WHY DID THE UK GET IT WRONG? A REPLY
Dennis Dixon
This article replies to a recent
contribution to the Jersey and Guernsey
Law Review by Filippo Noseda, which argued that the United Kingdom’s
contribution to the development of tax transparency
was largely due to Eurosceptic and anti-human rights attitude. This article
argues that, regardless of what might be thought about Euroscepticism and
opposition to the Human Rights Act, moves to tax transparency represent a wider
consensus both in the international community and in the United Kingdom. The
merits of that consensus is doubtless open to academic discussion, as is the
potential for the United Kingdom to seek to impose its approaches (including
potentially mistaken ones) on the Crown Dependencies. However, given that
support for tax transparency has a broad and bi- partisan base in the United
Kingdom and elsewhere, speculation as to the motives of the current British
government do not provide a useful framework for tackling the balance between
privacy and tax transparency.
1
This article is by way of response
to Filippo Noseda’s recent Jersey
& Guernsey Law Review article entitled “Too Much Information: Why did the UK get it Wrong?”
(“the 2021 article”).1 This was itself a follow up piece to
Noseda’s earlier contribution from 2017 entitled “Too Much
Information: When the UK gets it wrong” (“the 2017 article).2
The 2017 article contributed greatly to the Crown Dependencies’ exposure
to UK decision-making in the field of international tax information exchange.
If the United Kingdom makes mistakes in respect of balancing privacy rights
with the fight against tax evasion, then there is a risk that it will try to
drag along Jersey and Guernsey
regardless of constitutional propriety. There was very little in that earlier
article directly linking the United Kingdom’s approach to tax information
to the government’s attitudes to human rights.3 The more
recent 2021 article is, by contrast, something of a polemic linking the
UK’s approach to tax information exchange and tax transparency with the government’s frequently negative attitudes to
1 (2021) 25 Jersey & Guernsey Law Review 63.
2 (2017) 21 Jersey & Guernsey Law Review 182.
3 Ibid, at para 35.
human rights
adjudication—and to Brexit and Euroscepticism generally.
2
It will be argued here that,
whilst the 2017 article posed very interesting questions as to how the Channel
Islands’ relationship with international tax information standards is
complicated by its constitutional relationship with the United Kingdom, the
2021 article leads itself astray by (a) mining a thin stream of international authority against routine bulk information
powers (in fact, largely ongoing cases), and (b) submerging this interesting
line of enquiry under a denunciation of British Euroscepticism and human rights
scepticism.
3
There will be essentially five
arguments made in response. First, there are longstanding critiques of human
rights adjudication. Concerns as the power given to judges under human rights conventions is not something uniquely
right wing. Nor has the existence of such criticisms been as operative in UK
policy as Noseda suggests. Secondly, initiatives for bulk information powers or
for the easy obtaining of specific information exchange have often come from the EU or the USA. Thirdly, the
United Kingdom’s use of routine
bulk information powers to tackle offshore tax evasion dates to 2005 with the Offshore Fraud Project,
which is perhaps the only context where the use of such powers has led to
judicial decisions on human rights objections. Fourthly, the human rights
compatibility of such measures is a matter of justification under the European
Convention on Human Rights (“ECHR”). An individual may well believe
a sweeping measure is proportionate
under the relevant ECHR article; whether he or she proves to be correct if the
matter comes to adjudication is no indication of their human rights philosophy. Finally, Noseda makes much reference to
the idea of a fully public register of beneficial interests as being a
violation of human rights. It is a
matter of record that those in the UK Parliament who took the lead in trying to push such a register on
the Channel Islands were very much
pro-ECHR, anti-Brexit politicians.
The Noseda 2021 article
4
The original 2017 article focused
on the UK–Crown Dependencies dynamic. Noseda sets his stall out vividly with the failure of the Prime Minister,
the Rt Hon David Cameron, to defend the constitutional position of the Crown
Dependencies in the House of Commons following the start of the “Panama
Papers” affair.4 The article is an intriguing exploration of the problem of the United Kingdom
4 Ibid, at para 13 et seq.
imposing measures
on the Crown Dependencies, when the legality of such measures is potentially
doubtful in the jurisdictions of origin. Noseda notes at para 30 of his article
that the European Commission had concerns about drafting legislation on public
registers of beneficial ownership so
as to avoid the resulting Directive being annulled by the Court of Justice of
the European Union. That raises the
obvious point: what if the United Kingdom imposes such legislation on the Crown
Dependencies, only for the EU to be forced to
abandon the legislation itself? The heart and soul of the 2017 article was the
vulnerability of the Crown Dependencies to direct UK intervention on issues of
fundamental economic importance to the Dependencies. It is an important
article.
5 The follow up article in 2021 is more polemical. To explain it,
it is worth going into a bit of background on the nature of its key concern,
i.e. the “automatic
exchange” of information. Information exchange can be divided into three
types:
(a)
“On request.” This is
the classic form of mutual assistance in tax
matters. If Ruritania believes that Rupert of Hentzau, one of its leading
citizens, is hiding money in the banks of neighbouring Sokovia, it can request
that Sokovia find out necessary information. There is theoretically no limit to
the number of requests that can be made, nor the number of subjects of
requests, nor the number of documents included, but time and other resource
limits on both sides will mean that requests will be limited.
(b) “Spontaneous.” The OECD’s definition is that
the “exchange of information is the provision of information to another
contracting party that is foreseeably
relevant to that other party and that has not been previously requested.”5
To explain, Ruritania knows nothing of what Rupert of Hentzau is up to, but he
comes to the attention of the Sokovian authorities, who contact Ruritania as
they suspect Rupert is defrauding their neighbours.
(c)
“Automatic.” The OECD’s definition is
that the “exchange of information involves
the systematic and periodic transmission
of ‘bulk’ taxpayer information by the source country to the
residence country concerning various
categories of income”.6 Essentially,
5 Manual on the
Implementation of Exchange of Information for Tax Purposes, Approved by the
OECD Committee on Fiscal Affairs on 23 January
2006, see www.oecd.org/ctp/exchange-of-tax-information/36647914.
pdf (last accessed 6 September 2021).
6 See www.oecd.org/tax/exchange-of-tax-information/automaticexchange.htm
(last accessed 6 September
2021).
certain forms of information
are defined as being automatically of interest to other jurisdictions, e.g. interest income of third-country
residents. The jurisdiction where that income arises will automatically report
such income to the interested state—and such reporting to other jurisdictions in turn requires
the collection of the information in the first place. Ruritania and Sokovia
both collect set information on the assets and income of the other’s
residents, and exchange the information at regular intervals.
6 For present purposes we must add a third means of information
gathering and transmitting: public registers of information. Noseda’s
2021 article mentions moves towards public registers of beneficial ownership at
several points (e.g. paras 1, 5, 9, 14
and frequently thereafter). Strictly speaking, these proposals tend to be aimed
at money laundering rather than taxation issues, although they will also be of
interest to revenue authorities; unexplained wealth is clearly of interest even
when a taxpayer is trying to launder or otherwise hide what has been illegally
retained.
7
From a data protection and general
privacy perspective, the use of “automatic exchange” and public
registers raises obvious concerns. Instead of requests that are targeted for
cause, or the sharing of ostensibly useful data which has already been
collected, an “automatic
exchange”/“public register” system requires the regular
obtaining and sharing or publicising of financial data on a vast amount of people and companies, most of
which will be of no interest to the revenue authorities for the simple reason
that most people will be entirely compliant.7 Noseda notes the rise
of FATCA-style legislation, the Common Reporting Standard and moves towards
public registers of beneficial interests as moves towards tax transparency that
are of concern to privacy rights.8 Although many of his examples are
international, e.g. the EU’s
Fifth Money Laundering Directive on public registers of beneficial ownership,
Noseda emphasises United Kingdom leadership in the trend:9
“Whilst the
international community has embraced tax transparency, the evidence discussed
in the previous article demonstrates that the UK has been at the forefront of
the campaign towards transparency.”
7 See UK addresses
holding Non-UK accounts, Re Application by Revenue and Customs [2009] UKFTT 224 (TC) at para 6.
8 Paragraph 1 of the 2021
article.
9 Ibid, para 7.
8
Noseda argues that the General
Data Protection Regulation of 2018 has led to challenges to automatic exchange
on privacy grounds.10 Noseda set out the plan for his article in
paras 9 and 10:
“. . .
These challenges are summarised in the first part of this article, where the
implications for the Crown Dependencies are also considered.
As these legal
challenges are the direct result of ill-conceived policies promoted by the UK,
in the second part consideration turns to why the UK got it so wrong.”
9
The first part of the 2021 article
outlines the fact of certain ongoing EU law challenges to automatic exchange.
First, Noseda outlines a Luxembourg challenge to public registries introduced
under the Fifth Money Laundering Directive. The challenge was made under the
General Data Protection Regulation.11 Secondly, the article outlines
a challenge in the German and Austrian courts to adherence to the Common
Reporting Standard. This challenge included human rights grounds.12
Thirdly, there were EU and UK challenges to the measures taken in respect of
FATCA, the USA’s Foreign Accounts Tax Compliance Act, which forced
jurisdictions to facilitate their financial institutions forwarding large
amounts of information to the American authorities as the price of doing
American-related business.13
10
It is not the purpose of this
article to consider the merits of those challenges. Indeed, Noseda’s
article goes no further than to outline the challenges. The existence of the challenges is
presented as strong evidence that the various automatic exchange/publicity
measures are contrary to basic rights. Such reasoning is doubtful. It shows
only that a challenge is at least arguable in those jurisdictions and that these non-United Kingdom
jurisdictions have precisely the sort of laws about which Noseda is
complaining.
The position of the
Channel Islands
11
There is a brief consideration of
the implications for the Crown Dependencies of Jersey, Guernsey, and the Isle
of Man. However, this
10 Ibid, para 9.
11 Ibid, paras 14–17.
12 Ibid, at paras 18–20.
13 Ibid, at paras
21–27. The measures for Jersey are the Taxation (Implementation)
(International Tax Compliance)
(United States of America) (Jersey)
Regulations 2014, implementing the agreement between the Govern- ment of
Jersey and the Government of the United States of America to improve international tax compliance and to implement FATCA signed on 13
December 2013.
goes no further
than to state correctly that there have been no challenges in those
jurisdictions, although such challenges could be made under Jersey and
Guernsey’s human rights legislation, being directly equivalent to the
Human Rights Act 1998.14
12
This brevity is unfortunate, as
there are issues more relevant to smaller jurisdictions that could be explored.
Most notably would be the extent to
which economic force majeure can
justify measures that infringe on rights, e.g.
if countries or groups of countries that are economically vital to Jersey
demand exchange of information or other measures touching on protected rights
as a precondition for doing business. It is a point which is somewhat
undignified, as few legislatures would want to
say “we disagree
with our own law, we had no choice, a ‘bigger boy’
made us do it”. Such a point would only be taken in extremis, and it is notable that the context of French pressure
was not argued as a relevant point in defending the 2013 amendments which
streamlined the grant of tax assistance under the Taxation (Implementation)
(Jersey) Regulations 2008.15
13
The point was noted in the human
rights notes to the Minster for External Relations’ proposition to
Jersey’s States Assembly for the then draft Taxation
(Companies—Economic Substance) (Jersey) Law 201-:
“The draft
Law requires that those who conduct certain defined activities in Jersey should
have economic substance in Jersey. The reason is to prevent blacklisting by the
European Union as part of its Code Group process . . .[16]
However, whilst
the draft Law addresses a new subject, it follows
established norms of investigation and provision of information. There is
nothing in terms of its mechanics to established international tax co-operation
procedures, it is bringing equivalent mechanics
to the area of economic
substance
. . .
Human rights law does not pretend to lay down codes of economic regulation, and
providing that there is a ‘fair balance’, A1P1 is satisfied. That
is clearly the case here, particularly considering the economic imperatives of
the EU Code Group process.”
The focus of
those notes was on property rights rather than privacy rights—which are doubtless weaker in the field of corporate
14 Ibid, at paras 28–29.
15 See Volaw v Comptroller of Income Taxes [2015] JRC244,
at para 21.
16 P.121/2018, see www.statesassembly.gov.je/assemblypropositions/2018/
p.121-2018.pdf (last accessed 6 September 2021).
governance—but
the point being made is doubtless powerful: the Crown Dependencies will
frequently implement economic regulation because of the demands of
international opinion.
14
Such issues can perhaps be
side-stepped where the EU is party to the measures concerned. The point was
explained in the Human Rights Notes
on the draft proposition for the Bank (Recovery and Resolution) (Jersey) Law
201-:17
“From a
human rights review perspective, the EU origins are significant. It was held by
the European Court of Human Rights in the case of Bosphorus Hava Yollari Turizm
ve Ticaret Anonim Sirketi v Ireland
(2006) 42 EHRR 1 that there is a ‘presumption’ that ‘the
protection of fundamental rights by EC law could be considered
“equivalent’” to that of the Convention system.”
It is a
remarkable abdication by the European
Court of Human Rights, but it appears that the Crown Dependencies can proceed
on the basis that, if it is alright within the EU legal order, then it is
alright for the purposes of the European Convention of Human
Rights—unless for some exceptional reason the European Court of Human
Rights says otherwise, or the EU measures fall foul of the EU’s own legal
processes.
15
In those other cases, doubtless an
analogy could be made to the famous Corner
House case, where the House of Lords recognised that decisions taken in an
international context cannot expect to be rigorously principled, ignoring even
distasteful realpolitik.18 That analogy is not perfect—Corner House concerned the dropping of a
decision to prosecute in the face of threats to national security—but the point is that the courts accept even
in a matter as important as the rule of law that
decision-makers must exist in a wider world than their
home jurisdiction. A measure may be unjustified in the jurisdiction that has
promoted it, or in a jurisdiction that is able safely to ignore any threat, but most of the world has to
choose its battles more wisely.
“Why has the UK got it so wrong”
16
The remainder of the article is
essentially a polemic on human rights scepticism and Euroscepticism in the United
Kingdom. The polemic is introduced by para 37 of the article:
17 P.134/2016, see www.statesassembly.gov.je/assemblypropositions/2016/
p.134-2016.pd (last accessed 6 September 2021).
18 R (Corner House Research) v Director of the
Serious Fraud Office [2009] 1 AC
756.
“As
litigation is ongoing, definitive statements must be avoided. However, as a
Swiss lawyer turned English solicitor almost 20 years ago, the author has been reflecting at length
on the seeming disconnect
between the policies advanced by successive UK governments and the fundamental
values enshrined in a human rights convention that was introduced in the immediate aftermath of the Holocaust and
the European continent’s descent into madness.”
The remaining
twenty-five (out of thirty-four) pages are almost entirely detached from the
issues of tax transparency, and into more general issues of law and politics.
As such, the relevance of a critique of the United Kingdom’s various
approaches to international human rights instruments and adjudication to the
issues of tax transparency is never
properly explained.
17
The only link with the first part
of Noseda’s argument is a short section at paras 88–99 contrasting
the UK’s apparently unthinking acceptance of tax transparency in
automatic exchange agreements (and
FATCA in particular) with the EU’s raising data protection concerns over
FATCA. It is unclear on the material cited how far those concerns went beyond concerns as to the level of
protection the personal data would enjoy once it arrived in the USA (para 94)
and the exploration of ways that
FATCA could be both workable and ask for less data (para 95). We are told that
the EU’s Data Protection Working Party decided against FATCA (paras 96
and 97), but the only reason offered
for the EU Member States ultimately accepting FATCA was that the United Kingdom
did so, and this gave them (for an unspecified reason) no choice (para 98). In
other words, the EU’s published material and statements suggest that it
was at least interested in data
protection and human rights concerns, but this was not so with the United
Kingdom. Noseda concludes this detour (para 99) by saying:
“The UK
government’s disregard for the opinion of the EU Data Protection Working
Party in relation to FATCA, and the introduction of public registers of
beneficial ownership in 2016, are indicative of a poor level of understanding
of the fundamental rights contained
in the Charter and the ECHR.”
It is thus not a
disagreement over what can be justified in derogation to privacy rights under art 8 of the Convention, but something
far more fundamental.
18
The thrust of the second part of
Noseda’s argument can be readily appreciated from the relevant
sub-headings:
The UK as a driving force behind the ECHR19
Political backlash (Brexit)—“enemies of the
people” Parliament
The courts
Human rights—hostage of 21st century UK politics
EU Charter of Fundamental
Rights—victim of Brexit EU Charter of
Fundamental Rights—victim of Brexit
David Cameron starts
the assault on the ECHR Poor understanding of the Charter
UK politics
The winner takes all [i.e.
the first-past-the-post system] Useful charisma—and dangerous
populism Continental Europe—the
enemy within
The UK—the enemy
without
The curious story of
CCTVs and identity cards in the UK Conclusions
It is a list of
subject matters that suggests an article on the high-level direction of
Britain’s constitutional direction.
19
It would be impossible to reply in
detail to the points made. As would be inferred from the sub-headings, many of
the points are ultimately political. It suffices for present purposes to make
the criticisms under five heads.
Longstanding
critiques of human rights
adjudication
20
The tenor of Noseda’s
article is that attacks on human rights’ adjudication are inherently
dangerous and irresponsible—linked intrinsically to a disregard of
freedom and rights against the dangers of
an overpowerful state.
19 This is a very common
point to make, but it is difficult to understand. First,
there is significant doubt that the United Kingdom intended the European
Convention to be anything more than minimalist, e.g. E Bates, “British Sovereignty and the European Court of
Human Rights”, (2012) 128 Law
Quarterly Review 382. Secondly, Dicey’s famous comment that half of
the content of statutes comes from interpretation is even more true in respect
of human rights conventions. It is entirely irrelevant who was responsible for
creating them when their meaning
comes from subsequent interpretation. This
follows from the nature of the Convention as a “living instrument”. Thirdly, it is parochial to suggest that support
or opposition to an international convention on human rights should in any way
depend on how far one’s compatriots had been involved in the drafting.
21
This attack sidesteps the obvious
point that there are long standing
criticisms of both human rights’ adjudication and judicial bias. These
can be found resonating in the
writings of Oliver Wendall Holmes and Benjamin Cardozo from the days when
judicial activism in the US Supreme Court came generally from the conservative
side. Holmes’s Lochner dissent
still resonates as a classic statement of the dangers of constitutional review
leading judges to decide what can or cannot be done in areas of social and
economic policy.20 Cardozo’s still often- cited The Nature of the Judicial Process warns
clearly that judges are influenced by the opinion groups to which they belong.21
It would be possible to compile a lengthy review of literature sceptical of the
ability of judges to step away from their biases, and of the particular dangers
this brings when judges step into the field of interpreting and applying broad
constitutional/human rights clauses, and barely cite a conservative voice. The
classic British statement comes, of course, in Griffith’s The Politics of the Judiciary, the centrepiece of which was a withering
and compelling denunciation of how the conservative judges of the day tended to
suck the life out of pro-trade union legislation.22 All that has
happened, is that the critiques of judicial activism now tend to come more from
the right than the left.23
22
It might, of course, be argued in
response that none of the British attacks on the judges and on the Human Rights
Act has anything to do
with such reasoned criticism. This may be true of some, possibly many attacks,
but as a general proposition it risks high-handed elitism. The simplest and perhaps most
repeated criticism of constitutional review is that famously given by Alexander
Bickel—at the time politically liberal—when he said that
“[t]he root difficulty is that judicial review is a counter-majoritarian
force in our system”.24 Whether it be “judicial
review” in the US sense of striking down statutes on the basis of a broad
definition of “due process”, or British judges applying ss 3 and 4
of the Human Rights Act, this “root difficulty” is at the heart of criticism of human rights’ adjudication. It
20Lochner v New York, 198 US 45
(1905).
21 Cardozo, The Nature of
the Judicial Process (2005, New York), pp 170– 171.
22 JAG Griffith, The Politics of the Judiciary
(5th edn, 1996, London).
23 For an excellent critique of this dynamic, see JH Ely,
“Another Such Victory: Constitutional Theory and Practice in a World Where Courts are No Different from
Legislatures”, (1991) 77 Virginia
Law Review 833. The critique is more powerful as coming from a political
liberal.
24 A Bickel, The Least
Dangerous Branch: The Supreme Court at the Bar of Politics (2nd edn, 1962,
New Haven: Yale University Press), p 16.
is this
“root difficulty” that spills out less eloquently than Bickel, Griffiths,
Holmes, and Cardozo into public discourse. There is nothing in the material cited by Noseda that does not have a resonance in well-established critiques
from the most respectable of writers. It is difficult to draw any wider
conclusions when it can reasonably be seen as just another example of what
happens when judges make decisions of constitutional or legislative
significance which are politically disagreeable to a vocal part of opinion.
Those who disagree at a political level with the outcome of the judicial
decisions tend to accuse the judges of politics; those who agree at a political
level tend to defend judicial objectivity. The sides change, but the nature of the criticisms bear a
striking resemblance across the generations.
23
It is also difficult to see that
the strands of thought have been as influential as Noseda
suggests—Griffiths would live to see his
critique abandoned by his fellow left-leaning lawyers and academics. The
Human Rights Act remains. The United Kingdom
remains a party to the European Convention on Human
Rights. It remains the case that the
only Act of Parliament passed without a statement of compatibility since the
Human Rights Act came into force is the Communications Act 2004. No ultra-purposive interpretations under s 3 of the Act have been overturned by legislation. The
only declaration of incompatibility to be consistently ignored by Parliament was that involving prisoner
voting,25 and even then, a settlement has been reached with the
Council of Europe comprising the surprisingly
minimal step of enfranchising prisoners released on licence.26
24
The co-existence of heavy
criticisms and obedience to the Human Rights Act can be demonstrated by the
case of R (F) v Home Secy,27
where the UK Supreme Court said that a law imposing lifelong reporting
requirements for sex offenders under s 82 of the Sexual Offenders Act 2003
breached the right to privacy by reason of being disproportionate. Responding,
the Home Secretary, Theresa May MP, said that she was “disappointed and
appalled”, and that the government
would make “the minimum possible
changes to the law in
25 Smith v Scott
[2007] CSIH 9, following Hirst v United Kingdom
(No 2)
(2006) 42 EHRR 41.
26 See Council of Europe, Committee of Ministers 1324th
meeting, 7 September 2018. The position is well explained in House of Commons
Library Briefing Paper No 07461, “Prisoners’ Voting Rights:
Developments since May 2015”, 19 November 2020, pp 25–27.
27 [2010] UKSC 17; [2011]
1 AC 331.
order to comply
with the ruling”. She added: “I would far rather not have to stand
here saying that we have to make a change to the sex offenders’ register,
but we do have to make a change”.28 Presenting the government’s response to the
House Lords, Baroness Neville Jones
said:29
“The
Government are appalled by this ruling, which places the rights of sex
offenders above the right of the public to be protected from the risk of
reoffending, but there is no possibility of further appeal. This Government are
determined to do everything that we can to protect the public from predatory
sex offenders and so we will make the minimum possible changes to the law in
order to comply with this ruling.”
Baroness Hale (2013,
p 17) contrasted the vehement government criticism of the Supreme Court’s
decision in R (F) v Home Secy wiith
the Government’s and Parliament’s legislative acceptance of the
decision.30 But this is to draw attention to the fact that
legislators may hold wholly negative views of human rights decisions, and yet
treat the same decision as definitive
on what the law must or must not be. Strong dissatisfaction may come to
nothing.
25
Most importantly, there is nothing
to show that any of the complaints made by Noseda in the second part of his
2021 article were operative in
respect of decisions on tax transparency. Whether it be attitudes to human
rights’ adjudication, Brexit, or the executive vs Parliament
confrontations of 2017–19, it is difficult to see why any of these
dynamics are causally linked to the UK’s approach to tax transparency. It
is this point that we will now explore in the four ways set out in para 3
above.
The non-UK initiative in tax transparency
26
In the last nine years, Jersey has
responded to many changing international standards in areas of fiscal and
financial governance. More interesting to this article is that there have been
three initiatives that have been spearheaded by particular countries or
groupings:
28 HC Debate, 2011.
HC Deb 16 February 2011, vol. 523, cc.959 and 961
29 HL Deb, 2011: col.714
30 Hale, B (2013).
“What’s the point of human
rights?”, Warwick Law Lecture 2013, 8 November 2013 (https://www.supremecourt.uk/docs/speech-131128.
pdf, last accessed
26 August 2021)
(a)
The threatened French Blacklisting
which led to the Taxation (Implementation) (Amendment No 8) Regulations 2013.31
This greatly streamlined the
procedures for responding to requests for exchange of information, making it less
easy to argue privacy rights
in defence of such claims. This led to, ultimately unsuccessful, human
rights’ challenges.32
(b)
FATCA itself, which was an
American initiative, however much Noseda tries to shift the blame to the United
Kingdom on account of it being the first country to surrender the American
demands. It is not as if the Americans are uninterested in privacy. The United
States is the home of privacy as a constitutional right, the famous
“right to be let alone” first suggested by the future great liberal Supreme Court Justice, Louis
Brendeis, early in his career, and later read into the constitution.33
This right to privacy is something very dear to the Democrat Party then in
office, being at the heart of abortion and gay rights jurisprudence.34
It would be grossly unfair to say that President Obama and his government cared
nothing for privacy as they created FATCA.
(c)
The EU Code Group initiative which
led to the Taxation (Companies—Economic Substance) (Jersey) Law 2018.
Although not simply a matter of automatic exchange of information, the
legislative response to the EU demands required the Jersey authorities to
impose considerable reporting obligations on companies, with provision made for
exchange of that information.
27
It is, of course, true that the
United Kingdom subsequently made its own FATCA-style demands, but the point
here is that the concept was very much an American creation.
28
It is difficult to support a
conclusion that the United Kingdom sits with a special responsibility for tax
transparency. The United Kingdom does have a special capability of forcing transparency on the
Crown Dependencies and could do so ahead
of actual international
31 See the Jersey States Assembly Report to P.132/2013,
www.statesassem bly.gov.je/assemblypropositions/2013/p.132-2013corrected.pdf (last accessed
6 September 2021).
32 Volaw v Comptroller of Income Taxes 2015 (2) JLR 209, 2016 (2) JLR
198, 2019 (1) JLR 302.
33 S Warren and L Brandeis, “The Right to Privacy”,
(1890) 4 Harvard Law Review 193.
34 Roe v Wade, 410 US 113 (1973),
and Lawrence v Texas, 539 US 558
(2003).
standards being
formed.35 But that was not the target of Noseda’s concern in
the 2021 article. The point was that the moves to tax transparency were because
the United Kingdom was getting it wrong for various reasons. However, even if
the United Kingdom had somehow tipped the balance to create a “slippery
slope” towards ever greater dismissal of privacy concerns, tax
transparency is a cause which has been taken up eagerly beyond the United
Kingdom.
29
In short, setting aside the
underlying rights and wrongs of tax transparency, in 2021, it is far too late
to say “Why did the United Kingdom get it wrong?” when the anti-tax
transparency inquiry must surely seek to set out “Why did everyone get it
wrong . . . and the UK’s special role in that mistake?” This would,
of course, beg the question: why, if everyone is “getting it
wrong”, should we look for parochial reasons as to why the United Kingdom
apparently came more quickly to the “mistake”. Why is there not
simply a generally shared view on the balance between privacy and tax
transparency, with the real argument
being whether that balance is justifiable? Attempts to drill down into
psychological arguments for one country’s
reasons could then be left behind.
Pre-2010 use by the United
Kingdom of bulk information powers
30
It is a cornerstone of
Noseda’s argument that the UK’s approach must have been conditioned
by Conservative attitudes to human
rights and to Europe. A key date is thus May 2010, then the Conservatives
(albeit in a coalition with the Liberal Democrats) became the governing party.
31 A problem with this approach is that the Inland Revenue (and
subsequently HMRC) had already begun the use of bulk information powers, with
the first applications being made in 2005. This was the Offshore Fraud Project,
which used s 20(8A) of the Taxes Management
Act 1970 (and subsequently para 5 of
Schedule 36 to the Finance Act 2008) to require
financial institutions to supply account details for all UK resident customers holding offshore accounts. The
35 This was the essential problem the Crown Dependencies had
with the “Mitchell-Hodge” amendment in 2019 that would
have attempted to force the Crown Dependencies to adopt public
registers of beneficial ownership. It would have been done ahead of any
agreement of an international standard, essentially as a form of diplomacy
practiced by the backbenchers of the House of Commons to set an example for the
rest of the world. See “Miscellany: Respecting Constitutions”,
(2019) 23 Jersey and Guernsey Law Review 131.
project
originally involved individual applications against specific institutions. It
moved to making several applications against named institutions at the same
time and culminated in 2009 with a successful application to the First-Tier
Tribunal for 306 financial institutions to hand over such data on the basis of
a generic risk analysis.36
32
Although this project was not
about exchanging information with other jurisdictions, it was about obtaining vast amounts of information from taxpayers
so that it could be analysed. The Revenue’s analysis was that only around
20% of the offshore accounts would show a tax loss—the rest would be
compliant.37 This would drop to 5% where private banking clients
were in issue.38 If automatic exchange with foreign jurisdictions
represents a failure to respect human rights, then it is no different if the
information acquired is used for purely domestic
consumption. Information on a mass of individuals will be obtained and be
available for scrutiny by a relevant revenue authority, whether the authority
that obtains the information is one and the same as the authority that
scrutinises it does not change the quality of privacy-based objections.39
33
The Offshore Fraud Project was not
a politically driven project. Despite having been the lawyer to the project for
most of its duration and having presented most of the applications before the
Special Commissioner (subsequently the First-Tier Tribunal), the author is not sure where the
idea for the project came from. However, as a simple matter of constitutional
logic, it could not have come from a political level, nor could politicians
have had any say in the key development of the legal arguments that supported
the project. Section 5 of the
Commissioners for Revenue and Customs Act 2005—following
s 1 of the Taxes Management Act 1970—places such matters in the hands
of Commissioners (and, thus, in the hands
36 See for example, A
Financial Institution, Application to Serve a Notice on a Financial Institution [2005] UKSPC SPC00517; Section 20 Notice on a Financial Institution
[2009] UKFTT 68, 69 and 70 (TC); UK
addresses holding Non-UK accounts, Re Application by Revenue and Customs [2009]
UKFTT 224 (TC).
37 UK addresses holding
Non-UK accounts, Re Application by Revenue and Customs [2009] UKFTT 224
(TC) at [6].
38 Application—customers with UK addresses holding non-UK
accounts [2009] UKFTT 195 (TC), at para 4(3).
39 In automatic exchange cases, there might be objections if a
counterparty is untrustworthy but that is a different matter entirely to a
general objection to the level of tax transparency required by automatic
exchange agreements.
of the relevant
officers). The Treasury may give general directions, see s 11, but no more.
34
The Offshore Fraud Project did
have to deal with human rights objections, as can be seen from the cases cited above. Although the ex parte nature of information powers
applications meant that only the Revenue was represented at the hearing, those
financial institutions that objected (and many
did not object) sent lengthy legal
submissions to the Tribunal. It was also the duty of the Inland Revenue/HMRC to
raise any points that were not before the Tribunal.40 Far from ignoring human rights’ objections,
or holding such matters in contempt, the written decisions of the Special
Commissioner/First-Tier Tribunal are a chronicle of the objections taken by the
law firms engaged by financial institutions, the response of the
Revenue’s lawyer, and the conclusion of the Tribunal. (It might also be
noted that the various arguments circulated widely in the tax world, and no
financial institution ever saw fit to challenge an information notice by way of
judicial review—which would certainly have been a route had any believed
they had cogent human rights grounds.)
35
In short, the policy and legal
basis for bulk information request and
use was laid long before David Cameron became Prime Minister. It was laid at a
time when Labour’s Tony Blair was still winning elections. It was laid by
a technocratic project run almost entirely by the Liverpool branch of the
Inland Revenue’s Special Compliance,41 with legal support
coming from the Revenue’s Solicitor’s Office. Politics and human
rights scepticism had nothing to do with it; although the ability of its lawyer
to answer human rights points to the satisfaction of the tribunal (and to deter
judicial review) was obviously
critical to its success.
Any human rights disagreement is as
to justification
36
There is no dispute that bulk
information powers and automatic exchange give rise to questions of art 8
rights under the European Convention (“right to privacy”). As with
almost all human rights arguments, the real point is about justification.
37
It is not the role of this article
to set out an argument for or against measures such as FATCA, the Common
Reporting Standard or public
40 For a clear example of this, see para 11 of A Tax Haven Company v Revenue & Customs [2006]
UKSPC SPC00533, which relates to a different project that also employed s
20(8A) of the Taxes Management Act 1970.
41 That office had many name changes during the project but
without really changing its nature.
registers of
beneficial interests as being justified for the purposes of art 8. The point is rather that
disagreements as to justification are part of the European Convention process.
We set out above when considering the art 8 case of R (F) v Home Secy that it is possible for ministers and legislators
to vehemently disagree with a human rights decision but nevertheless comply. It
is similarly possible to disagree strongly with particular decisions or
approaches whilst being enthusiastic about the Convention.
38
To give a good example of vigorous
dissenting opinions being held by
prominent supporters of the Human Rights Act, Baroness Hale strongly believed that the European Court of Human Rights
decision in Marper v United Kingdom that
art 8 forbade the blanket retention of DNA samples was wrong. She believed that
the assistance it gave in solving
sexual offences made the relevant Act of Parliament justifiable.42
She was of that view judicially in the case that
led to the Marper decision, and
re-affirmed it in her Barnard’s Inn
Reading in 2011.43 Baroness Hale’s support for the European
Convention and for human rights’ adjudication is undoubted; so it is hard
to think of a better example of how disagreements on justification on particular issues have little or nothing to do
with overall support for human rights.
39
A further example of vigorous
dissent co-existing with strong support for human rights adjudication can be
seen in the House of Commons debate that supported a motion against complying
with the European Court of Human Rights’ decisions on prisoner voting.44
The proposition was brought jointly by the Conservative David Davis and
Labour’s Jack Straw. The latter, of course, was the Home Secretary who
had steered the Human Rights Act 1998 through the House of Commons.
40
There is simply no logical
connection between the UK government
championing tax transparency and its wider attitude to human rights. It is
quite possible to believe that maximum tax transparency is human rights
compatible, and to entirely support the Convention. It is possible to support
such transparency and have doubts about the Convention but on balance to
support it. It is possible to oppose
tax transparency measures, and not believe at all in human rights adjudication.
If the European Court of Human Rights decides
that view is mistaken, it is entirely
possible greatly to regret
42 (2009) 48 EHRR 50.
43 B Hale, “Beanstalk or Living Instrument? How Tall can the ECHR Ggrow?”,
2011. See www.supremecourt.uk/docs/speech_110616.pdf.
44 HC Debate, 2011a. HC Deb, 10 February 2011, vol 523, cc 493–58.
that decision but
still to support the Convention. The attitude towards tax transparency and
privacy is no indication of attitude towards the Convention; nor can we work
backwards and say that because someone is critical of human rights adjudication
that this makes them more or less likely to
believe in tax transparency. It may from time-to- time be the case that a
politician who believes in human rights adjudication is more likely to be
sceptical of tax transparency (or the other way round), but this is not the
same as suggesting that the two viewpoints are logically linked.
Politics of tax transparency protagonists
41
The final factor that severely
undermines Noseda’s argument is the
point that, in the United Kingdom, support for tax transparency and public registers of beneficial
interests has also been very strong in non-Conservative circles. Noseda
touches on this at paras 87–88 of the
article:
“. . . Mr Cameron’s government had led an onslaught on the right to privacy, as discussed in the
2017 article.
In particular,
although tax transparency had been on the agenda of the Labour Party, the SNP and the Liberal Democrats, it was
Mr Cameron’s government that signed up to the first IGA in September 2012
despite the negative opinion expressed by the European Data Protection Working
Party.”
42
This section is particularly
curious in that the Liberal Democrats were in coalition with the Conservatives
at the time—and the Chief Secretary to the Treasury was a Liberal
Democrat throughout the coalition of 2010–15. The argument appears to be
that, although Labour and the Scottish Nationalists may well have done
precisely the same, as it was the
Conservatives who signed up to the first FATCA Inter-Governmental Agreement,
the reasons must have been of a particularly Conservative flavour. The
pro-European Convention, anti-Brexit
parties might well do the same,
but the Conservatives were
the lead party in the coalition that put the policies in process, so the
reasons must be to do with the anti-European Convention, pro-Brexit opinion
streams in the Conservative Party.
43
From a Crown Dependency
perspective, the argument becomes bizarre. Noseda’s complaints include
public registries of beneficial interests. There have been concerted attempts
to impose these on the Channel Islands from the United Kingdom. However, such
attempts have been led from the backbenches, in particular by the opposition
parties (Labour, Liberal Democrat, and SNP) with support from the more
pro-European wing of the Conservative Party. The Mitchell of the “Mitchell-Hodge
amendment” that sought to impose
such registers
on the Channel
Islands was Andrew Mitchell, MP, a Conservative who was on the Remain-side of the Brexit argument.
44
It is quite true that the
Conservative Party has been most responsible for the tax transparency policies
to which Noseda objects. The possibility that he seems to overlook is that this
is simply a function of the Conservative Party being in government, and a function of there being a general
consensus in favour of tax transparency—with there being evidence that
the non-Conservatives tend to hold this opinion, if anything, more strongly.
Conclusion
45
In Noseda’s 2017 article, he
dealt vividly with the vulnerability of the Crown Dependencies to UK
intervention in matters of tax transparency and public registers of beneficial
ownership. These are important subjects. Without wishing to trespass in this
article on the various rights and wrongs, the question raised was a vital one:
what if the United Kingdom imposes something on the Crown Dependencies which is
not actually an international standard, and possibly never becomes one? Given
subsequent events with the Mitchell-Hodge amendment, a revisiting of the
subject after even just four years was entirely justifiable and welcome.
46
The problem, however, with the
follow-up 2021 article is that it does not really seek to consider the events
of the last few years. It is instead a polemic on certain attitudes expressed
on the right-of-centre in the United Kingdom on human rights adjudication, the
role of Parliament, judicial review, and Brexit. From a Crown Dependency
perspective, the key developments must be the “economic substance”
demands pushed by the European Union, and the Mitchell-Hodge amendment on
public registers of beneficial ownership. The latter, far from being the
product of the right-of-centre attitudes that Noseda seeks to describe, was
overwhelmingly the product of those on the centre and on the left of the House
of Commons. This underlines that the moves to tax transparency are supported by
a very broad church.
47
In truth, if the United Kingdom is
getting it wrong, so is pretty much everyone else. If Eurosceptic,
rights-sceptic Conservatives are getting it wrong on tax transparency, then so
too is pretty much everyone else. Unfortunately, particularly given the
interesting argument in the 2017 article, Noseda has allowed himself to be
side- tracked by more political passions that ring through his article.
Academic writing would be much poorer if it were never inspired by underlying
political passions. But such passions need to be kept “underlying”
lest the academic side be submerged.
Dennis Dixon is an advocate of the
Royal Court of Jersey and is currently General Counsel for the Jersey Financial
Services Commission. Any opinions expressed are his own and should not be taken
to be those of the Commission. Formerly, he held offices with Her
Majesty’s Revenue and Customs in the United Kingdom.