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24 July 2007 Blog Home : July 2007 : Permalink

Monaco Not A Tax Haven

OK not an "Offshore Financial Centre" (OFC) which seems to be bureaucratese for much the same thing. i.e. somewhere that makes its living channeling money about for people who don't live there. I've discoevred this fact thanks to a post by Tim W, writing at the Adam Smith Institute blog, where he talks about the jaw dropping idiocy of considering the UK to be a tax haven. The person who does this is an IMF researcher (PDF), and the person who brags about it is Richard Murphy, a gentleman whom I have mocked before. Tim W does the goods on the UK part quite well, but I thought I might have a look at the source material just for fun. Starting with Mr Murphy's summary where he states:

The findings are significant. Simply by considering this ratio at a level of statistical significance (and in most cases the stats are extremely clear) a new list of OFCs is produced. The following which were considered OFCs by the IMF are confirmed as such: [...]

The following which the IMF thought to be tax havens fall off this list:

But most tellingly three new OFCs are identified. they are:

This data is objective. I’ll admit, the UK is clearly not as dependent on financial services as, for example, the Channel Islands, Cayman or Luxembourg are, but equally, compared to places like the US we’re massive players. It’s time to recognise reality. With its cohort of supporting states in the above list the UK is at the centre of the threat to world stability caused by the financial services sector and tax abuse.

The financial services sector is a "threat to world stability"? Umm yes I guess this is true if you think that in times and places where the financial services sector hasnot been available the world has been remarkably stable. The populace of these times and places have also been poor and as a result of their poorness, disease ridden, prone to starvation and, by any objective measure you like to make, miserable compared to those of us who live in places and times where the financial services sector is present and active. Compare Zimbabwe (say) with its neighbours South Africa and Botswana. Guess which nation lacks the financial services sector? Oh and "tax abuse" From the context tax abuse means people doing their best to avoid paying taxes by moving their financial affairs to places where they can legally pay less tax. Mr Murphy appears to share Polly Pot's belief that everyone should be taxed at about 90% of their income and then cheerfully sign up for government assistance to survive. Well actually that is what I'd call tax abuse, if I didn't reserve the term for the sorts of people of create a new tax and then retroactively apply it.

But enough of the bleatings of Mr Murphy. One thng that struck me was that a certain nation close to where I live did not appear on the list of OFCs - Monaco. Indeed  on P 18 of the PDF we see a graph where Monaco has a negative number implying that it is a net importer of financial services.

It therefore appears that the reason why certain (wealthy) people prefer to live in Monaco rather than a few metres away across the border in France is nothing to do with a desire to (escape) tax abuse and that there must be some other explanation . Perhaps there is a massively more pleasant microclimate covering Monaco and this more than makes up for the cheek by jowl living conditions....

Alternatively the IMF report is a piece of junk. Well lets see if we can find some evidence. Clearly if the IMF is right then all those british titans of industry and commerce would be staying in London for the whole week instead of residing in Monaco. Umm well there's Lord Laidlaw, Mrs Green (wife of Philip G), the Barclay brothers and that is after about 2 minutes of googling, which also gives us this Grauniad piece which says:

The Guardian has traced more than 650 directors of British companies who give their current address as Monaco, and the top 10 residents there with UK interests alone control family assets worth more than £13.5bn.

Now either these 650 directors are all financial idiots because they prefer to live in Monaco not London - or the IMF report is bunk. What do you think is the answer?