22nd November 2017
As the fallout from the Paradise Papers continues, the Channel Islands have made a step towards further tackling fraudulent behaviour by signing a joint commitment with the British and Irish Governments.
Reaction to Paradise Papers
At the British-Irish Council Summit held in Jersey earlier this month, representatives from the likes of the UK, the Isle of Man and Guernsey came together to discuss how to prevent the use of complex cross-border tax arrangements in order to reduce payments. Those in attendance agreed that this is not a localised issue and is instead an international concern that will only be solved through global collaboration.
Indeed, Scottish First Minister, Nicola Sturgeon, highlighted the need for worldwide transparency on taxes, stating “We must have rules and regulations in place that properly promote tax transparency but also operate to close down any tax loopholes that people are using in order to unfairly minimise the tax that they pay.”
Commitment to closing loopholes
Given that this latest leak hasn’t revealed any evasive, and therefore illegal, activity, the main focus of this commitment from the Islands is to close the loopholes that high profile individuals and companies have been using, rather than prosecute fraudulent behaviour.
As the Chief Minister of Jersey, Senator Ian Gorst, stated at the Summit:
“We joined with the UK Government in committing ourselves to ensure that our island and financial services community are not used for what we might call ‘rogue operators’ and we continue to meet the very highest international standards and we’ll work together to ensure that we continue to do that.”
Lessons for us all
The fact that the Channel Islands is taking action to stop people and companies making the most of loopholes really does demonstrate the commitment authorities worldwide have to recovering lost finances. As legal systems are tightened, those seeking to capitalise on tax savings schemes will find their options dwindle rapidly.
The simple fact is that governments across the globe are fast catching up with – and shutting down – avoidance schemes. And as they do so, it’s almost certain that the world of cross-border tax requirements will become heavily policed and more complex, increasing the chances of facing a penalty for incorrect payments.
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