4 May 2009
Jersey is doing its bit to promote a global level playing field by managing clients’ wealth in a transparent and judicious manner, says Geoff Cook
International finance centres in offshore locations were subjected to an intense period of activity during the build-up to the G20 summit, where among many priorities there was a focus on strengthening transparency, accountability and improving international cooperation.
Amid the political rhetoric and considerable national and international media speculation about the future of so-called ‘tax havens’, there has been debate regarding the differences between secrecy jurisdictions and cooperative jurisdictions such as Jersey.
The majority of lawyers who work with the leading offshore jurisdictions appreciate that the role of international finance centres and their value to the global economy has been widely misunderstood. International finance centres compete for international business in exactly the same way as many Organisation for Economic Cooperation and Development (OECD) and G20 nations do: on a mix of financial expertise, lower costs, attractive tax regimes, political and social stability and robust, flexible laws and regulation. They act as conduits for mobile international capital, which is essential to the operation of free markets, and they attract this capital from where it is not needed and route it to where it can be deployed most efficiently.
Furthermore, locations such as Jersey have committed to the principle of information exchange for a number of years and engaged in an extensive programme of signing tax information exchange agreements with leading nations in the G20.
The announcement at the G20 summit that financial centres such as Jersey are included on a ‘white list’ of jurisdictions “that have substantially implemented the internationally agreed tax standard” alongside the US, the UK and many leading nations of the EU and OECD is clearly welcome. From Jersey’s point of view, the recognition that there should be a global level playing field in respect of regulation and cooperation is also to be welcomed.
It is readily understood that the decisions at the G20 summit will not permit any of the reputable offshore finance jurisdictions to become complacent about their commitment to sound regulation and transparency. Jersey’s finance industry remains committed to supporting the Island’s government as it continues its work with the OECD to further the development of a global level playing field for all financial centres.
We are also addressing some of the wider issues about offshore finance that have been debated, but that have little supporting evidence to back up claims. For instance, we are in consultation with academics in the US, the UK and Australia in order to bring forward evidence that demonstrates the value of offshore jurisdictions to onshore economies and to further show that there is no link between work offshore and poverty and debt in the Third World, as has been claimed by opponents. In fact, a recent academic study has shown that the presence of aninternational finance centre with an onshore economy is an economic accelerator, and we need to articulate this argument in the wider debate and bring evidence to support it.
The apparent confusion over tax avoidance and tax evasion (now used interchangeably and inaccurately at best) has also been a misleading issue. For example, utilising your ISA allowance, paying into a pension or trading a few shares within your capital gains tax allowance are activities that many millions of people undertake in the UK. This is tax avoidance - which means to say that, without taking those planning measures, those people would pay more tax. To accuse banks, companies or individuals of immoral behaviour because they plan their international affairs in legal and sensible ways simply raises the spectre of wrongdoing in a misleading and mischievous manner.
Jersey continues to be an attractive and stable choice and it is encouraging that business has been holding up well during these turbulent times. During this period of upheaval in the global financial services markets, finance centres that can demonstrate stability, alongside sound regulation, are best placed to succeed in the longer term.
While clients around the world may have less wealth than a year ago, the fact remains that they still have wealth, and they need it managed. Investors and their legal advisers are looking for solid, reputable organisations located in respected jurisdictions in which to safeguard their assets.
Geoff Cook is chief executive at Jersey Finance
A practitioner’s response
Huge pleasure and some relief, as well as a sense of opportunity, was the reaction from Guernsey to the outcome of the G20 meeting on 2 April and the simultaneous publication of the OECD’s white, black and grey lists of jurisdictions.