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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