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Saving For a Space Ship

The Fall Of Jersey: How A Tax Haven Goes Bust - £145 M A Yr Black Hole

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I started a new thread, due to the response after originally posting here

http://www.housepricecrash.co.uk/forum/index.php?/topic/198494-london-tax-haven-has-more-billionaires-than-any-other-city-in-world/page-2

The fall of Jersey: how a tax haven goes bust

http://www.theguardian.com/uk-news/2015/dec/08/fall-of-jersey-how-tax-haven-goes-bust

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.”

That is quite a hole, and the question is, how can Jersey fill it? The solutions are not pretty: voluntary redundancies, compulsory redundancies, new taxes, fewer public services.

Jersey bet its future on finance, allowing its other industries to shrivel, in the belief that it could live well in perpetuity from moving other people’s money around.

If that belief was false, then does its fate await another island off the coast of France – one that has also pledged its future to finance? In short, is Jersey’s worrying present Britain’s bleak future?

Edited by Saving For a Space Ship

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Unfortunately for Jersey, it doesn't have its own sovereign currency that it can just print - whoops, I mean QE - in order to pay for the deficit. It will actually have to figure out a way to balance the budget, which I suspect will prove to be a good thing in the longer run.

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Whats the land/property taxes like in Jersey.

Surely if your all in on finance on a small island the case of LVT is compelling.

They should have been rolling in it and surely a bank with billions in fiddled cash does not mind paying high property tax as long as the business is not looked into.

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Excellent news. Scamming tax havens under attack. Back to fishing and tourism for you.

and Bergerac

Bleak.

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I suspect they'll hike corporation tax to 1%.

They have plenty of scope to raise taxes - corporation tax in nil unless you are a bank - 10% or an energy/water firm - 20%.

Personal taxes are low and no-one pays more than 20% of their income in tax. For the general population, a series of exempt bands mean that most people pay much less than 20%. How much resistance this gets is another matter and it given that it is only the low taxes that draw the financial industry there in the first place, higher taxes may drive some away. Probably for the best in the long run.

(There was uproar when the states introduced GST (VAT) about ten years ago)

Incidentally, the cost of houses on Jersey (for those allowed/qualified to buy) is bonkers.

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Apparently the UK Treasury looks after Jersey's finances (presumably with advice from the BoE). Probably a bit like Scotland with the ability to create its own tax system and tax structures etc.

Jersey's GDP per Capita is far higher than the UK mainland.

Likely any financial black hole will become the responsibility of UK taxpayers - again.

Edited by billybong

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where's all the money going?

is it public sector workers rewarding themselves ?

It's not so much where the money is going, it's the fact that the money isn't coming in. Summed up succinctly in the article:

"Officials in European countries were furious about Jersey helping their citizens avoid taxes. In 1997, they began to take action.

In a new code of conduct, the EU insisted that all members (as well as those jurisdictions that wanted equal access to its market, such as Jersey) tax local and non-local companies the same. The rules were not to be imposed for another decade, but it was immediately clear that they threatened to destroy Jersey’s business model, which was reliant on giving foreign companies tax advantages denied to locals.

Technically, officials had a choice: they could either raise taxes for foreigners, or cut them for locals, providing everyone ended up being treated the same way. In reality, however, Jersey had no choice at all – not if it wanted to keep its finance industry. Dozens of other small jurisdictions had followed its lead into financial services and, if it raised taxes for everyone to 20%, all the lucrative trade would evaporate from its computer screens, only to condense in places with lower levies: the Isle of Man, Dublin, Singapore or Hong Kong.

So, in 2008, it abolished taxes for all companies except financial firms (which pay 10%) and utilities (which were left with the 20% rate). The two main tax bands gave the policy its name: Zero-10. And thus, the black hole opened. Between 2009 and 2010, tax receipts from companies fell by almost two-thirds: from £218m to £83m."

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I wonder what HK and Singapore's secret is?

The devastating effect of having a large financial sector was laid bare in Iceland and Ireland. NYC and London get away with it because they have large captive markets (ie the US and UK) to leech off, but its no surprise Jersey would meet the same fate.

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Those "running" Jersey probably liked the idea of having a small island (effectively UK) just off the shore of France with people having a higher standard of living than in France/mainland eu - even if it was all based on debt - again.

Apparently Jersey's GDP per Capita figure is similar to Switzerland's (and if it's included in the UK's GDP per Capita it will help to bump up the UK's relatively poor GDP per Capita figure).

Edited by billybong

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They have plenty of scope to raise taxes - corporation tax in nil unless you are a bank - 10% or an energy/water firm - 20%.

Personal taxes are low and no-one pays more than 20% of their income in tax. For the general population, a series of exempt bands mean that most people pay much less than 20%. How much resistance this gets is another matter and it given that it is only the low taxes that draw the financial industry there in the first place, higher taxes may drive some away. Probably for the best in the long run.

(There was uproar when the states introduced GST (VAT) about ten years ago)

Incidentally, the cost of houses on Jersey (for those allowed/qualified to buy) is bonkers.

The reason a lot of companies use places like Jersey is that they can hide behind the corporate service providers making it really hard to tell who owns what.

There are a whole host of ways that govts could use that desire to be a barge pole away from the action to sort that deficit out without driving the big financials away.

Isle of Man is better on a tax basis,cheaper to buy a house and a generally great place to live/raise a family.

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A recurring theme in Bergerac was Bergerac - why did the BBC need the character to be half-French - wanting to buy a house on the island. But as he was not a local and not rich enough he could not do so.

So he had to metaphorically tap his hat to the rich and well do of the island who allowed him to rent a place cheaply.

I think this is their problem - those boomers are still alive on the island but they have not allowed any new money to come in. None of that oligarch riff raff... who probably preferred sunnier climes anyhow... so it sounds like they have shafted themselves?

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I wonder what HK and Singapore's secret is?

The devastating effect of having a large financial sector was laid bare in Iceland and Ireland. NYC and London get away with it because they have large captive markets (ie the US and UK) to leech off, but its no surprise Jersey would meet the same fate.

HK and singapore make things!

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HK and singapore make things!

Hi tech gadgets are nothing compared to spuds.

I imagine that Jersey has spent decades telling people "NO!" whilst HK and Singapore have spent decades saying "YES!" to new ideas.

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Another thing - not had a decent, tasty Jersey potato in over a decade.

Will no one think of the potatoes!?

Yum. I love Jersey potatoes / Jersey Royal potatoes.

To celebrate deflation, for dinner tonight we're having Crispy Parmesan Crusted Chicken (

) - although I rarely eat much meat really... just occasionally and it has to be top quality from good butchers - with Jersey potatoes salted and buttered tonight. Yum.

I'll spend in shops and treat myself more when house prices/rents fall.

Get the toffs in the fields, and hard HPC.

MISCELLANY

Much of the crop of Jersey Royals is grown in fields too steep to be harvested mechanically. A large number of the potatoes are picked by a visiting seasonal workforce that travels from, amongst other places, Poland and Madeira.

http://www.eattheseasons.co.uk/Articles/jersey_royal_new_potatoes.php

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LOL the Jersey States has come out against the Guardian article today:

Gorst rejects Guardian’s claims of bankrupt future

A NEWSPAPER article depicting the Island’s economy as ‘on the rocks’ has been described by the Chief Minister as little more than headline grabbing.

The three-page article published in yesterday’s edition of the Guardian claims that Jersey is ‘heading for bankruptcy’ as a result of the zero-ten tax regime, under which all Jersey-registered companies except financial services and utilities pay no tax.

http://jerseyeveningpost.com/news/2015/12/09/gorst-rejects-guardians-claims-of-bankrupt-future/

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Some interesting entries in Econible's top ten tax havens 2015,especially at no.2!!!!!!

The league doesn't seem to allow for the actual volume of money using the various tax havens so if that was taken into account then the UK would likely be top of that league.

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LOL the Jersey States has come out against the Guardian article today:

Gorst rejects Guardian’s claims of bankrupt future

A NEWSPAPER article depicting the Island’s economy as ‘on the rocks’ has been described by the Chief Minister as little more than headline grabbing.

The three-page article published in yesterday’s edition of the Guardian claims that Jersey is ‘heading for bankruptcy’ as a result of the zero-ten tax regime, under which all Jersey-registered companies except financial services and utilities pay no tax.

In the absence of detailed figures to show that the Island is not on the rocks then that statement seems to be little more than headline grabbing.

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