Britain can force its tax havens to curb secrecy. But will it?

   0   0 Blog, Secrecy
The buck stops at Buckingham Palace

Does the buck stop at Buckingham Palace?

Jolyon Maugham, a UK tax barrister, has written a useful blog looking at promises the UK coalition government made before the last election about getting its offshore satellites to curb financial secrecy — and then he has compared those promises to the actions that have been taken since then.

Do read the whole short blog, but the conclusion is:

“What’s happened?

. . .

In a word, nothing.

The UK does possess the power to force our tax havens to adopt this measure – at least that’s what an article in the highly respected New Law Journal concluded. It’s just a matter of political will. Which seems to be in rather shorter supply after the General Election than it was before it.

This is as we have said in our new UK country report for the Financial Secrecy Index outlining how the United Kingdom has become arguably the most important global player in the offshore world of tax havens or secrecy jurisdictions. The New Law Journal article says:

“The supremacy of the UK government is incontestable as a matter of strict common law. This is compounded to a certain degree by statute, for example in an obscure piece of Victorian legislation (the Colonial Laws Validity Act 1865) which provides that “any colonial law shall be…absolutely void and inoperative” to the extent it is repugnant to a UK Act of Parliament.”

It cites numerous examples where the UK has intervened, but it also goes on to argue that there is “an entrenched constitutional convention not to interfere in the laws of the overseas territories.” Our UK report notes:

“The vague nature of political relations between Britain and its OTs and CDs is extremely convenient for the City of London and for the tax havens: each claimed their dependence on Britain or independence from it, as it suits them, and Britain often claims ‘there is nothing we can do’ when scandal hits – though this is untrue.

The bare truth is that Britain controls these places: all their secrecy-related (and other) legislation has to be approved in London, and Britain can step in and impose direct rule when it wants to, as it did in the Turks & Caicos in 2009. As a top BVI legal expert told us in a telephone interview, London has “complete power of disallowance” of legislation. What has generally held Britain back from intervening is political will.”

TJN’s job, in this particular respect to influence this amorphous thing called “political will.”

Just for an example of the pushback: see this article from the Cayman Reporter entitled Premier stands ground on beneficial ownership.

We have written to Britain’s queen about all this but when she replied she told us that it’s not her affair and that we should talk to the politicians. So the buck doesn’t quite stop at Buckingham Palace, as our mischievous caption above suggests. Yet even so, she was wrong to be so brusque with us: she could wield great influence if she really wanted. Instead she seems content to have her face splashed across their banknotes and postage stamps.

Cayman banknote

For some superb pictures of tax havens, see here.

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