Southern attacks 1.(1).ks.

[Terminator 4]

WE are told repeatedly that Jersey is not a tax haven; it is an offshore finance centre.
We have a flat rate of tax at 20% that applies to everyone — apart from finance businesses (10%) and foreign-owned non-finance businesses (0%).
This flat rate is even supposed to apply to wealthy 1(1)K residents who are required to pay a ‘benchmark’ of about £250,000 in tax for the privilege of living in one of our luxury mansions and occupying a few vergées of our precious land.
As a rule of thumb, wealthy residents can expect to pay 20% on their first £1m of (declared) Jersey income; 1% on the next £1m and 0.5% on the rest.
We have 135 such wealthy residents. If they paid their tax at the benchmark rate, that would generate over £33m, almost sufficient to cover GST. That would be handy, wouldn’t you think?
So how much do the wealthy actually pay?
In 2002 they paid £10.7m tax in total, or around £79,000 on average. (Questions in the States, 4 November 2003).
You and I, being taxpayers at the 20% tax rate, might expect the government to chase a better return from its wealthiest residents, so what has the Treasury Minister done about it?
In 2006 Senator Le Sueur managed to extract the magnificent total of . . . £8m from the 135 wealthy residents; an average of only £59,000 each. (Questions, 15 July 2008).
Why is it that the wealthy cannot be made to pay their fair share, or at least the agreed benchmark rates?
Why can’t we vote out a Treasury Minister who prefers to tax the poor via GST rather than the wealthy?
Do I suffer from the politics of envy? I don’t believe so.
I believe in progressive taxation, as does Senator Le Sueur. Even with the addition of GST, he argues that our tax system is ‘mildly’ progressive.
Our tax system is not progressive at all.
Examine, for instance, these effective tax rates:
lLow to moderate earners (marginal rate): 8%.
lModerate to high earners (full rate): 14%.
lHigh earners (20 means 20): 20%.
lFinance sector (before zero-ten): 13%.
lFinance sector (after zero-ten): 10%.
lForeign-owned non-finance (post zero-ten): 0%.
lRichest 1(1)K residents: 6%.
lIf you think this makes sense as tax policy, then you are probably doing well out of it. It makes little or no sense to me.
La Rochelle, Bellozanne Road, St Helier.

http://www.thisisjersey.com/2008/07/28/all-those-rich-people-and-just-8m-tax/

[JACKSBACK]

This is why he should be our next Chief Minister. He is right yet again because the rich should pay more.

[Jason the Maverick]

This is hardly new news.  Most of these people have a contract with regard to the level of tax they pay.

[Malachi]

It might not be news and you might (and probably do) not think much of the individual attacking the bespoke tax arrangements that most 1(1)K's have, but can these arrangements really be justified/defended?

(in income tax terms of course; a lot of these people are 'worth' X millions etc., but this has no relation to what they might earn every year).

[Jason the Maverick]

Stuart Syvret has brought this up before.  I am not sure whether it is right for an elected politician to actually attack 135 people like this in a local newspaper.  All it does is drum up resentment against one of our classes.   

[en830]

I wonder how it works with taxable income, do they only get taxed on the income realised in Jersey ?

Also on paper they maybe worth several hundreds of million each, but in reality, have only a few million in the bank earning interest. The rest being made up of property, stocks, shares, futures and options etc, on which they would pay tax on any realised income.

I'm not defending the system, just putting another iron in the fire !!!!

[Deputy Dawg]

This is old news which was brought up by Syvret ages ago, and as it is so old you would have thought that Le Sueur would by now have had time to look at it properly and get the full details.

Southern is not giving all the details and his figures are flawed, but the 1 1(k)'s as a rule have paid far too little. Lets just make them Jersey residents and charge them 20% on world income, thats still 20% less than the UK.

[boatyboy]

It my be old news to some but this is new to me, and I presume others. If Mr Le Suer is right,  I heard him on BBC radio being put under some serious journalistic pressure, the wealthy imports pay tax on their Jersey incomes after agreeing a benchmark tax ?. Which surely must mean after the new house costing millions, plus a mooring for the yacht and the new cars, they then go out and get a job on Jersey. Tax is then deducted from their Jersey income.

Are we really supposed to believe this?

Jersey has two laws different to England ( there are probably others regarding tax ) should a wealthy ( now Jersey ) resident wish to leave millions to loved ones he / she will not suffer death duties none. In England the government takes forty per cent after three hundred and twenty thousand pounds, of the total value left by will including houses deposits jewellery etc. This is significant amount to lose if you are very wealthy. There is no capital gains tax so should a wealthy immigrant purchase property again in England after they become a Jersey resident and then sell it again in a couple of years, any increase they make they keep. Death duties would be payable though, as the property is on England soil ,if the value is more than mentioned above.

Geoff Southern was right to bring attention to the purse string policy makers warped sense of values. Why as the very wealthy leap frog regulations to live here in luxury, are some not paying their fair percentage ?You have let us down again Jerseys establishment, and continued by little Terry.

[Terminator 4]

It won't change anything because unlike the poor, the 1.(1). K's can just pack up and bugger off to another offshore Island.  My dislike of the 1.(1). K's is that they offset their income tax with capital gains on commericial and private property which is inflationary for everbody else.   

[soon]

Most of this was news to me. There is a State's website devoted to high value residents - www.reflectonjersey.com, from which I quote below. Whatever the morality of providing a haven for these worthies, they are not meeting their side of the bargain.

"High Value Residents – “1(1)Ks” The 1(1)K licence given to high net worth individuals derives its name from Jersey's current Housing Law (see Housing). A key consideration in the granting of 1(1)K licences is the expected level of annual tax contribution to be made by the applicant. To meet the current requirements, applicants would normally be expected to generate sufficient income so that - at the present rates of tax - their annual tax contribution is in the region of £100,000. As part of the application process consideration will be given to the total net worth of the applicant, in order to be satisfied that the applicant has sufficient wealth to generate the expected future tax revenues. With effect from 1st January 2005, 1(1)K individuals new to the island are taxed on their Jersey source income at 20%. The first £1,000,000 of non-Jersey source income is also taxed at 20%, but the next £500,000 is taxed at 10% and non- Jersey source income above the £1.5 million level is taxed at just 1%"

Also I dislike the obsequious tone of the conclusion - "In Conclusion We do hope you have enjoyed reading this brochure on the Island of Jersey and that we have provided you with enough detail to allow you to make an informed decision regarding residency and the opportunities that Jersey has to offer. To potential high value residents, Jersey offers a very personal and individual support mechanism with confidentiality assured. This is designed to make the application process as clear and speedy as possible yet ensuring that all aspects are fully covered. All applications are dealt with through a single point of contact. I will be pleased to answer any of your queries and assist you in making any appointments you may wish with organisations in the island. On application, full details will be sent to you. On return of these an initial response will be provided immediately. A final response will be forthcoming within 10 working days. Once approved the service continues and full assistance will be given wherever you feel it is necessary. From providing information on housing and schooling to mooring your boat -everything, in fact that will help in your important decision to relocate. We appreciate that this is a major lifestyle change and aim to support you at every stage. Thank you again for your interest in Jersey."

[Jason the Maverick]

They have been trying to get more 1.(1).ks in for years.  Frank Walker likes them a lot.

[Conductor]

What is Southern trying to prove here?  If people are not paying enough tax then isn't it up to the Tax Department to check them out? 

[boatyboy]

Most of this was news to me. There is a State's web site devoted to high value residents - www.reflectonjersey.com, from which I quote below. Whatever the morality of providing a haven for these worthies, they are not meeting their side of the bargain.

An excellent and informative post from member Soon. The One point of contact referred to in the post is Nigel Philpott, ex executive of Jersey Tourism. He holds their hand through the airport to the mooring of thier yacht. Why are the tax department not doing the same? There again look who is in charge of the treasury, hangs with the rich and brings in GST with help from 27 other states members to be fair. Roll on the elections, if you don't normally vote, how about voting this time ............just to get your own back on 28 that voted to raid your wallet or purse.

[Jason the Maverick]

Letter in today's rag counter attacking Geoff Southern:

DEPUTY Geoff Southern has recently made a high-profile attack on the 1(1)K residents of Jersey and their financial contribution to the Island’s economy.

He describes them as ‘people in mansions’, although he tells us he is not motivated by envy.

He cites a figure of £8m as the amount paid in direct tax by this group, which he feels is insufficient. I don’t know if this is an accurate figure, and it is unclear if he feels they are collectively ungenerous or certain individuals are abusing the system. If it is the former, then surely this is a subject for the States to debate; if the latter, he should be working with the Comptroller of taxes.

However, is it really necessary to provoke envy, and possibly hatred, via a letter to your newspaper, in particular when the facts, as presented, are misleading and incomplete and the outcome could do substantial harm to the Island’s economy and tax receipts?

 If the 1(1)K population of Jersey were to apply to live in Switzerland, they would not only be welcomed with open arms, but their tax bills would, in the main, be substantially reduced. Similarly in the Bahamas, they would be welcomed at a nil rate of direct tax (which applies to all residents).

There are at least a dozen other countries lining up behind these two to similarly welcome this group into their community. The UK has, for a long time, acknowledged the benefits brought into the country by wealthy foreigners. The reason for this is that all the above recognise the spending power and spin-off benefits that accrue from most of these individuals and their families.

We are constantly being told, often by our politicians, that we must diversify our economy. Looking around the Island, I can think of over a dozen significant and diverse businesses (largely outside finance) that have been established by our 1(1)K residents and their families.

In trying to establish the ‘worth’ of these people to our Island, therefore, I think we need to add the tax bills of these businesses and the hundreds of their employees to the £8m figure cited by Deputy Southern, together with their collective spending power in the Island.

Finally, I have attended enough charity events here to know that many of the 1(1)K residents are constant and hugely generous donors. One cannot fail to remember David Kirch’s gift to all the Island’s older population just a year or so ago.

Many of the high-profile 1(1)K residents are also great ambassadors for our Island and, while we currently have certain politicians mindlessly trashing the reputation of Jersey around the world, these people frequently help our morale and our economy by portraying a somewhat more balanced picture of a largely caring and generous society.

I really do think our politicians need to make themselves aware of the basic economics of this Island before they start to publicly attack a particular industry or group.

I am not a 1(1)K resident and I do not have a privileged background, but I do feel that we will all be losers if we administer the Island on the basis of politics of envy.

I agree that an elected member of the States should not be targeting people like this.

[Conductor]

Do the JDA just want people with wealth to leave now?