Guernsey Praises FT Coverage, Wants Clarity From OECD

Mandy Robinson, Tax-news.com, London

03 August 2000

On Monday, Guernsey's Advisory and Finance Committee expressed its praise of last week's Financial Times special report: 'Tax Havens Under Siege'. The Committee's President, Laurie Morgan, said 'too often external media coverage has painted a negative picture without an opportunity for us to reply or contribute any balance but this series of features was better researched, with a Financial Times journalist spending three days in Guernsey and speaking to a wide range of people.'

Guernsey is one of a number of tax havens blacklisted by a recent OECD investigation for supposed harmful tax practices. Deputy Morgan commented: 'The FT’s own editorial column on Friday criticised the developed countries for bullying smaller territories to get them to put up tax rates. Most importantly, it also highlighted the hypocrisy of the OECD, bearing in mind the considerable number of harmful tax practices which exist in its own member states.'

Deputy Morgan called the Financial Times "Europe's most important business newspaper" and was pleased it had highlighted positive aspects of the island's efficient public services and fiscal management and brought to the attention of its readers that Guernsey has no debt. He stated: 'many people outside Guernsey will now have a much better understanding of how the island operates and the benefits we bring.'

The article also discussed that while Guernsey was willing to enter discussions with the OECD with regard to its blacklist, the OECD had failed, in part, to act swiftly and efficiently towards the island's request. Guernsey has refused to pledge any co-operation with the OECD until it has made clear what it wants Guernsey to commit to.

Deputy Morgan stated that 'the word confidence has recurred a number of times over the last week, both in the FT and in a radio interview … there is no doubt that it is extremely important to the island’s finance industry that investors do not get misled by inaccurate statements … Guernsey can remain confident in its future. The series of articles has brought to the UK readership, and a wider audience, many of the true facts about Guernsey as a financial centre … many people outside Guernsey will now have a much better understanding of how the island operates and the benefits we bring.'

In addition to the editorial comments the Financial Times made on the difficulty some of the blacklisted tax havens have experienced in their subsequent discussions with the OECD, an article in the Wall Street Journal has also raised concerns over the OECD's attitude towards tax havens.

In the Wall Street Journal, Daniel Mitchell, a senior fellow at the Heritage Foundation in Washington (known as a major Washington think tank), as well as a former advisor to the Senate Finance Committee, wrote: 'The OECD’s work is particularly dangerous to global commerce. The latest gambit from the high taxers is a breathtakingly brash attempt to compel low tax nations to act as collectors for their more greedy brethren.'

Mr Mitchell's criticism of the OECD's quest to eliminate low tax regimes and their threat of competition for higher tax rate countries, stems from his belief that governments from powerful industrialised nations are looking to construct a 'cartel' of high tax countries. In his article Mitchell stated: 'Cartels, by their very nature, only succeed if consumers have no alternatives. For instance, if conducted unilaterally, the EU’s crusade to protect high tax nations is doomed to failure. Jobs, talent and capital will migrate out of the EU to jurisdictions with a less hostile attitude to private sector wealth creation.' Furthermore, because the OECD and the EU believe that large cartels will sustain high tax rates, other nations (i.e. in the Caribbean and the South Pacific) will continue to attract new businesses to their tax regimes.

Mitchell continued: 'The OECD and EU want to turn back the hands of time. By pushing for a world tax cartel they hope they can undermine the liberalising impact of globalisation on public finance … what these people are aiming at is destroying financial privacy. They are going for the low-tax regimes, no matter what. What we are watching here is the last gasp of the high tax social welfare economy.'

Mr Mitchell asserts that a strong stance is needed by the low tax regimes in response to the OECD and he makes clear his disapproval of Bermuda, Cyprus, Malta, Mauritius, San Marino and the Cayman Islands in their commitment to co-operate with the OECD when other territories such as Guernsey refused: 'They seem to have decided to throw their friends to the sharks in the hope they get eaten last.'

According to Mitchell, low tax regimes play two major roles within the global economic order: 'First and foremost competition is good. It promotes higher efficiency and better service. Tax competition also has a beneficial impact by keeping a greater share of resources in the productive sector of the economy,' he said.

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