Sark, Larks - and tax havens

I suppose one of the considerations for choosing Brecqhou on which to build a great house is that Sark, of which Brecqhou is a sort of fiefdom (though the Barclays are changing all that; after all, when you've paid 2.3 million pounds for an island you are nobody's fiefdom!) - has no income tax.  There's not a person in the world who doesn't want to own property and be resident in a place which has no taxes, me included. But I'm not sure I would have wanted close proximity to Sark.

In fact, Sark not only has no income tax, but no capital gains or inheritance taxes. There is no VAT and many businesses can be run without having to register for or charge it.  And  Sark has no company register.

The tax free status of Sark led, inevitably, to the jauntily called Sark Lark, though this is just another name for the old company-director-for-hire game. But times have changed.  The Barclay brothers acknowledge that, and, along with the British Government, of which Sark is a Crown Dependency, take a dim view of the Larkers.

Sark has a population of about 600, and at one point it was said that most of the adult population was involved in the business of directorships.  A resident of Sark, for instance, offers himself as a company director to some mysterious off shore company about which he knows nothing and for which he has no responsibility. This company pays no tax and is not required to declare its true ownership.  This arrangement can be lucrative, with directors' fees ranging from one to two hundred pounds, upward to tens of thousands of pounds. 

Naturally, the would-be-director, having a high opinion of human nature, assumes the company he is linking up with is highly respectable.  Nobody willingly wants their name associated with a bunch of money launderers involved in all manner of skullduggery.

However, greed is part of human nature and let's be honest about this, we all like money.  This sort of set up looks very appealing. And the odd directorship or two is doing no-one any harm, is it?  But, when it gets to the point where people might, for instance be company director of 700 companies, or perhaps have a couple of dozen phone lines running into their house,  or maybe, even, regularly have letters addressed to 200 different companies rolling through the letter box - then that is raising the bar, somewhat. And shortening the odds on trouble. I have to say, people playing this game are a lot bolder than me.

All it needs is for just one of a person's multitude of companies to crash land publicly, and in no time at all the boys in blue are coming up the  garden path closely followed by several dozen hacks and the paparazzi, and that person's  photo is spread all over the newspapers alongside assorted crooks and conmen, and life is looking pretty ugly. And it wouldn't do much for the reputation of of the Bailiwick of Guernsey and the reputation of the Channel Islands generally.

Once upon a more innocent time, this sort of larking about was fun.  But these days, with drugs lords and arms kings moving money around the world one step ahead of the authorities, and Bin Laden and his band of romantically garbed young men out and about fundraising successfully for their cause,  none of this looks quite so clever, or safe.

Sark, though independent, is also part of the Bailiwick of Guernsey and in 2000 the Bailiwick introduced the Fiduciaries Law, which looked as though it would bring the Sark Lark to an end.  But it's clear that hasn't happened.

The Barclays object to the practice.  So would I, in their position. And even in my lowly position, I object. This is a dangerous climate at the moment for anybody who wants the right to hold on to their own hard-earned money and find somewhere safe to put it.  We are in the midst of a concerted attack on the whole concept of off shore funds and tax havens, by both the OECD in Europe and, in America, by the IRS tenacious pursuit of the Swiss bank UBS. 

There are black and white lists of tax havens that are acceptable or not, as the case may be. And on the whole it is better not to be on the black list. It's always better not to draw attention to yourself. Sark's behaviour unfairly draws unwelcome attention to the Channel Islands, which run their affairs in a perfectly orderly manner.  Like most so-called tax havens, the Channel Islands have reciprocal Tax arrangements with the UK and most other countries in the world. Sark has no such arrangement.

Some years ago my favourite high IQ guru,  Lord Mandelson, was speaking in Guernsey.  He was asked about the European attitude to the Channel Islands.  He gave his usual wise advice. He said they were not really on the EU's radar screen and advised that they should 'remain unintroduced.' Exactly. Keep a low profile. Sark could spoil all that with its unsubtle greed.  It's a quaint little feudal system which looks increasingly out of touch with the real world

Next post is going to be about where we are at present in relation to the fight back by the off shore world, against the present attack on its belief in its right to some measure of privacy to protect itself and those it shelters.