Income tax clampdown nets £3m. more for public coffers

ISLANDERS have tried to hide £9.5m. from the taxman.

ISLANDERS have tried to hide £9.5m. from the taxman.

Investigations carried out by the Income Tax Compliance and Investigation Unit saw 162 enquiries in 2012.

Tax on the multi-million pound figure for undisclosed income would have generated £1.9m., but late payment surcharges and penalties took the amount recovered by Income Tax to a record £3m.

Director of Income Tax Rob Gray, pictured, said recent additional powers made it easier to catch evaders.

‘The net is continually being closed on the minority who attempt to evade or avoid paying the correct amount of income tax,’ he said. ‘In the past, tax evasion was often considered a “soft crime” but the effects impact on every person who uses public services – the taxes we pay fund those services.

Comments for: "Income tax clampdown nets £3m. more for public coffers"

PLP

I wonder if they found someone with £2.6 million undeclared income? ;-)

guernsey sim

thay do not like it when people living in guernsey try to hide there cash with out paying tax . but guernsey makes a living out of hiding money from the uk tax man . its about time the uk closed down guernsey so the island can be given back to guernsey people .

GM

Guernsey sim

Sorry but that's a badly ill-informed response. If you had said it about 10 years ago it would have been a lot more valid then.

The Guernsey finance industry is not about facilitating the hiding of money. It facilitates proper, legal, tax avoidance. The hiding of money is illegal tax evasion, which is what the article is about.

The days of Guernsey facilitating tax evasion are long gone.

Indignados

The "if you had said that 10 years ago" line will be one you will use again in 10 years time about now, GM. Your sort are never willing to come clean at the time about the truth of a situation because you've got your snouts in the trough.

The Guernsey finance industry "facilitates proper, legal tax avoidance". Makes one so proud to be a Guernseyman, eh? Helping all those rich folk and big corporations to play the crony capitalism game of monopoly that allows them to win everytime at the expense of everyone else.

I agree with 'guernsey sim'. We rightly don't like islanders hiding their money from the taxman, yet our whole economy has been built on people/firms doing exactly that from where they owe it. Oh, the irony of it! Don't bother getting technical about it to muddy the waters, try thinking ethically and morally...if you can. But I'm guessing you sold your soul to the devil on the altar of mammon long ago.

GM

Just telling you how it is. Not easy to change the facts. The technical distinction exists and always has done. Illegal tax evasion isn't around any more. Legal tax avoidance planning is still very important to Guernsey and to the entire Guernsey economy. Has been for many years.

If you want to play the moral game, remember not to buy duty free goods in the future. Oh, and don't claim tax relief on mortgage interest or life assurance premiums. All are perfectly legal forms of tax avoidance but would not be acceptable if you take the moral stance.

Spartacus

GM

Unless there is tax which is payable how can it be avoided? Legal avoidance methods are known as loopholes and these are fast disappearing. Only the wealthy have access to these opportunities and they therefore contain a moral dilemma.

Life insurance tax allowance has gone, mortgage interest tax relief is going but I disagree that these are tax avoidance methods.

MichaelR

GM, I have an uncomfortable feeling about this "it's not illegal" mantra. The finance industry employs hundreds of lawyers and accountants to winkle out loop-holes in other countries' laws.

Duty free purchases or mortgage relief are not the same animal at all: they are officially sanctioned by the government. To try and link the two is being disingenuous.

Claiming that something is not illegal and therefore OK is dodgy to say the least. Many people would say that cheating on your wife is not illegal but how many would approve of you doing it?

(As an aside, adultery used to be punishable by incarceration in Castle Cornet. Was this law ever rescinded? The castle would be overflowing if this was enforced).

GM

Spartacus

That's largely correct. You are quite that it is getting much harder. The "entry threshold" for tax planning is much higher as a result.

I wouldn't agree that claiming mortgage interest relief is not tax avoidance. I know of Guernsey residents who have deliberately left £400k mortgages in place in order to get the tax relief, choosing instead to pay off other debt for which tax relief on the interest was not available. That's still tax avoidance. My reference to tax relief on life assurance premiums was generic - you are right to point out that its no longer available, but it certainly was, and many would say that it did constitute tax avoidance.

The rules of the "game" have been extensively rewritten in recent years and will continue to be rewritten. It means that core traditional markets for Guernsey, such as the UK, will die. We have to aim at completely new markets in far-flung regions. Other competing jurisdictions have advantages over us and the competition will be very tough.

It could take the island many years to reshape the finance industry. I anticipate 3-5 years of contraction to take a few steps backwards before new niches are successfully cultivated. Whether or not those steps are fully regained is the big question.

GM

Michael R

I understand that opinion. I don't agree with it, but I can respect those who do.

Tax law is extremely "grey" and is muddied further by the blurring between avoidance and evasion. The moral issues have obviously also come to the fore.

There will always be demand for "tax mitigation", which is the new term, but the dividing lines between "acceptable tax mitigation", "acceptable tax avoidance" and "unacceptable tax avoidance" will I am sure still be blurred many years from now.

guernsey sim

GM legal tax avoidance . it means the same thing getting away with not paying your far share

vic gamble

...your "far share"...are you speaking in geographical terms...such as in offshore islands...?

GM

Guernsey sim

What's the "fair share"? It's paying what is due under the law. If the law says it isn't taxable then it isn't taxable. That's legal. If it was taxable, then its evasion. That's illegal.

TED

guernsey sim-

I agree with your comments Guernsey is a Tax Haven end of story!!! All of the money held in Guernsey is here to avoid paying taxes in other countries, it may be hidden here (legally) if you believe that, but it is morally wrong. The Finance industry has ruined this Island and I do not see much of a future here for our young people unless something changes.

jimbo

TED

So finance has ruined Guernsey has it? What do you think it would look like if finance had never arrived?

Would we all be knitting jumpers out of vraic now to keep the remaining 25,000 population busy?

kevin

jimbo,

No, we wouldn't be knitting jumpers out of vraic, but then we also wouldn't be paying £450k for a rabbit hutch or £1500+ per month to rent one as it might remained a bit more affordable to live a comfortable lifestyle for those that actually work for a living.

And I very much doubt we would be scratching around looking to save a few million if we had not sold our souls to the finance industry.

But I forget, those who are doing very nicely out of it would never accept that it just might not be the best thing that ever happened to Guernsey.

jimbo

You are optimistically assuming that you would be one of the lucky few who would actually still have a job. What economic activity would be taking place? Where would the customers with any money to spend on goods and services be generating their money from? What sort of health and education service could the island maintain? How big a public sector do you think we would need with the population halved and then mostly made of pensioners when the working age population has migrated to try to find work?

There are no industries out there which would produce enough to replace even 10% of what the finance industry generates for Guernsey today. The sad thing is that it would only then that the penny would drop with those who don't feel that the loss of the finance industry would affect them. Guernsey would be an economic basketcase.

kevin

It might surprise you but Guernsey has managed to survive for hundreds of years before finance came along - in fact its finances were probably in a better state in the late 70s/early 80s than they are now.

Back before finance became established there was never a need for an infrastructure on the scale we have now when the island was mainly locals, the population has hugely increased in the last 30 years and as a result so has the need for a bigger hospital, bigger and better schools, new airport etc etc.

Of course we cannot afford to lose the finance industry now but we don't really have much say in the matter do we? If our competitors can offer better conditions, cheaper labour and tax breaks finance will go - simple as.

Scarlett

Jimbo. I've said it before and I'll say it again - you speak like we have a choice in these matters.

The average Guern did not choose for finance to be here (though many have profited because of it) and the average Guern will not choose for finance to leave (though many will suffer for it).

The UK and, in fact, the rest of the world, has been in financial crises for some years now, whilst Guernsey has happily sat in it's bubble and continued to assist finance and the wealthy to quite legally not pay their wodge elsewhere.

Before the rest of the world was in such dire straights, it had no problem with this, in fact, in many ways, we were actually useful to them and they proactively encouraged it.

Those days are now gone, and these countries don't want to play any more, as they can't afford to, so they can and will slowly legislate our 'legitimate' business OUT of business claiming morality and all the things that previously they didn't give a flying fig about.

You, I, Kevin, no one, in fact, can speculate as to what Guernsey would have been like had we not put all our proverbials in one basket. We can maybe say we'd have been poorer, had less in material terms, and thus surmise that we would have been unhappier, but that is based on the assumption that having more money and stuff makes us happier.

I see a lot of unhappiness in our oh-so materialistic island, Jimbo, don't you? Somehow enough is never enough, and there's always someone who can afford a bigger 4 x 4 than the next guy, who's on the step that 'we' want to be on on the corporate ladder, who get's two hols a year, not just one, who's kids wear designer gear that's 1st hand, not 2nd....

then of course, all those decent hardworking local people who couldn't afford a house for love nor money as there's always someone out there being paid more who can afford to pay the stupid house prices.

In fact, the divide between the rich and the poor over here grows wider every year due to our finance rich island, which has to date been ok for those who profit from it, and pretty disastrous in terms of affordable housing and the cost of living for those who do not - and there's a lot who do not.

One thing perhaps we can speculate about now is not the imaginary past of no finance but the very real possibility of a future with it slowly eroded.

All the shiny things we are used to and aspire to and think are so dreadfully important may soon be out of reach for not just some of us, but most of us, and what then?

Would the oncoming disaster that some speculate this will bring and the fallout from that have happened if finance had never been here? Well, no, it wouldn't, because we wouldn't have that far to fall, would we?

What goes up must come down, as they say, and I think all we can do is thank our lucky stars we've had it good for so long and brace ourselves for a very bumpy ride as the gravy train wends it's way slowly out of the CI's station.

There is no easy solution and as for maintaining the status quo, if Einstein himself were in charge he couldn't come up with an equal alternative to finance as there isn't one. The whole world is poorer now, and we are part of that world, and will just have to deal with it like everyone else.

Dave

One industry that will come to Guernsey is marine turbines. In Alderney agreements have been signed between governments so within ten years it will be a reality in Alderney.

jimbo

kevin

Guernsey's economy was able to thrive in the recent past because of agriculture (EU subsidies for Dutch growers put paid to that), and because of Tourism (cheap flights to the sun and a lack of demand for our "product" put paid to that. There were alternatives to finance. Since those industries died, we have had no alternative and that remains the case.

The 70s and certainly the early 80s was when the finance industry was booming, and there was a sustained period of sizeable economic growth without massive investment in infrastructure. That massive investment in infrastructure only really started once our economic growth had just about peaked.

Population-wise, official census records show that the population grew in the period between 1961 and 1971 (i.e. BEFORE finance) by 6,390, which is the biggest single 10-year period of population growth between 1961 and 2011. How do you explan that?

1961 to 1971 +6,390

1971 to 1981 +1,853

1981 to 1991 +5,554

1991 to 2001 +133

2001 to 2011 +3,900 (not official)

Over the past 30 years the population has risen by 18% (if we accept the 2011 unofficial SoG figure). By contrast, Jersey's population has grown by 28.67% in the same period. Since 1961 our population has grown by 39.6% and Jersey's by 64.5%. Interesting statistics. In that same period from 1981 to 2011 the global population rose by 52.5% and from 1961 to 2011 it rose by 124.3%. There are a lot more people on the earth today - its only natural that ours will have risen, but we've "managed" the numbers pretty well.

In response to your last point, there is no reason at all why we shouldn't retain a substantial finance industry, albeit somewhat smaller than at present. However that also means holding on to what we've got rather than making decisions which will encourage business to move away. Any change to our tax regime is therefore critical. If we send out the wrong noises then it would be a huge own goal.

kevin

Excellent post Scarlett, sums it up pretty well really.

jimbo

Scarlett

I agree with most of that. Hard to argue with the majority of it.

Not quite sure though that its correct to say that we had no say in the finance industry. The electorate elects the deputies and if people were or are bothered enough than they would lobby their deputies accordingly. Apathy rules in this island, although perhaps less so now than in the past.

You are right in saying that its impossible to see what the island would have looked like, but on the basis that we've spent the last decade or so trying to find alternative viable industries into which to diversify and have come up with zilch, its easy to conclude that the island would not be too different economically from the Isle of Wight, but without UK taxes to fall back on. We may well have had no option but to seek to be absorbed into the UK. A horrific thought for many of us, perhaps not for some though.

There is a considerable amount of unhappiness in the island, alongside a lot of contendedness. Some of whose who are unhappy though do rather take things for granted and often just don't appreciate how fortunate they are. Many have less to grumble about than they might think. Its largely because they have always had it easy. There are many in the lower rungs of the finance industry who moan about their lot, but who will never realise that in the UK they might be flipping burgers at MacDonalds, if they were lucky. They'll still moan about their lot here, about house prices etc, without realising that you can't buy a house in the UK on a burger chain server's salary either. That's obviously an over-generalisation, but you get my drift.

I agree fully with your past few paragraphs. We are where we are and need to make the best of it, even if we would prefer not to be in this position.

Scarlett

It's nice to have a sharing of views and meeting of minds sometimes on here, Jimbo ;)

I don't like to sit on the fence, but I do understand the positives of the finance industry being here, it's just the negatives hold equal weight in my mind and in the minds of those who don't benefit from it.

I wish what you said about Guernsey people and their elected representatives was true, that is, that the elected did what they should do and represent the people.

Sadly though, it seems this is increasingly not the case, and our leaders seem less focused on what the people they represent want and more interested in doggedly following their own agendas (often unclear, even to them, I suspect!)

'61-'71 population growth, now, wasn't that a baby boomer period? Either that, or it was before Sky......;)

Guernseyman

Right let's get this back on track and off the has the finance industry ruined the island.

What I want to know is why the £1.1m worth of fines is not being used to recruit and train enough staff so they can keep up with the work and not send threatening letters to poeple who have actually compelted their returns?