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The United Kingdom

The Dependencies

Britain is the mainland for some small nearby islands that are British but not part of the UK. Although the people of the Isle of Man and Channel Islands are British, the islands are self-governing "Crown dependencies."

The main Channel Islands are Jersey and Guernsey. In 2013 Jersey suggested that they form a confederation to build on existing areas of co-operation. Jersey issues its own versions of the British passport and British currency. It has a distinct legal system and some natives speak French or a French patois. There are other, more distant "overseas territories", including the Cayman Isles and Gibraltar.

You might expect these islands to be an embarrassment for a nation that often assumes the superiority of its ways. The social systems of some of the islands have been described as feudal.

The Isle of Man

On the Isle of Man, which has a population of 80,058, the local government was having law-breakers beaten long after the British government had decided that such punishments were barbaric. Homosexuality was illegal until a European Court of Human Rights Ruling and pressure from Britain forced a change in the law.

The Channel Islands

The Channel Islands were occupied by the Nazis in World War II. Some of the islanders collaborated with the occupying army by identifying Jewish neighbours and other islanders who resisted the occupation.

The Germans built concentration camps on the islands. Nobody knows how many died in the camps but it has been estimated to be in the tens of thousands.

This conflicts with the British conceit that while the French may have allowed in the German army and the Germans may have persecuted the Jews, such things could never have happened in Britain. Although you may never have needed a passport to visit, the special status of these islands has allowed the British to maintain their sense of themselves as unconquered and uncowed by the Nazi regime.


The tiny Channel island of Sark was, until 2008, Europe's last feudal state. It had been governed under a feudal system since it was established 400 years ago when queen Elizabeth Tudor issued its "royal charter". The island's governing chamber had been composed of 40 landowners and 12 elected deputies. But in April 2008 the British Privy Council approved legislation to replace this with an elected parliament of 28 in order to comply with the European human rights convention. However, the feudal offices of Seigneur and Seneschal remain. The first is an heredity "lord" who leases the island from Britain's hereditary head of state and the latter the chief civil and criminal judge who also presides over the parliament. There is no divorce and women members of the parliament have to cover their heads.

The Isle of Man, despite its poor record, has agreed to incorporate the European Convention on Human Rights into its law. The Channel Islands have been exempted.

Jersey, a prime holiday resort, also has a serious narcotics problem. At one time the head of the island's Alcohol and Drugs Service estimated that out of a population of 85,000 there were 2,000 heroin users. However, the stress that Jersey puts on rehabilitation rather than punishment, means that the waiting time for detox programmes is only 48 hours.

Tax Evasion

Oxfam has described the dependencies as being "at the heart of a global network of tax avoidance that costs poorer countries and regions $170bn a year".

In 2019 MPs proposed what the Financial Times called a "financial transparency crackdown" with a ban on secret company ownership in Jersey, Guernsey and the Isle of Man. These dependencies are exempt from European Union rules that require registers of true company ownership.

Government officials in the three dependencies said that such legislation would create a constitutional crisis as the entities are self-governing. The deputy chief minister of Guernsey warned that it would "seriously undermine" his depenendency's "relationship with the UK and the crown".

In order to block the legislation the British prime minister delayed the vote on the legislation to which the reform had been attached. She defended the right of the dependent entities to manage their own fiscal affairs.

In 2017 the Financial Times had reported that "The extensive revelation of offshore tax avoidance structures in the Paradise Papers has put the governments of Britain's overseas territories, such as Bermuda and the Cayman Islands, on edge". The "Paradise Papers" are client data belonging to the offshore Appleby law firm made public in 2017.

The Papers revealed that the dependency of Jersey played an important part in the efforts of the American Apple corporation to minimise its tax liabilities. The company moved two subsidiaries to Jersey. And the small island played "a significant role in Apple's newly configured Irish tax structure set up in late 2014" according to the International Consortium of Investigative Journalists, which coordinated the release of the Papers.

The Financial Times reported that the minister of financial services for the Cayman Islands denied that money could be hidden and tax avoided in that British dependency. And Gavin St Pier, chief minister of Guernsey, told the newspaper that the news media coverage of the "Paradise Papers" was a "part of a well-orchestrated, ongoing campaign to gain public access to private financial information".

But Sven Giegold, the European Green Party's spokesperson for economic affairs in the European Parliament, claimed that the British government had been hindering the EU's fight against tax avoidance and money laundering for years.

The truth is that the British dependencies have a long history as tax havens. Financial services account for half of the economy of tiny Jersey. And together with Guernsey, the Isle of Man, Gibraltar, Bermuda, British Virgin Islands and the Cayman Islands the dependencies account for a large share of the offshore finance industry.

The islands have had a reputation as havens for tax evaders and others who wanted to avoid too much financial regulation. Companies registered there have been able to avoid filing annual accounts or disclosing their ownership. The Financial Times estimated in early 2000 that together with Bermuda and the Cayman Islands the dependencies cost Britain £1bn a year in tax revenue. Their financial industries were encouraged by the Bank of England, which saw these tax havens as useful for the flow of foreign capital. The UK also welcomed over-sized financial industries as removing any need to give aid to entities that might otherwise not have been self-supporting. But, in the words of the Financial Times "from the start, the Inland Revenue was concerned about a murkier side of the offshore industry that ran alongside its legitimate activities: its role in abetting tax evasion".

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The dependencies and territories carved out different niches. The British Virgin Islands became synonymous with international business companies. Bermuda became one of the world's leading insurance centres. The Caymans is a leading hedge fund centre and became a big wholesale banking centre, with huge volumes of overnight banking business from the US. The islands also helped multinationals minimise and defer corporate tax bills.

In April 2022 the prime minister of the British Virgin Islands was arrested by American police on drug dealing and money laundering charges. The followind day a British government enquiry reported that "almost everywhere (in the islands) the principles of good governance . . . . are ignored". Judge Gary Hickinbottom, who led the enquiry, concluded that it was "highly likely" that thee had been serious dishonesty in the government of the islands.

Jersey, with a population of only 100,800 in 2016, at one time had 11,800 working in financial services, 80 banks from 16 countries and 335 investment funds. In 2019 the British Lloyds Bank froze 8,000 of its offshore Jersey accounts in what the Financial Times described as a "dirty money push".

Guernsey is similarly well provided with financial institutions. About 10% of the population work for them. Sark has a population of only 575 and no motor cars, but 23,000 businesses are registered there. One Sark resident has been registered as a director of 3,000 companies. The Isle of Man, which has population of 80,058, crams 1,781 banks, 192 insurance companies and 102 investment funds into its few square miles.

Local politicians sit on the boards of banks that they regulate. The islands' banks are also alleged to be much used for money-laundering. Newspapers have reported drug dealers from Britain and Ireland being ferried by taxi from the airport in Manx, Isle of Man, to the island's discreet banks, carrying bags full of cash.

According to British press reports in June 2000 only pressure from the British government kept the Channel Islands and Isle of Man, together with the overseas territory of Gibraltar, off an OECD financial task force list of countries accused of failing to stem money flows from drug trafficking, embezzlement of international aid and other organised crime through their banking systems. Instead they were placed on a list of states whose actions were under surveillance.

By March of 2002 the two Channel Islands had joined the Isle of Man in agreeing, in the words of the Financial Times, "to improve transparency and exchange of information providing rich nations did the same." In 2008 a European Union "white list" of financial centres which had what the Financial Times called "top quality anti-money laundering controls" omitted the Channel Islands and the Isle of Man. Instead they were given an intermediate status allowing EU states to treat their standards as acceptable if they chose.

Following American legislation in 2010 all the offshore jurisdictions signed up to strong financial information exchange arrangements with the UK and USA. And in 2013, the British government announced that all the overseas territories and dependencies had said they would sign a multilateral convention on mutual assistance to counter tax evasion.

The Isle of Man now has tax information exchange agreements with Britain and Germany. Jersey has similar agreements with Britain and 10 other countries. And Guernsey and Britain also have a bilateral agreement. However, according to the Financial Times such agreements, which require a strong case to be made against the person under investigation, are little used.

In 2013 France gave notice that it would put Bermuda, the British Virgin Islands and Jersey on its list of "non-co-operative jurisdictions", which will mean a levy of as much as 75 per cent on payments from France, unless it is persuaded that they are not acting as tax havens.

And in the same year the European Union began investigations into claims that Gibraltar had been giving special treatment to selected offshore companies and had made favourable tax arrangements with multinational businesses.

In 2015 the Financial Times reported that the overseas territories had refused to create public registers that would have made known the ownership of companies in their jurisdictions. Nor had they agreed to give law enforcement agencies unrestricted access to data.

The territories did agree to keep records of the ultimate ownership and control of companies in their jurisdictions. They also agreed to discuss with UK law enforcement agencies the development of "a timely, safe and secure information exchange process".

In 2018 an amendment to a bill to deal with sanctions and money laundering required the 14 British territories to publish by 2020 ownership registers for the companies based in their jurisdictions. This was something many had resisted. They wanted only British tax officials to have access to the registers.

Leaders of the dependencies were angry about the new law. One accused the UK of "colonialism".

The new law does not apply to the Channel Isles or the Isle of Man.

In June of 2019 Guernsey, Jersey and the Isle of Man announced that they would open company ownership records in a way that would meet EU transparency standards. However, British MPs said that the dependencies were not going far or fast enough.

Northern Ireland

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