The fall of Jersey:
December 8, 2015 5:40 AM   Subscribe

How a tax haven goes bust. Guardian long-read describing the rise and fall of Jersey as an offshore tax haven.
posted by Ned G (25 comments total) 17 users marked this as a favorite
 
To paraphrase Mel Brooks: Nobody move or the finance industry gets it!
posted by srboisvert at 6:06 AM on December 8, 2015 [4 favorites]


I worked there over the summer of 1987 while in college. Very odd place. Police state in many ways, or it was then.
posted by GallonOfAlan at 6:07 AM on December 8, 2015


For clarity, we're not talking about New Jersey.

It fell a long time ago, due to the Care Bear Cleansing.
posted by leotrotsky at 6:10 AM on December 8, 2015 [1 favorite]


Police state in many ways, or it was then.

Could you elaborate on that? Do you mean a firmly entrenched Old Boy network that runs the police department?
posted by leotrotsky at 6:12 AM on December 8, 2015 [1 favorite]


If only there were some way for a government to raise funds to pay for essential services!!!
posted by mittens at 6:16 AM on December 8, 2015 [11 favorites]


A couple of years ago, a friend started asking me about international IP law. Uh, right... you do know that's hella complicated and you need specialist legal advice, and I just write about little bits of it from time to time? But they persisted.

Eventually found out they were consulting for the Jersey Government, which was considering setting up some kind of offshore IP registry and becoming the world's trading hub for same. For the life of me, I couldn't see what they were banging on about, how it would work, what good it would do for anyone or why anyone would care. Either it was too clever and subtle for this bear's brain, or it was just some wild-arse scheme dreamed up by desperate men.

Having read the piece, I think I know which.
posted by Devonian at 6:18 AM on December 8, 2015 [8 favorites]


If only there were some way for a government to raise funds to pay for essential services!!!

That's the problem. Capital is mobile and it's a race to the bottom. If Jersey raises taxes on the money that's parked there, it'll just move to the Isle of Man, or the Caymans, or the Cook Islands, or any number of other offshore havens.

It's the same issue in the states with the competition for trust assets. Everyone is fighting to pass more favorable legislation, so that now in some states we have perpetual trusts, an abomination against both the common law rule against perpetuities and any kind of equitable society.
posted by leotrotsky at 6:46 AM on December 8, 2015 [10 favorites]


There are several definitions of tax havens. The Economist has tentatively adopted the description by Geoffrey Colin Powell (former economic adviser to Jersey): "What ... identifies an area as a tax haven is the existence of a composite tax structure established deliberately to take advantage of, and exploit, a worldwide demand for opportunities to engage in tax avoidance." The Economist points out that this definition would still exclude a number of jurisdictions traditionally thought of as tax havens.[5] Similarly, others have suggested that any country which modifies its tax laws to attract foreign capital could be considered a tax haven.[6]
There are, still, many to use, should you feel the need to
posted by Postroad at 6:53 AM on December 8, 2015


Its another form of monoculture. Once you have nothing but one industry, then you have to do whatever it takes to keep it happy.

The other option is facing a really painful readjustment of the entire economy rather than an only slightly less painful, but faster, readjustment of the state. Basically all the options suck.

Not to mention the pre-finance economy based on tourism can't come back in the mass market because you simply can't compete with 400 GBP weeks in Cyprus.
posted by JPD at 7:15 AM on December 8, 2015 [1 favorite]


There are several definitions of tax havens

1. Low taxes
2. Secrecy
3. Doesn't care where the money originally came from

Pick any two.
posted by kersplunk at 7:21 AM on December 8, 2015


For clarity, we're not talking about New Jersey.

Also for clarity: the article mentions both London and the City of London, which are distinct entities.
posted by reprise the theme song and roll the credits at 7:32 AM on December 8, 2015


Sounds like they need a new Jersey.
posted by miyabo at 7:36 AM on December 8, 2015 [3 favorites]


They really shouldn't have abandoned their original industry of producing sports shirts.
posted by dr_dank at 7:38 AM on December 8, 2015 [5 favorites]


A group tried to set up a New Jersey a while ago. That didn't really work out like they for hoped either.

I imagine the economy of Jersey will improve once the BBC gets around to remaking Bergerac.
posted by AndrewStephens at 7:40 AM on December 8, 2015 [1 favorite]


They really shouldn't have abandoned their original industry of producing sports shirts.

Neighbouring Guernsey might have something to say about that - they produce their own eponymous jumpers which give their name to the shirts worn by Australian Rules footballers, as well as geansaí - the generic word for a jumper or jersey in Irish.
posted by kersplunk at 7:48 AM on December 8, 2015 [1 favorite]


For the life of me, I couldn't see what they were banging on about

It is depressing how frequently the reason for that is because the powers that be don't have a clue about what's going on. Obviously, David Cameron's letter to his local council complaining about cuts that he forced it to make is a prime example, but thinking that the people who run a government serving 100,000 people will have better foresight or business nous than the people running a moribund midsize department store chain (say WHSmith or BHS) seems to be a recipe for disappointment.

Depressingly, I suspect that the local press in a small country is going to be even less critical of the powers that be than a company newsletter.
posted by ambrosen at 7:59 AM on December 8, 2015 [1 favorite]


From TFA: "However you look at it, though, ordinary people, through higher prices and pay freezes, job losses and benefit cuts, are plugging a hole left by a massive corporate tax break."

That sums up the depressing state of global affairs.
posted by cynical pinnacle at 8:05 AM on December 8, 2015 [2 favorites]


The fictional locals in the book, which was published in March, are resigned to their fate. “We all know that foreign money has the run of this place,” one says. “But it’s quite another thing altogether to openly replace the Jersey flag with a set of splayed arse cheeks and a dollar sign.”

There's a visual for you.
posted by cynical pinnacle at 8:13 AM on December 8, 2015 [2 favorites]


Does building an economy exclusively on finance ever work out well?
posted by benito.strauss at 9:39 AM on December 8, 2015


Alas for the once-thriving cabbage cane industry.
posted by XMLicious at 10:16 AM on December 8, 2015


Well, I feel sorry for those who were fighting against it, but it sounds like most of the island were perfectly happy to profit by helping some of the worst people in the world fuck other people over. So my pity for the rest of them being fucked over in turn is fairly scant.
posted by tavella at 12:11 PM on December 8, 2015 [1 favorite]


It's like the Resource Curse, except the resource in question is an abstraction. And therefore portable. That portability is what made it possible to bring it to Jersey in the first place.

The horse-race metaphor seems even more apt than the author realizes; horse races end. You cash in and it's over. You can't count on winning the next one, even if you've won two in a row.

You'll note the corporate-tax-avoidance businesses didn't bootstrap themselves in some lawless Libertarian wonderland like Somalia or the wilds of Pakistan. They set up shop in a place that already had a stable, functional government, society and infrastructure, all made possible by generations of working people paying taxes.
posted by Western Infidels at 2:45 PM on December 8, 2015 [3 favorites]


Also defense being provided by England.
posted by Mitheral at 4:52 PM on December 8, 2015 [1 favorite]


And what a bang up job England did of that.
posted by GeckoDundee at 3:56 AM on December 9, 2015


They got what they paid for.
posted by biffa at 8:30 AM on December 9, 2015


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