Targeting the tax havens
鈥淲e expect the Germans to bang the table,鈥 one source told me. 
And there will be a quiet murmur of approval from the British minister if they do. The commission representative might quietly applaud. But none of them seems quite sure what they can actually do.
The Germans would like something to be done about tiny states that act as tax havens.
This is not surprising as they are in the middle of a still unravelling scandal about rich people avoiding paying tax by hiding it away in Liechtenstein.
'Bullying tactics'
They鈥檝e been accused of bullying and a top Swiss banking official had to apologise for .
A German spokesman told me in brisk Anglo-Saxon language that that they had prepared a paper on the way forward was nonsense.
But most here think it would suit the Germans if the European Union as a whole could act, rather than leave it to them alone. They were already going to report on negotiations with Hong Kong and Macao and this is certain to lead to a wider discussion.
Sources tell me the commission is, in theory, keen on toughening up the rules. It feels the is full of loopholes and lacks teeth.
It will almost certainly announce that a planned review of this directive will be brought forward from the autumn to the early summer.
But what they can do? Britain would be keen on putting pressure on the small countries to at least .
But how to put pressure on them? is the tax dodgers setting themselves up as 鈥渇oundations鈥, so ducking the rules that cover individuals.
Commission Sources say some countries, such as France and Luxembourg, may be against any loophole-closing. And even if ministers could reach agreement, designing new rules is difficult.
But what about the principles? Should there be European Union rules on this? Is such tax evasion morally wrong or a clever use of accountants? I would love to hear a billionaire explain why they should be a foundation.
6PM BRUSSELS
They should have expected it but I am told ministers were rather surprised that the German finance minister hijacked the meeting and lectured them for ten minutes on the inequities of tax havens, demanding the loopholes should be closed.
I'm told "he went off on one". The commission's response was rather more bland.
It's possible new laws may be on the way: but it'll take a time, as things do in Brussels.
The commission will speed up its review and have something on paper by the end of June.
This is the UK Treasury's response: "Tax evaders should not be able to hide behind banking secrecy laws. We need
clear pressure from Ecofin and the commission on Lichtenstein to provide more information to make sure people are not acting illegally to evade their tax obligations.
"The EU Savings Directive has already led to a big increase in transparency and co-operation across borders to prevent tax evasion.
"The UK supports the commission's proposals to bring forward the timing of the review into the Savings Directive."
Watch this space.
I鈥檓 Mark Mardell, the 麻豆约拍's North America editor. These are my reflections on American politics, some thoughts on being a Brit living in the USA, and who knows what else? My 
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Here's my principle: If I were a millionaire, I would rather overpay accountants and lawyers than have my earnings bolster the overblown coffers of (any) government.
Bearing in mind that I loath accountants and lawyers, one can ascertain my opinion of governments.
It is very important hat people are aware of the disrinction (one which confused even our esteemed ex-Paymonster General, Dawn Primarolo) between tax avoidance - the perfectly legal ways of arranging one's finacial affairs to minimise the amount of tax paid - and tax evasion, any illegal ways of arranging one's finacial affairs to minimise the amount of tax paid.
It is now almost impossible in the Uk to tell the two apart, due to the labyrinthine laws introduced by and on behalf of HMRC.
It appears that this ridiculous state of afairs will now be promulgated throughout the whole EU.
What is needed is a simple system such as that in Monanco (a country with no reported tax avoidance issues);
1) Scrap the artificial and expensive-to-collect distinction between National Insurance and Income Tax
2) All income, from whatever source, is taxed in the country of origin (i.e. where you earn it)
3) All income is taxed at one of three rates; 0% for all income below the national average, 25% for all income up to twice the national average, 50% on all income above that
4) Scrap all the complicated tax allowances, special savings schemes and investment incentives, but allow each person - and that includes children - to grant all or part of their 0% band to their spouse or parent
Further evidence that the EU is becoming a supra Socialist State seeking ever widening and invasive taxing powers.
I've seen tax evasion operate very easily in Belgium for contractors: an "offshore" company (in on the deal and based in a financially loose place - Luxembourg, Bermuda, Liechtenstein...) acts as a middle man. The company for whom the contractor does the work is invoiced by the offshore company (which is of course perfectly legal). The offshore company takes a small cut of the invoiced amount (e.g. 5%, and which is again still legal) then pays the contractor a small portion of the remaining amount as a "salary" (which of course is still perfectly legal and enables the contractor to have all legal paperwork). The next part starts to become illegal. The offshore company then places the remainder into an account in the name of the contractor, in this same offshore location. It then just remains for the contractor to take out the money at leisure. The most illegal part is that the contractor does not declare the income.
How to stop this? I think the only way is for all the EU to stop doing any business at all with countries which do not adhere to certain rules AND in particular, not do business with any company which is set up in such a country. Only then will the system grind to a halt.
[P.S. Mark I live in Brussels if you want to meet up and discuss this!]
I concur wholehearted with Christopher:
The taxation system I find myself in is way too complicated. Somehow our political system encourages politicians to add ever more tax breaks for certain groups, creating a general feeling amongst taxpayers that if you're only exempted from three or four fees or taxes, you're losing out heavily.
And we are losing out, aren't we? On my part-time job, whilst my modest income results in an acceptably sounding income taxe rate, all the government-stipulated mandatory insurances and other fees make my conceived taxation edge towards 50%. And that's not yet taking into account that my employer additionally contributes to these fees almost as heavily as I do.
My income is somewhat average, so you can imagine how people actually hit by our progressive taxation system might feel -- at least they can afford to hire accountants...
叠箩枚谤苍,
Germany
Actually Hugh's got it wrong to a degree. In many countries, there's nothing illegal to do undertake the process as described. It's all to do with your status for tax purposes.It would be only illegal to repatriate the cash to the country where you are tax resident and not declare it. Once it's in the country and one is spending it, then it's generally taxable income. However, the rules are complex and there's no sweeping generalisations.
The real issue is that the likes of the EU and other governments (and their laughable mouthpiece the OECD) want to advance an uncompetitive taxation agenda. The British government has tried to demonise tax avoidance and equate it with tax evasion. There's nothing morally or ethically wrong in legally arranging one's affairs to minimise one's tax burden. Unfortunately the situation now is totally perverse - the richer one is, the less one pays as one can afford the best advice and manipulate the system.
If the tax systems were internationally competitive on rates, simple to understand and properly organised then everyone could benefit from the redistribution of wealth (that is what taxation is). It's up the government to sort it out properly.
Abusing and bullying countries Lichtenstein, Andorra or Monaco is not going to work. Money will migrate to other places less fussy and worse, not in Europe.
If Hugh believes that Luxembourg or Bermuda are 'financially loose', he had better think again. All but three countries/pricipalities are OECD green-lighted as far as tax compliance is concerned. The three remaining are Monaco, Liechtenstein and Andorra. And, as far as being 'financially loose' is concerned, Monaco and Liechtenstein are not 'loose', they still believe in being private.
They do not ask awkward questions, and although this sticks crosswise in the craw of those who want to milk you for your money and those chasing after fraudsters and the like, it still harks back to an age where bankers were bankers, not bankers, judges and policemen rolled into one.
As Hugh points out, it is the individual who consciously makes the decision to evade tax. Evasion is illegal, avoidance is not (although every government would have you believe otherwise).
If the Inland Revenue were as honest in dealing with me as I am in declaring my earnings faithfully, that would be a great encouragement. The club of European States that forms the EU should take collective action to limit the power of wealthy people to be dishonest too.
Max Sceptic,
While we understand that this is all about you...
...what possible good would this do for anyone else?
Are these the same 'overblown (sic)coffers' that are having difficulty providing quality education, health care and defense for its citizens?
"Britain would be keen on putting pressure on the small countries"
Mark, in your comments on those 'small countries', and with regard to the EU directive, you miss two interesting and note-worthy points.
Firstly that Belgium (the heart of the EU) is one of the countries which has decided they will not disclose bank details to anyone else. And secondly, when submitting your EOY tax return, that very same country on the other hand will not currently take into account tax already paid and transfered to Belgium, on declared interest earned elsewhere.
The latter apparently the subject of a warning from the EU commission last year, and possible submission to the ECJ.
PS: there seems so many Michaels posting here these days I've decided to become "Michael B". Until perhaps forced to work my way up to Michael X.
The higher the taxes, both direct and indirect, the more likely that ordinary citizens/subjects will want to cross the line between tax avoidance and tax evasion. Equally, the harder governments make it to hold bank accounts in other countries, the more people will lie to the relevant institutions to be able to maintain the accounts. In my experience, the continual crack down on the tax evaders is making life much harder for the rest of us to manage our affairs within the letter and spirit of the law.
As an international contractor, I鈥檝e been reading these machinations with fascination. I openly admit I have an account in a 鈥渢ax haven鈥 鈥 Switzerland where I lived and worked, and see no reason why the massively wasteful and corrupt EU should benefit for money I legally earned and paid tax on outside of the EU. Until I bring money into the EU, it鈥檚 nobody else鈥檚 business.
To read a lot of the comments from MEPs and journos, it sounds like I鈥檓 a fat cat billionaire grabbing milk money from starving babies. Err 鈥搉o. I earn a bit more than a standard employee, but have all the associated risks of running my own business. I pay quite a lot of tax when I work in the EU, but if my business goes bust 鈥 I鈥檓 eligible for next to no social benefits.
To answer Hugh 鈥 I am a contractor in Belgium, and use accountants to a: keep me legal and b: split my income between income and pension in a tax efficient way. Any contractor who is only paying 5% is massively breaking the law if/when they bring that untaxed income into the EU, and unless they鈥檙e taking flights to the Cayman Islands to collect the cash 鈥 there鈥檚 no way they can bring it into the EU banking system without setting off red flags. I suspect you are listening to too much to pub talk.
If you really want to talk about tax evasion in Brussels, how about all the EU/NATO/Commission types who don鈥檛 pay their full share of Belgian taxes or VAT!
David (At 04:53 PM on 04 Mar 2008), It seems we are taxed - directly and indirectly - more than ever. Do you really believe that we receive in return "quality education, health care and defense"? I don't.
The British government spends 拢5,500 per household per annum on the NHS. I could certainly buy better health insurance for my family for less. Our 'education' (second only to the NHS as a bottomless hole into which taxpayers money is poured) is a scandal: educational levels are ridiculously low and many 'graduate; without even basic reading, writing and mathematical abilities. As for our defense - I'd gladly spend more on this, but that doesn't mean more taxes - it mean cutting 'investment' - i.e. government spending which is spiraling out of control.
David (At 04:53 PM on 04 Mar 2008), It seems we are taxed - directly and indirectly - more than ever. Do you really believe that we receive in return "quality education, health care and defense"? I don't.
The British government spends 拢5,500 per household per annum on the NHS. I could certainly buy better health insurance for my family for less. Our 'education' (second only to the NHS as a bottomless hole into which taxpayers money is poured) is a scandal: educational levels are ridiculously low and many 'graduate; without even basic reading, writing and mathematical abilities. As for our defense - I'd gladly spend more on this, but that doesn't mean more taxes - it mean cutting 'investment' - i.e. government spending which is spiraling out of control.
Underlying all this seems to be the basic (aesthetic) choice between "civilisation" and "feudal anarchy"
The former can be defined in terms of the shared responsibily that comes from living in communal conglomerates -while the second can be defined as total freedom for those in power to do as they wish plus total freedom for the rest as long as they do not get in the way of the rich.
Such "freedoms" include the freedom to die of starvation and sickness -which in more "civilised" countries are restricted through an organised system of "rights" implying "responsibilities" which are logically restrictive.
Clearly, "civilised" systems are more popular in the "social" (and generally richer) northern European countries -while the "feudal-anarchic" system is more popular in the countries with widespread poverty, including Britian and the US.
Presumably, poor people profit more from a "civilised" distribution of income -while the rich appear to "loose" money on the deal. This is perhaps why the conflict could appear to be similar to a traditional "class conflict". Apparently, "feudal-anarchic" governments (supported by people like "Max Sceptic") have apparently noticed that the "civilised" countries could be interpreted as a living proof of the failure of "feudal-anarchic" systems -and so the more social economies have to be undermined.
However, Keynsian economic theory suggests that it could be the (social) redistribution of income that keeps the industrial machines turning (via a mass market). Prsumably, this explains why the German, Swedish and other more "civilised" economies did better until being undermined by global "outsourcing" by the "feudal-anarchic" economies. This would suggest that both rich and poor can be much richer when operating within a system of communal sharing of communally earned profits.
I am outraged, and I want other people to be outraged at what is effectively a two tier system.
In this world its completely unacceptable for the rich to hide their money and avoid paying taxes while the working man is enslaved into a lifestyle of taxes and servitude.
Meanwhile, the super rich dont pay their fare share of taxes. Its an appalling situation that is compounded by government officials who say its better to have these people in our country than not. I say kick them out!
Why should I pay my taxes at all, given the world over the rich seem to get away with hiding their money and avoiding the prying eye of the tax man?
If I chose to avoid taxes the government would come down on me like a ton of bricks, yet the super rich are give the 'special' treatment because other wise they would go somewhere else. So what is the message I can learn from this?
I want to start a revolution; the corrupted and distored distribution of wealth both in the UK, and worldwide is an absolute discrace. Why are we putting up with this, and more importantly why are people so apathetic of having their lives controlled by the few.
UK tax version ( PIT 22% + NIN 11% VAT 20% + gasoine tax + road tax etc etc.. ) form 100拢 about 40 is yors.
Your money is not your money, Your money is Our money!
So pay what you have to pay and be quiet!
People would pay their taxes if they get something in return and their money were not wasted. Also, in terms of tax haven there is no clear definition as there are countries that provide a special environment for some operations such as U.K. Some countries have to think that if they ask for money they have to offer something in return such as better environment and services to live and not penalize people that they have money. Last, the action to pay an informant that some countries did is disgrace as they seem disparate for money. Supposedly in most western countries the involvement of the state is low. Is that a new state plan economy where everybody has to do something predetermined?
I am sure Brown and other like minded national leaders must be jumping with joy seeing Lichtenstein squirm. And so should Lichtenstein squirm if theirs is a haven for gangsters and drug dealers. But much of that money being pursued was honestly earned money with tax paid at source. Wouldn鈥檛 we all like to have some haven where honest earnings could be protected against rising inflation without Gordon Brown skimming off his cut. Wouldn鈥檛 we all like the protection from Brown for our pensions that members of parliament have. And why should we be taxed at the gates of Hell while so many socialist members of parliament manage to ensure that their offspring keep the family estate. Of course, the treasury will argue that if they didn鈥檛 collect their funds this way they would get it from us via another. And as long as they only get it from honest working people who pay tax at source that is so. But what about the self employed who all earn the minimum wage, drive around in large cars, and offer a discount for their services with no tax. It is too much bother to chase them. How about getting the large number of people back to work who have become incapacitated under this hazardous labour government. Is that too difficult, or is it too easy just to hit those of us with a tax code. If it is honestly earned money, tax paid once, then I envy anyone who has managed to protect it from further taxation. And none of should feel good about what is happening.
Welfare states, such as Germany, cannot continue their social largesse without raising taxes on dwindling working class, which might result in social unrests.
Therefore they try and close as many loopholes as possible.
I predict that after Lichtenstein, Andorra, Monaco and San Marino may become next targets.
[Caymans are out of Berlin's league, because too many very influential people in Moscow might get upset if those tiny islands were pressured]
No wonder why people do a lot to avoid being ripped of by the taxman. The public sector throughout Europe is getting mor and more greedy. But of cours they need money so members of the european parlament have something to loot, and they also need funding for their corrupt system of subsidies. Oh, and we must not forget ther urge to regulate every litte detail in peoples life, so they can employ more of their chums in complete nonsense jobs to administer such regulations. Here in my own country, Denmark, the taxman has recently had a so-called "Fair Play" campaign to focus on moonshine work. However, that campaign clings extremely hollow, because of their own unfairness: Here the taxman operates as a crossbride between af mafia and a Kafka-like soviet style bureaucracy. They refuse to admit own errors, and when eventually forced to do so (after sometimes year long trails), they continue to drag their feet and postpone the returning of money they have unlawfully looted from it's citizens. Also here in Denmark, they have turned the burden of proof upside-down: Normally, a man is innocent, until proven otherwise. When it comes to tax issues, the taxpayer must prove that he/she does not owe the taxman anything. Additionally, as long as countries like the UK have their own tax heavens, like Jersey, the Caiman Islands and so on, it should be carefull about throwing the first stone. It could backfire. Last but not least: Where would western governments and intelligence servises be, if it wasn't for the well-known heavens? How would they manage to fund dodgy arms deals to dictators around the world, which they like to keep at power? (Often because they have financial interests in those countries) It's about time to stop the hypocracy and the double standards. Most people would agree that we all have to contribute to society, in order to have an functioning infrastructure. (roads, police, hospitals, schools etc. etc.) However, it must also fair and the transparrency must go both ways. Otherwise people will see tax evation as purely financial self defence, against a state mafia, that is only out to rip them off in order to fill theri own pockets and to waste taxpayers money on all sorts of nonsense issues and subsidies. Maybe it's time for a Europe wide revolte against taxmen, governments and their bureaucrats?
People would pay their taxes and not using their so-called tax havens if governments used the public money prudently and didn鈥檛 waste them.
Another issue is that Liechtenstein is a free country and not a protectoral of Germany, U.S.A or which ever country feels so. It is ethical to 鈥渋nvade鈥 a country simply because doesn鈥檛 has the same taxation as other counties?
States have to realise that it鈥檚 their fault that people use these countries and not the tax haves fault.
The problem is that Ireland describes itself a one of the richest countries in the EU but at the same time, when it comes to payments and subsidies, it acts as if it was still very poor. I am now totally confused: are we rich or poor? Was the Celtic Tiger a passing phase or is it still roaring? This confusion is the reason why many Irish people are unsure on how to vote on Lisbon. Ireland has always had some sort of privileged status in Europe; the effectiveness of Irish lobbying at EU level is unmatched. This is why Irish has been granted the status of official language (with the creation of more EU jobs for Irish speakers...). Welsh and Catalonian did not succeed to achieve the same, even if their languages are spoken much more than Irish. The issue therefore is: what is the best option for Ireland鈥檚 future in the EU?