My colleague Richard Murphy has ‘proof’ the States of Jersey are engaged in a high stakes game that is putting into law practices that effectively encourage tax evasion. According to emails Richard has seen between Paul de Gruchy, barrister responsible for project managing the law and Malcolm Campbell, Comptroller of Income Taxes, Jersey:
I imagine that a large number of wealthy people all over the world (including Jersey) do just the thing you fear in your e-mail – place assets in trusts in another jurisdiction, define themselves as excluded persons for the time they are resident in a specific jurisdiction, have assets returned to them when they cease to be resident in that jurisdiction, and then receive all the gains/rolled-up income tax free.
As Richard notes:
Now he, and the other participants in the correspondence call this behaviour ‘avoidance’ but that’s self delusion on their part. To structure affairs like this is false representation. The person is claiming to put the assets in trust when they never have any intention of doing so. In other words they intend to evade tax. That’s entirely different from avoidance, but it is this evasion that Jersey is facilitating.
The issue has also been reported in The Observer.
When I was in practice, the establishment of discretionary Jersey settlements was standard fare. The difference was that trusts were established prior to creating any other form of legal entity or the purchase of assets. In the cases I handled, there was always a risk that assets would not realise gains or that the businesses such assets supported would fail. We always ensured that trust management was organised at arms length to ensure there could be no question of who controlled the assets in question. We also tended to reserve these trusts for non-domiciled UK residents. I’m not arguing there was some degree of artificiality but we always stayed safely within the law and not on the edge. That’s entirely different to what Richard is discussing.
Expect the anti-avoidance lobby to take on greater prominence as the degree and depth of collusion in tax avoidance between governments and taxing authorities becomes clearer.
Technorati Tags: tax avoidance, tax evasion
