Poor Guernsey. The small island off the northwest of France sounds lovely: “Guernsey is a special place, a thriving community that welcomes its visitors with open arms and leaves a lasting impression on all who set foot on her soil” says a tourism website.
So why are U.K. authorities harrasing residents — folks like private equity honcho Guy Hands — about using the posh isle as a tax haven?
Maybe it’s because Guernsey’s zero tax rate on capital gains has attracted $1 trillion in deposits, representative of other tax loopholes that allows folks to stash as much as $11.5 trillion offshore, resulting in billions of dollars in lost tax revenue for already fiscally starved countries.
As The New York Times reports:
“…the time-worn trick of moving one’s main residence to the Channel Islands, Monaco or the Cayman Islands, for example, while maintaining business, social and cultural ties at home is not as simple as it used to be. That is because the British authorities have started to crack down on the practice.
The increased scrutiny comes at a time of heightened sensitivity to tax avoidance worldwide. While moving to a tax haven is still rare among the rich, it represents the tip of the iceberg of the far more common practice of moving substantial sums of money abroad, often without reporting it to the authorities.”
Tax havens have been in the crosshairs for a long time, but the recession has actually made it an urgent issue, which is why you’re seeing this and the UBS case in the US. Beyond that, the use of offshore accounts by Bernie Madoff and R. Allen Stanford offer another reason to increase scrutiny.
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