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The tax heavens Jerseys fall, corruption and breakdown of the British economic system

The first post explained how Norway largest credit management service Lindorff does not pay taxes from the company revenue. The owner is the Jersey-based company Nordic Capital, and Lindorff partly included in new company Intrum. Nordic Capital owns 47% of the stocks. The head office is in Stockholm, has 9,000 employees and 2018 profit of EUR 1320 million (NOK 14.2 billion).

Norway loses 7% yearly of its corporate tax revenue to tax havens

Norway loses 7% (2015-2016) of its corporate tax revenue because of these tax havens, $5,912 million (56,5 billion NOK), the tax revenue lost (% of corporate tax revenue) 1,419 $ million (13,5 billion NOK) (source missing profit )The story about Lindorff is not exclusive, corporations act as Robin Hood stealing from the poorest and hand-out dividend and generously spend billions on lobbying. The largest share of the non-EU money spent to influence Brussels comes from the United States, with Switzerland ranking second, followed by Norway (Source Norway missing profit).

Harbour of St. Helier

From the very first wave hitting the harbour of St. Helier, the stim of money floats across the island of Jersey. The small city a wealthy holiday paradise with cafes, theatre and market stalls. It a class above any coastal town on the mainland in the UK and other places. The look is somehow not telling the truth, and Jersey looks healthy and wealthy but close to bankruptcy. In April communicated the officials a statement of which the budget of £140 million would be sufficient for the fiscal year 2019. How did it go wrong? A question raised by the local newspaper Evening Standard. The same years a few months late in June a revised budget £140 million was in place. Still, another local magazine Connect called it “the black hole” and if the budget cracks and it will, it means, in reality, closing down all the schools and permit all teachers, the many parks close and the roads fall apart.

The island with only 100.000 inhabitants it is simply too much, was there a solution? The volunteer had to leave their jobs, mandatory, new taxes and fewer officials the cure. The government of Jersey decided that it was not room for many branches, only finance, in the wilderness still believing they could benefit well on corporations moving money around as the income.

As mention in the previous post, Jersey long history closer to France than England have since 1200 been in a verbal fight between the two countries. However, the circumstances made Jersey British enough to keep the pound as currency; nevertheless, not enough to pay taxes. Therefore, the island foundation is the offshore industry. In the 1960s, the commercial bank’s placement of cash was close to 336 million EUR; it was then ten times as high as in Great Britain. And in the 1970s as the big players began to establish themselves, it increased with 45 per cent and have not stopped ever since  (source The economy of Jersey and the fall, The Guardian).

Powell was hired in 1969 and took a position as the governmental protector of the finance sector

In 1969 the people in charge of the most significant goods of the island decided to find somebody who was able to understand the offshore market and work around the law, they hired an Irishman who previously worked for the Northern Irish government Powell who published a study of Jersey in 1971. The foreign corporations who registered their offices in Jersey did not pay tax at all, while the local banks, lawyers, accountants and administrators who helped them set establish paid 20 per cent taxes on their income- a fraction of the charge in the UK. Over 30 years after Powell took over the role the Jersey government increased the annual budget by five times yearly.  During the period Jersey build schools, new road systems, marina, harbour and the unemployment rate less than 2 per cent.

Jersey expanded the financial business by helping regimes hiding assets without asking questions

After the glooming 1970s, Jersey continued to grow their business from only serving a few English tax refugees who mostly was concerned about taxation. Jersey became happy to help anybody from everywhere without asking questions. When the officials in Moscow wanted to hide the communist party assets the last days of Soviet Union, they placed it in Jersey, as wanted to protect the ownership of the assets, the same did the south Africans to avoid apartheid sanctions. Suddenly the workload became vastly to handle, and he hired a local from the island as assistant John Christensen studied in Great Britain and experience serving as a volunteer for Oxfam. He was from the beginning one of the critics of the unethical methods that the island kept the money for corrupt Africans, and over the years he became more concerned about the vast amount of dirty money that came from everywhere to the island and most of all irritated that nobody cared.

The workload of Powell leads him to hire John Christensen as an assistant

However, the final humiliation for Christensen came in 1993 when a currency broker hustled many investors, mostly Americans 23.4 million EUR via a Jersey subsidiary. The scam was for years not investigated by the local authorities. It took a few years before the fraud got media’s attention as a journalist from the Wall Street Journal. It was one of the senior authorities.

The assistant Powell would never hire

It was the last drop for Christensen who felt that his colleagues and the island helped criminals to hide stolen wealth, besides she saw how much damage the financial sector did in the isle. The massive increase in real estates, working cost and prices rise to unacceptable levels. No other industry could cope, except finance. The prices on houses the same as in London, locals could not buy anything unless working in the departments or finance sector. Still, it was not the last they heard from Christensen, and Powell wishes he never employed him. The day after he left the job, he already got ten years of frustration and inside knowledge. Christensen decided to tell what he knew about offshore finance; soon, he became a headache for the officials. In 2002 he joined forces with the accountant Richard Murphy who shared his view.

Tax Justice Network (TJN) started investigating the offshore industry, ranking tax heavens black money laundry

Murphy and Christensen founded the organisation Tax Justice Network (TJN) who study the Offshore sector and publish the Financial Secrecy Index. The tool ranks how tax havens attract black money. The first index published 2009 showed Jersey is on or close to all the ten jurisdictions. It makes illegal money transactions fluctuation – Jersey ranks before Panama and Gibraltar, and many media studied the index pinpoint. Jersey is one of the worst taking the wealth from the most impoverished nations. Ever since the index been a painful affair and in 2013 Jersey Finance called the fake index propaganda, the office is financed by the authorities to promote the finance sector.

Brussels was furious over the tax avoidance in Jersey

However, there are more critics. Brussels got power and was angry over the tax avoidance and that Jersey helped the citizens to avoid it. 1997 EU implemented a new code of behaviour that was about to make a real threat to Jersey’s business model. A problem occurred for the authorities on Jersey, as they got only two options, increase taxes for all foreigners or cut taxes for the locals. The law accepted if everyone was equally treated. Jersey did not have any choice if they wanted to keep the finance sector. They had difficulties as if the tax was to be set too high, the stream of money would end up elsewhere.  Then in 2008, they stopped taxation on all corporations except finance pays 10 per cent and politically named it Zero-10. It opened the black hole as the tax from the corporations fell with 70 per cent between 2009 and 2010, from 244 mill EUR to 93 mill EUR.

The black hole

For the locals, it chocked, the island and people they loved became reduced without compassion or support from their leaders. The island is dead a black hole is an amount necessary to keep the society alive such as education and health. To compensate the government made a law that increased the prices on everything with 5 per cent. Warren Buffet said “as is first when the tide moves out “the economic sculpture, discovered who swimming naked, as the credit crisis sucked liquidity out of the global market”. Jersey exposed being naked like dumping toxic waste at the beach. The finance sector is seven times bigger than agriculture and tourism together. Since the 70s the island lost two of its three pillars and now worried dependent the final stage that was firm and complex.

The most significant economic crisis in history 2007 involved HBOS, Northern Rock and the island of Jersey

The plight of Jersey role in the most significant economic downfall in the past happened 2007 when the bank HBOS established by Halifax and Bank of Scotland made an announcement; to lend out money to a Jersey registered debt vehicles called Grampian Funding, who at the time assets of 20.2 billion EUR. The news that Grampian Funding existed is nothing compared that it is the most extensive banking channel in Europe, and now in need of economic assistance from its parents.  The chock was total, like discovering a well-known face thought you knew, suddenly a huge leap had grown. Simultaneously in the autumn, several banks admitted, among the most dramatic Northern Rock, their own Jersey bank made secretly economic operations who financed the mortgage loans that eventually shattered the British financial system (source HBOS Wikipedia)

Trust and Trustee

The problems of banking are always the same banks lend, process it and, lend out via a giant money printing machine. It is not a problem as long as the device gives-out and available, however as soon the credit supply stops the money to come from somewhere. And when it stopped in Jersey, they moved the machinery into the trust market. In a trust fund, the duty served requires that the client submits to all personal interests while acting for the benefit of another person. Therefore, a client trusts his assets to a trustee; it implicates the client does not own any assets or claim ownership. The trustee follows the instructions the client gave while still owned the assets. The issue exists no official register on trust. The same autumn came more bad news as several banks admitted they had Jersey-based shadow operations financing the mortgages. However, the worst was Northern Rock, led to the fall of the British economic system.

The US corporation Enron debt pay with as little help from their friends the British government who let the British payment the fraud with taxes

It is not new, already 2001 the most abundant energy corporation in the US, Enron had hidden a gigantic debt on Jersey before they collapsed 2001 (source Abuse Your Illusions: The Disinformation Guide to Media Mirages. Edited by Russ Kick published 2003 by Disinformation company). The newness in the credit crisis was that the regular British taxpayer had to pay. As the British government said they wanted to nationalise Northern Rock 2018 (trust Granite) and several other institutions, later on, became owned by the government. The cost of the nationalise were colossal hundreds of billion pounds. Jersey did not pay as a penny.

The increased problems of Jersey policy of the financial sector

Since then the officials criticised heavily the calculation made by Tax Justice Network that these tax heavens were hiding close to 30 trillion pounds. American, British and EU Authorities made clear Jersey are obliged to inform about any citizens on the island involved in banking services. Thereby some refuse to handle British account holders. The number of banks on Jersey steadily felt because of the island many frauds and scandals. From 73 in the millennium and last year 33. The bank’s deposit top year was 2007 and felt with 40 per cent in 2014, with approximately 153 billion EUR. During these years, the finance sector on Jersey declined with one-third and the number of clients with one-sixths (Source The economy of Jersey and the fall, The Guardian)

What can be the lesson of Jersey and the harm created elsewhere

Today looking back, the experience is governments who deliberately favourite banks before other sectors and with no closed door between the financial and officials. It creates enormous problems in those countries were tax income from private, and corporations disappear, and regimes hide stolen money. In this case tax money from the credit management sector go, actually are taken from the people who got debt problems and always the weakest.

Next in the series The Norwegian government act as Robin Hood stealing the wretched blind

Financial dictionary

Hedge funds
  • A hedge fund is a private, loosely regulated, aggregate investment fund managed by an individual or business for the benefit of the wealthy clients who contribute capital to the fund. Hedge funds usually have a wide range of investment strategies, and many originally intended to protect a portfolio of stocks from the risk of significant market downturns. Alfred W. Jones, American writer and financial journalist, is credited with creating the first hedge fund.
Private Equity Fund (Private Equity Fund)
  • Private equity companies invest in businesses intending to increase value over time before eventually selling the company with profits. Capital is raised from limited partners to invest in promising private companies or sectors. In larger companies, a bankruptcy court cannot protect shareholders if the liability is so high that it does not allow for capital liability coverage. It is unlikely that anyone, except those filing new lawsuits, will get the investment back. In some cases, they will receive full compensation, while creditors and other victims will receive little or nothing of contributed capital. However, if the court accepts strategic use of the Bankruptcy Act, small odds usually no injured party or creditor will be fully reimbursed. In both cases, shareholders are likely to lose both equity and future dividends.
Trust Fund and Trustee
  • A duty of trust requires that you submit to all personal interests while acting for the benefit of another person. That is the highest duty implied by law.

Source and Useful Information

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