Nick Shaxson ■ Jersey: the fall of a Finance-Cursed tax haven

Jersey tide

Jersey at low tide. From The Heavens – the new tax haven photo book from Paolo Woods and Gabriele Galimberti

A new article in the Guardian Long Reads series, entitled The fall of Jersey: how a tax haven goes bust. (Not as dramatic as this one, but still.)

The article heavily features Jerseyman John Christensen, TJN’s Director (along with Richard Murphy of Tax Research UK, who has been influential in TJN’s history.)

Jersey’s financial sector has done very well out of offshore finance, for decades: but now there’s trouble at t’mill:

“In April, officials announced that the budget would be short £125m a year by 2019. “What went wrong?” asked the Jersey Evening Post. And that was just the start of it. By June, the annual deficit – now known on the island as the “black hole” – had been revised upwards to £145m, more than £1 in every five that the government spends. “The black hole is so big,” according to Connect, a Jersey business magazine, that “filling it will take the equivalent of shutting down every school in the island, laying off every teacher, letting the parks turn into overgrown jungles and having our roads literally fall apart.”

Which is something that Murphy in particular has been forecasting: congratulations on that dogged foresight.

The Guardian article by Oliver Bullough contains Jersey’s own Colin Powell for endorsing TJN’s view of tax havens as places that offer the wealthy escape routes from the tiresome duties and responsibilities of society:

“If the attractions of Jersey as a low-tax area stem from the high levels of UK taxation, the island should not be criticised for offering an escape,” Powell argued, in a study of Jersey’s economy published in 1971. In other words: if laws are dumb, there is nothing wrong with working around them.”

We have put it like this:

“Loosely speaking, a secrecy jurisdiction [or tax haven] provides facilities that enable people or entities escape (and frequently undermine) the laws, rules and regulations of other jurisdictions elsewhere.”

Our emphasis added. One could almost describe this as a super-concise two-word definition.

And Powell describes something else we’ve described in great detail: the ‘captured state’ phenomenon where democratic debate is deliberately sidelined in an effort to ensure that skittish offshore finance doesn’t get challenged.

“They know that Jersey has political stability, doesn’t have political parties. It’s not going to be faced with a sudden swing to the left, or swing to the right, or whatever direction, a change of tax arrangements. It’s also got fiscal stability,” Powell explained, during a long evening interview in his surprisingly modest office in St Helier.

Our emphasis added again. Many visitors to Jersey would be astonished that a place that feels so remarkably British is so politically alien. Powell’s words again remind us of other aspects of our explanation of what tax havens or secrecy jurisdictions are:

“Secrecy jurisdictions tend to be ‘captured states’, where offshore financial services tends to be deliberately ring-fenced and insulated from domestic political opposition. Relevant laws and approaches to the industry are created by small numbers of professional insiders in the jurisdiction in collaboration with offshore financial services interests from elsewhere, with the civil service often providing little more than a rubber-stamping service. Most of our narrative reports for the larger secrecy jurisdictions find the ‘captured state’ phenomenon to be relevant, as does TJN’s research into the so-called Finance Curse.”

In our country reports on Jersey and many other tax havens, we’ve found this phenomenon again and again and again: each with its own local peculiarities. In Jersey’s case, it comes alongside astonishing corruption (and do briefly look at that link, if you have time).

Packaging all this bad stuff up is the Finance Curse, a TJN-developed concept that the article describes in detail:

“With high property prices, a brain drain into financial services, successive governments favouring banking over other industries, and a revolving door between finance and public administration, the parallels between Jersey and its larger island neighbour are too obvious to ignore. In fact, the Tax Justice Network has a name for the phenomenon: “the finance curse”.

“For two decades, I’ve heard Jersey politicians promising to diversify the island’s economy, but the island is now more dependent on offshore finance than it was 20 years ago,” Christensen said. “If George Osborne is serious about wanting to build a northern powerhouse, he should read up on the finance curse and take appropriate measures to tackle the dominance of the City of London.”

There’s oodles more to this article: now read on. Soon available on podcast.

Related articles

Comments • 1

  • December 8, 2015 - 5:13 pm

    A simple cure for the financial curse: dynamically set (with monthly release of ONS labour market statistics) bankers’ top-rate income tax to ten times the percentage rate of unemployment, and make the bank-levy a simple presentation to those banks of the cost to the state of paying out unemployment benefits.

    In other words a feedback mechanism between the performance of the economy and taxes on the financial sector and its participants.
    Would RBS’s Global Restructuring Group have sank so many SMEs to grab their assets cheap if we had this system in place instead of Alistair Darling’s one-off Bonus Tax?

    If this was done in the UK tonight, it would change the entire Globe in the morning, because of London being the financial centre it is.

    You want Tax Justice, I can’t think of a more just tax than

  • Leave a Reply

    Your email address will not be published. Required fields are marked *

    This site uses Akismet to reduce spam. Learn how your comment data is processed.