Shouting at the radio

I don’t often shout at the radio but a recent item got me going.

About 2000 UK public officials are being castigated in the media for using a legal loophole to reduce their tax bills.

The key word here is legal.

If it’s a loophole and the UK government are upset then the solution is easy. Close the loophole.

But it’s morally wrong to avoid tax.

A lot of what governments do is morally wrong but they’ll get very upset if we don’t pay our taxes because of that fact.

If it’s legal and the politicians don’t like it, then they can change the law to make it illegal. That’s what politicians do. Make laws to further their policies.

Guernsey is in the throes of losing what has become a not so minor industry exploiting a low value exemption to the taxing of goods imported into the UK.

It was a reasonable exemption until those big companies who would export into the UK anyway decided to legally use it to avoid unnecessarily paying VAT.

It was morally questionable but legally ok.

Should Guernsey have allowed such businesses to set up in the Island?

Why not.

It is not up to us to enforce what the UK may regard as a moral obligation. We will obey international law and will not be a knowing party to anything illegal. A media or politically stoked moral outrage doesn’t come into it.

If the UK government want to change the rules, then that is their prerogative. We may not be happy about it and did contest the ruling in the UK courts but at the end of the day we must comply to the rule of law.

Guernsey has often been criticised for allowing itself to be used as a base for a finance industry which actively encourages legal tax avoidance.

It’s that word again. Legal.

We do not deal with those who break the law to evade their tax bill. We do not knowingly break the law full stop. If we find out that someone has been acting illegally, then they are reported to the necessary authorities and the business is brought to a close under official instruction.

But why shouldn’t Guernsey exploit their position and encourage an industry which legally benefits the Island?

Every other developed country does the same thing and the UK is very successful in attracting foreigners to their shores because of the low tax rate offered to non-domiciliaries (those not legally long term residents). The fact that some of these short term residents have been there decades doesn’t seem to upset the UK revenue authorities too much.

What’s sauce for the goose is just as good for the smaller gander and Guernsey will not be shutting the door to good business just because other countries cannot make their own tax laws watertight.

These other countries may not like it, but it is up to them to change their tax laws and close the “loopholes” which are being so successfully exploited.

So, stop playing politics and kicking up the dust of moral outrage to mask the inadequacies of your own laws.

I’ll stop shouting now.