The race to the bottom Southern refers to is between Jersey, Guernsey and the Isle of Man. All, according to tax reform campaigner Richard Murphy, are "pursuing a destructive path towards shattering their tax base by eliminating corporate taxes for their clients." If you think that sounds a bit overwrought, consider these figures.
In the year 2000, Jersey's total general revenue income was £398m. Of that figure, £208m – or 52% – was company tax. Personal tax accounted for £166m, or 42%. By 2005, total income was £467. Some £202m was paid by companies, 43% of the total. Individuals paid £242m, or 52% of the total.
Tax abuse industryThe picture is a clear one, as Murphy says in summation. "The tax burden has shifted dramatically from businesses using Jersey as a tax haven to the local population who are now paying for the privilege of hosting the tax abuse industry whilst at the same time their economy is facing ruin as local politicians realise they have no idea how to plug the continuing deficits they face."
As we have shown in our series of articles on tax havens, this 'race to the bottom' is a global phenomenon. Corporations capture the political process in nation states and push low tax as a positive measure. But they mean low tax for themselves, not everyone, and they still need citizens to pay tax in order to provide the infrastructure that enables them to operate.
So what results is a transfer of wealth. Those at the top take the profits and are insulated against losses. That insulation is provided by the rest, who must pay to bail out the periodic crises caused by the system and who are also asked to foot the bill avoided by corporate interests.
That's why there's talk of the 1% and the 99% on the streets across the world. The trend of moving the burden of taxation from those able to pay to those less able or unable to pay is being challenged. But for now, Jersey is merely the most stark example of a global trend.