Treasure Islands - Nicholas Shaxson [117]
Extreme economic inequalities are tolerated offshore—and often welcomed as incentives for the poor to work harder. It is an ethos memorably summarized by the economist J. K. Galbraith as “the ‘horse and sparrow’ theory of income distribution and tax: if you feed a horse enough oats, some will pass through to the road for the sparrows.”9
This soak-the-poor attitude is a constant theme as Jersey seeks to stay ahead of other jurisdictions in its race to attract capital. In 2004 Jersey cut the corporation tax rate from 20 percent to zero, except for finance, which pays 10 percent. This tax cut blew a hole in the budget big enough to finance Jersey’s entire benefits system, so they made hundreds of redundancies and introduced a tax on consumption, hitting the poor especially hard. Shona Pitman, a States deputy, calls this the “tax the poor to save the rich” approach.
Super-wealthy people and corporations can actually negotiate the tax rates they will pay. For most of the 1990s, wealthy people wanting to take residence sent their lawyers directly to Christensen’s office to negotiate their rates. Jersey would insist on a minimum annual tax payment, and the millionaire or billionaire would then simply remit to Jersey the amount of money that, when calculated at Jersey’s flat 20 percent tax rate, would reach this sum. Christensen’s predecessors had settled on a £25–30,000 tax payment each time; Christensen raised this to £150,000—which meant remitting income of £750,000 each year to Jersey. If you had worldwide income of £10m, say, your effective tax rate would really be 1.5 percent. A similar principle applies to corporations. For a Jersey International Business Company, the top rate starts at 2 percent and falls from there depending on how much profit they plan to book in Jersey.10
“Jersey has the social structure of a Hilton hotel,” explained Jerry Dorey, a Jersey senator. It contains “a collection of alienated individuals who are just here to make money.”
At the time of writing, six of Jersey’s ten ministers are multimillionaires. “This is a parliament of wealthy people,” said the dissident Jersey deputy Geoff Southern. “I think there is still a resentment that peasants have got into power.”
One winter night in 1996, toward the end of his time in Jersey, Christensen opened the books for a reporter from the Wall Street Journal who was investigating a fraud ring involving a Swiss bank operating out of Jersey that had been ripping off American investors and who posed some very precise questions. The story, entitled “Offshore Hazard: Isle of Jersey Proves Less Than a Haven to Currency Investors,” ran on the Journal’s front page several months later.
Jersey’s finance industry and politicians went into spasm: This was one of the first times Jersey’s supposedly clean and well-regulated finance sector had been challenged in a serious global newspaper. The end of the article quoted a senior civil servant who, everyone in Jersey knew, was Christensen. He knew that in talking to the reporter, he was effectively resigning.
“From then on, they would have done anything to get rid of me. But I had tenure: The only way they could do it was to find me guilty of professional misconduct or in bed with a choirboy. The tension was incredible.” He did not leave immediately: His second son was born the following month, and it took him some time to serve out a long notice period.
Now that he is a dissident, the barbs continue to fly across the English Channel. “Grapes come no sourer than those trodden by Mr. Christensen, who once worked in Jersey and was passed over for promotion,” the Jersey Evening Post thundered later. “Ever since, he has worked unceasingly to undermine the Island that foolishly slighted him.” A quote from Jersey, published in France’s Le Monde newspaper in April 2009, called him a “traitor to the nation.” He attacks Jersey, the whisper goes, because he was not