Guernsey is abusing the truth

October 13th, 2010

I noted the following this morning after Guernsey emailed me about it:

Guernsey plans timing for move to automatic exchange of information

Guernsey’s Government has announced that it plans to give financial institutions a window from 1st January 2011 to 1st July 2011 for moving to automatic exchange of information.

The Fiscal and Economic Policy Group carried out a public consultation earlier in the summer and this morning Chief Minister Lyndon Trott told the local Parliament, the States of Guernsey, of the planned transition to automatic exchange of information for the equivalent measurers Guernsey adopts relating to the EU Savings Tax Directive.

His statement outlined the intended timing of a movement to automatic exchange of information following the consideration of the results of the consultation process.

The Chief Minister said: “In light of the views expressed by members of industry and industry bodies, and given the States’ commitment to maintaining the highest standards of tax transparency, the Fiscal and Economic Policy Group recommended to Policy Council that institutions in Guernsey should move to automatic exchange of information from 1st January 2011 and no later than 1st July 2011. This transition period is to provide the maximum flexibility to our industry in making their necessary adjustments to their payment systems.”

And to be candid this is complete and utter misinformation.

All that Guernsey is doing is moving to a standard that the EU made clear would be compulsory in 2005 when the European Union Savings Tax Directive was introduced. It’s just belatedly coming into line.

And far from there being – as you would think from the release – automatic information exchange on all activities in Guernsey from 2011 onwards this is not true. All that will happen is that information on interest paid on bank deposits held in the name of individual account payers within the EU will be subject to exchange of info0rmatyion with the tax authorities of the states in which they are resident.

So we have this comparison ( simplify a little, but only a little):

Type of income Exchanged Not exchanged
Bank and some other forms of interest:
Individuals, EU resident
Individuals, not EU resident
Many forms of unit trust and investment funds
Capital gains
Trust distributions
Proceeds from most life assurance based products

In other words there is no move at all towards automatic information exchange going on here. There is just belated compliance with the very basic, and now widely acknowledged inadequate requirements of the European Union Savings Tax Directive.

It would be so much easier to take places like Guernsey seriously if they were honest. But it’s a sad fact that there rhetoric is a million miles apart from the reality of what they offer and that as a result they remain an ideal location in which to undertake tax evasion, and more, at cost to society at large, both within and more importantly outside that island.

Written by Richard Murphy

Follow @FinTrCo