August 14, 2000
Free Jersey
A plucky little island stands against a world wide
tax regime.
CHANNELING
THE RAGE
What
is it with the Queen's loyal subjects? It's always the most loyal
who create the biggest fuss. I have gone on about Ulster,
again
and again,
but this time it's Jersey that is creating a fuss. No, not that
Jersey, it really has been more than two hundred years since Ellis
Island was under the crown, or the jackboot of Imperialist London
for all the Mel Gibson fans. No this is original Jersey, a small
and pleasant island off the coast of northern France, which due
to a long and involved history is under the British crown but is
not part of the United Kingdom. It has got in a bit of a rage recently
about being labelled an offshore tax haven, and there is a possibility,
small but growing, that it may secede.
THE
NORMAN LEGACY
Jersey
is in fact, like two of the other three channel
islands, a constitutional leftover from the Norman conquest.
It is in fact not part of the United Kingdom, but a duchy, whose
Duke is the same as the British monarch. Like the duchies of Normandy
and Brittany these were part of the Norman king William's powerbase
in Northern France before he invaded England. More than nine hundred
years later they still share the same monarch, and Britain looks
after Jersey's defence and foreign policy. There is a large amount
of autonomy with domestic political decisions being made by the
island's States General. And this includes tax.
FINANCIAL
SERVICES
Jersey's
economy used to be fairly rustic, based on fishing, agriculture
and tourism. Tourism, mainly from Britain, is in a natural long
term decline as jet travel makes places like Spain and Florida more
affordable to the average Brit. Agriculture and Fishing have both
been ruined by the cack handed policies of the European Union –
which Jersey ironically does not belong to (it's the duchy and kingdom
thing). This leaves one area where Jersey can make its money, financial
services. With the lower taxes, the recourse to British law, a highly
educated local workforce and banking secrecy, Jersey has done well
from financial services, to an extent that some claim that 80% of
it's income comes from this source.
NANNY
WOULD LIKE A WORD
This
success is not appreciated everywhere. The Soviet-sounding Organisation
for Economic Co-operation and Development (OECD) has produced
a report
on tax "havens," which lists Jersey as among others who
have low tax rates and banking secrecy. Supposedly low taxes and
respecting tax payers privacy are "harmful tax practices,"
competition being fine for Microsoft but outrageous for governments.
Therefore appropriate measures will be taken against Jersey if no
measures are taken in the next year. That Jersey has a higher rate
of Corporate Tax than Ireland is not mentioned, because Ireland
is a medium size country with diplomats and a sizeable diaspora.
So the tax "havens" that they are concentrating on are
places like little Jersey. If it was just a case of being named
and shamed this would be bad enough (it may even be free advertising)
however it is being backed by force of sanctions. The international
community wants to close the loopholes.
THE
JERSEY PATRIOT
There
is some hope Jersey is standing up, for now. The main source of
pressure is bound to come from the European Union through Britain.
If Jersey were to secede from Britain, which through a constitutional
quirk it is able to do, then there would no longer be internal pressure,
but external pressure. So Jersey can keep its financial services.
Simple. As you can imagine this is not a course favoured by the
gutless elites that all modern societies seem to be cursed with,
but Jersey does have some hope, in one of the Senators, Paul Le
Claire. Senator Le Claire is tabling a proposition
in the local legislature calling for a referendum on independence,
and a local TV poll shows that he has 68% support for his stand.
He is also attracting attention from the Tories with the populist
(but not too popular) Tory spokesman John Redwood speaking up for
Jersey. Although the Jersey
government is taking a strong
line, for the moment, on this issue; few believe that they will
stick to it. The immediate cause is the European Union's recent
summit in Portugal, which has moved to end anonymity across the
Union (and beyond, including Switzerland). In combatitive form he
accuses the international community of treating Jersey as a "sacrificial
lamb." If the clamour for independence becomes uncontrollable
then we may see Jersey as the new rogue nation.
NO
TAXATION WITHOUT…
Sovereignty
may be a very splintered thing, but surely it must include the right
to set your own taxes across the whole range of economic activity.
In practice this will be circumscribed by human behaviour, as Britain
has found out with its now endemic tobacco and alcohol smuggling.
However, this still stands, for without the power to set taxes then
national governments become mere branch offices of the central tax
setting authority. You do not have to be a militia member or a Bilderberg
believer to see this. You can understand the governments' thinking
on this matter, the people who have always been heavily taxed because
of their relative lack of votes, the entrepreneurs, the investors,
the beneficiaries of wills and the high earners, now have leverage.
Offshore finance is more accessible than ever, and bloated governments
hate it. Some will even argue moves to dictate tax rates will increase
sovereignty, but these types have as much intellectual credibility
as those who argued that one party states increased real choice,
or that socialist economies increased real freedoms.
THE
PATTERN
There
is a pattern
to all this. The European Court
of Human Rights have overruled Liechtenstein's
absolute monarchy and the Channel Island of Sark's
feudal constitution, while the British Foreign and Commonwealth
office has been interfering with Caribbean laws outlawing homosexuality.
France was more blatant when it condemned the harmless principality
of Monaco as a "rogue state" for its tax practices, truly
cheapening this disreputable term. Any British attack on Jersey's
sovereignty is likely to be done in an equally circuitous route,
although the general condemnation will still be in the background.
FUTILITY
It
is this human behaviour that governments are trying to change, in
vain. By trying to set up a tax
cartel there will always be great rewards for undercutting this
regime as money flocks to the tax havens, international pariahs
or not. It is this in the end that will doom any serious attempt
to harmonise taxes. Technology means that money can be both effectively
moved and masked, government are fighting against the inevitable
if they think they can stop this. In a generation it will not be
the people of Jersey who will be regarded as foolishly standing
against the tide of history, but the busted and ridiculous belief
in international government by cartel. Until those happy days when
global government collapses under the weight of its own internal
contradictions we must see the struggles of the small and almost
ruritanian states like Jersey as our cause and our battle.
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