Tuesday, October 14, 2008

The anomaly of nationalised banks

We recently reported the curious situation that some governments might now find themselves in, with the Dutch government now claiming ownership over institutions that might have been, er, helping Dutch citizens evade their taxes. Which raises interesting possibilities.

In a similar (but not identical) vein, Bloomberg has now reported the following:

"The U.K. Treasury should tell banks receiving investment from the government to close their operations in offshore tax havens, said Vince Cable, a Liberal Democrat lawmaker who speaks on finance. "It seems totally inappropriate for banks funded by the taxpayer to be systematically avoiding British tax or helping customers to do so,'' Cable said in an interview. "The anomaly of the nationalized banks will bring this issue to a head.''

We agree, absolutely. The article also features a spokesman for Britain's opposition Conservative Party, who dodged the question entirely, by answering a different one that he seemed to prefer:

"We do not believe it automatically follows that banks receiving taxpayer support should be required to close down their international operations,'' said Philip Hammond, a Conservative member of Parliament who speaks on finance.

(Those who have read our blogs regularly would remember the Conservative Party's astonishing foresight in this crisis, reminiscent of the fortune-telling skills of the Cato Institute and the Center for Freedom and Prosperity)

The Bloomberg article contains many other interesting things: it features TJN's good friend Prem Sikka, as well as TJN:

"John Christensen, director of U.K.-based non-profit Tax Justice Network, said U.K. financial regulation should be extended to Britain's tax havens. "We need full disclosure of banks' activities in these locations so that we can see whether profits generated in the U.K. are being shifted artificially to avoid tax,'' said Christensen, who was economic adviser to the government of Jersey from 1987 to 1998."

Will Britain's government have the courage to think through the implications of what public ownership means? We will watch with great interest.


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