A Rat by Any Other Name

December 31st, 2010

Nick Clegg, I really must applaud you for following perfectly in step with a line of giant cowards that have recently been running policy in the United Kingdom.

Ok let me back up before I start offending anyone.  Which surely I have already done.  That statement was a little harsh.  The United Kingdom is a wonderful place.  I should know, I grew up in Northern Ireland, just outside of Belfast.  I called French fries “chips” for half of my life.  This was  particularly confusing for the lunch ladies at my middle school when my family returned to the U.S.:

“I’ll have chips with my hamburger, please.” I told them, tray extended.

“We don’t have chips today,” they replied.

“Yes you do.” I retorted, staring right at them, plain as day.  This went back and forth for several iterations before my sixth grade teacher needed to step in.

“She means French fires!” That settled it.

Anyway, what I mean to say is that I really have a deep affection for the whole UK.  Beautiful place, really.  Except when it’s raining.  Anyway I don’t mean this as an attack on the British.  Only as an attack on Nick Clegg.  And perhaps the British policy towards tax havens.  But that’s it.

So I’ll go back to my original line of reasoning.  Nick Clegg, Deputy Prime Minister of the United Kingdom, is still a coward.  And it still annoys me.

So here’s the story which has prompted my strong reaction.

Last week Mr. Clegg visited the Isle of Man, a British Crown Dependency and a tax haven.  During the meeting, Mr. Clegg made the rather bold statement that he would continue to “promote and defend moves towards full tax transparency to ensure no jurisdictions promoted perverse incentives to investors that deprived exchequers of legitimate income.”  For the American folks reading, an exchequer is a tax collector in England.

Ok, so far so good.  Clegg seems to be taking a stand.

He went on to tell us, “There are elements within the political establishment who have a problem understanding the constitutional position of the Crown Dependencies and the economic model which enables the islands to survive.”  Clearly referring to the point that Crown Dependencies can keep their taxes low because they are Crown Dependencies and get a lot of money from Britain.  And Britain will sweep in to protect them if this model should fail.  As it did with Cayman Islands last year.

This is obviously a failed model.  These Dependencies are able to take risks that other jurisdictions can’t or won’t, because ultimately they are “too big to fail.”

But this isn’t even the bit that irks me.  In fact, so far Clegg seems to be making an honest effort toward reform.  But here’s the sentence that dashed all those hopes and confirmed Clegg’s cowardice:

Asked whether he viewed the Isle of Man as a tax haven, he rejected the use of such “artificial labels.”  He said that UK would continue to promote and defend the Crown Dependencies but “within the context of wider moves within the EU and internationally to make sure there is full transparency in all tax jurisdictions and that tax jurisdictions don’t co-exist in a way that creates perverse incentives to investors and so deprive exchequers of legitimate income.”

Seriously?  You think the label “tax haven” is artificial?  I can give the names of fifteen websites that are self-promoting the services of Isle of Man as a tax haven.  Make that one hundred and fifty.

C’mon, Clegg.  Seriously.

But Clegg’s statement is emblematic of a broader British policy.  There is a global movement against tax havens.  It has become especially pronounced in this era of rising government deficits.  And the British are pretending to be riding the wave of reform along with the rest of the G20.  The truth is, the British have more leverage over many tax havens then most other members of the G20 and they aren’t taking the strong stand they could.

And that’s the reason I think Nick Clegg is a coward.  Britain has stepped an intrepid toe into the waters of transparency, making it look to the rest of us as though something is being done.  But the truth is, they are all talk.

One other note.  I fully support the fact that the British use different labels for different words.  “Chips” in the place of “French fries” certainly seems fair enough.  After all, some members of my country wanted to call them “freedom fries” not long ago.  But when it comes to tax havens, a rat is a rat. And it should be called by its proper name.

Written by Ann Hollingshead

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