Bank secrecy crumbles around the world

The members of the OECD have only one objective in mind when it comes to taxation: grab as much as possible. Having universally hocked the tax revenues for decades to come in a desperate attempt to shore up economies that are failing due to succession of poor decisions, those countries are now trying to find ways to get more money out of taxpayers - often by pretending that they are committing offences when in fact all they are doing is managing their financial affairs in the most tax efficient manner.

The UK Treasury - after more than a decade helmed directly or indirectly by the Spendthrift Socialist Gordon Brown - is crowing.

The Right Honourable Stephen Timms MP, Financial Secretary to the Treasury said yesterday: "Today's welcome announcement is further evidence that tax secrecy is fast becoming entirely unacceptable." The announcement was by the Liechtenstein
Government of its intention to sign up to the Organisation for Economic Co-operation & Development (OECD) standards of transparency and exchange of information.

On the face of it, there is little to complain about. Unless they first satisfy Revenue authorities that they are - for proper reasons - outside the scope of tax assessment and collection, it is seemingly not unreasonable that residents of a country should pay tax - and provide sufficient information to allow the assessment of whether those taxes are correctly calculated.

That's on the face of it. However, there are several reasons why this should not be so:

1) personal security. Whilst the OECD nations might reasonably claim that information in their tax offices is secure (stop laughing - just because the UK's government loses personal data on a regular basis is no reason to argue against this point - or is it?) it cannot be said that such information is safe in countries where bribery and corruption are both endemic and cheap. Putting one's wealth - and information in relation to it - out of the reach of kidnappers is a very common reason for offshore services: and London is a beneficiary: to whit the vast amounts of Russian money there for precisely that reason. And so is the USA: again vast amounts of wealth from South America is parked in the USA largely because of the perceived safety of data.

2) Under the UK's tax laws, there is absolutely nothing wrong with a taxpayer parking wealth offshore and letting it earn. It is taxable only when brought back onshore. Although Basher Brown wants to change this (and has been trying since at least 2000) he has not managed it yet. But he has, conversely, backed down on the idea of taxing foreigners who are resident in the UK on the money they bring in. So: you can be British and poor, or foreign and rich.

Brown announced his attack on "offshore" before his party won the 1997 general election but he had to postpone his plans when it was discovered that the services he planned to outlaw were popular amongst not just Labour supporters but also his own advisers.

Since then, he has gradually eroded the benefits available to UK residents - and acting with other EU finance ministers has laid the groundwork for a much wider and deeper tax regime than ever before - mostly out of sight of the UK electorate.

The Treasury, which is very much a driving force behind the FATF, the OECD and other international bodies frequently "welcomes" the decisions of those bodies but does not make plain the role of the UK Treasury in getting those decisions made.

Taxpayers in the UK now pay far greater taxes, duties and levies than at any time in history. Although the top rate of income tax does not reach the 97% imposed by the previous Labour government, increases in other payroll taxes (borne by both employer and employee) and indirect taxes means that the tax burden of the average UK family is now far in excess of half their earnings - and for some it has been estimated as more than 90% of the cost to the employer of salary and payroll taxes.

It is not just Liechtenstein that is caving in: as the G20 finance ministers plot to bring further pressure to bear, Andorra - a tax free enclave in the mountains between France and Spain (and not, formally, part of Europe) .

The pressure is now growing on Switzerland - already being attacked by the USA which claims UBS is harbouring tax evaded funds - to make more concessions.

Liechtenstein's Prime Minister Otmar Hasler said in a statement "With this declaration, however, we want to make clear that bank client confidentiality in future cannot be misused to facilitate tax crime." But given that tax crime is what drives most "anti money laundering" provisions - regardless of the headline grabbing comments about organised crime and other offences - it means, in real terms, that there will be few applications for information made that will fall outside the new boundaries.