‘The islands’ established laws, customs and liberties have been confirmed by successive Royal Charters from the
    reputed Constitutions of King John to the Charter of James II in 1687 which secured the independence of Jersey’s
    judicial system from the English courts and granted important privileges, including the right to tariff-free trade with
    England and freedom from English taxes.’

  14. Jim>

    You don’t even have to be non-resident for it to make sense. My brother works about half the year from the UK and half from Germany. His tax arrangements are naturally somewhat complicated. It’s a lot easier for him to be paid into a ‘tax-haven’ account first, then sort out the taxes owed afterwards than to be paid into (say) a UK account and have the taxman presume that all the money there is subject to UK tax and try to tax it.

    Incidentally, all of his work is remote, and some of his work is for a company he part owns along with a few other people: one of them has no fixed residence in any country, others are each in different countries, the service they provide is online, based on cloud servers, sales are spread evenly round the (richer parts of) the world, and incorporation in some jurisdiction or other is largely an administrative convenience. I’d love to see the ducking and diving Ritchie would have to go through to insist – as he would – that that company owes tax here.

  15. Of course most of the UK media seems singularly unaware that with CDOT & CRS automatic reporting, a UK resident with an account in an Dependency/OS Territory will see their information automatically reported to HMRC. Similarly US residents via FATCA. Ironically a way around this would be for UK residents to shift their account to the US, as US banks will be automatically reporting jack shit, per the US govt.

  16. The Meissen Bison

    Dave:I’d love to see the ducking and diving Ritchie would have to go through to insist – as he would – that that company owes tax here.

    I’m afraid you might be disappointed. You’re likely just to get an ex cathedra pronouncement.

    I have spoken. So candidly there.

    Matthew L: I wonder how many of the sanctimoniat will be caught up in this. It could be quite entertaining.

    A lot of aid money too, perhaps. A general rule of thumb is that the wealthiest person in an aid recipient state is the minister responsible for awarding aid contracts.

    The only exception to this rule is where the country has an anti-corruption commissioner in which case he or she tops the wealth list.

  17. ” Similarly US residents via FATCA. ”

    And citizens and green-card holders (even expired ones if not cancelled properly)…

    “as US banks will be automatically reporting jack shit, per the US govt.”

    Indeed. If one were cynical, one might suppose that FATCA, OECD reporting etc. is intended to stop US citizens and residents from availing themselves of even basic banking services elsewhere (even if they live there), and for everyone else to launder their dirty money in the US…

  18. “So there are perfectly legitimate reason for currently UK resident taxpayers to have overseas tax haven bank accounts then? Particularly in this day and age of expat working all over the globe?”

    Hasn’t the All Knowing One described Switzerland as a tax haven before?

  19. It’s like Ritchie read Piketty, who was completely wrong, didn’t actually understand any of it anyway, and now spouts misinterpretations of his own misunderstandings, topped off with demands to send a gunboat.

  20. topped off with demands to send a gunboat.

    As we don’t have any gunboats any more, I think we’ve just discovered what he’s going to spend all that PQE on!

  21. Jim, if in a tax year (6th April to the following 5th April) you are physically present in the UK on fewer than 16 midnights, and present for part of a day on fewer than 30 days, and earn your money wholly outside the UK, then it isn’t taxable in the UK.

    If you spend longer, it gets complicated; how many days in the UK you’re allowed depends on all sorts of factors (when you were in the UK in previous years, whether and where you are working, how many from a list of connections with the UK you have (house, family, etc.)); then there are rules on transit days, on days spent in the UK for emergencies; 105 pages of guidance.

    But yes, if you’re working abroad for long enough, and your visits to the UK are short enough, your foreign earnings will not be taxable in the UK, either when you earn them or when you subsequently return to the UK.

    Although if you keep the money in an offshore bank account that pays interest, the interest you earn once you’re back in the UK is taxable here and it’s your duty to declare it.

  22. Perry, indeed. And oddly enough according to the ICIJ’s own analysis the UK is the 10th most popular tax haven in the Panama papers (the US comes in and # 8 with Nevada, bless).

    https://panamapapers.icij.org/graphs/

    Apart from BVI and Anguilla (ffs how desperate would you have to be), CDOTs don’t figure that highly in any of the analysis. Doesn’t stop the usual suspects including Grauniad and Murphy whining though, even though they know as much about CDOTs and offshore finance as I do about the geography of the brain – i.e. the square root of fuck all.

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