söndag 24 december 2006

A really big tax fiddle - and legal too

I came across this on the website of Price Waterhouse Coopers (PWC)...

“So much has happened in the past three years to progress the development of Jersey and the Channel Islands as a tax-efficient environment to attract those property-owning corporates, etc... seeking to set up offshore property companies and unit trusts... However, as with so much offshore, it just takes some changes in tax legislation elsewhere to provide an impetus and take the offshore market to a new level.

“This certainly happened with Stamp Duty Land Tax (SDLT) in December 2003... The massive growth brought about by these changes led to the coining of the term 'JPUT' as the market norm for the holding of UK based property assets in a tax efficient way to shelter the sale of the property assets from SDLT...

“While ‘seeding relief’ (a concession for new unit trusts – henry) has been withdrawn, the legacy is a fantastic one of a much deeper market in indirect property owning offshore unit trusts...

"The future, at least the immediate future, for offshore property funds and companies remains favourable in my view. There is critical mass, the structures continue to be flexible and provide tax efficient benefits to investors, the income yields remain attractive for those London listed offshore property companies pursuing this route..

”Longer term is naturally harder to assess, but the offshore market continues to evolve. We are already seeing some innovative structuring for European property investment, both in the near and far continent, as property investment groups seek to continue to use the islands and also seek the benefits of the offshore route for the first time."

For the document in full, see

So ordinary people get clobbered by the tax, whilst those who can afford to pay for the best advice get off scot-free. And meanwhile, we are all urged to grass on people who work a little fiddle job whilst claiming a meagre Social Security benefit.

So is the Chancellor really concerned about this leakage? The liberal press tut-tut about it on some pages and advise their readers how to take advantage of the loopholes elswhere on their pages. The government and EU have leaned on the Channel Islands authorities.

But really, the Chancellor has nobody to blame but himself. The people who frame these taxes are supposed to be experts, and should have been able to forsee how SDLT and any other tax can be avoided. SDLT is in any case a bad tax as it discourages land transfer and therefore is an obstacle to the most efficient use of land.

The Land Value Taxation Campaign submitted a report to the Treasury when the SDLT was up for consultation. The Campaign advised that the tax on land transfer should be no more than a charge to cover administration, and that the appropriate way to tax land should be through a charge on the annual site rental value (land value taxation), payable by the beneficial owner. Such a tax could not be avoided by offshore ownership as the liability would remain, with the ultimate sanction of forfeit of the land if the tax was unpaid.


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