Country Rankings - Jersey
Feb 06, 2018 Jersey: confidentAmid the usual noise surrounding the Brexit negotiations, another couple of news stories caught my eye recently. And they suggest that the Channel Islands of Guernsey and Jersey are facing the prospect of Brexit with far more confidence, and a greater level of preparation, than their mother country. Indeed, the UK finance sector is said to be learning from Guernsey, according to the island's investment promotion agency, while the recent decision by Canadian energy firm Serinus to redomicile in Jersey was an important vote of confidence in a jurisdiction which not so long ago was facing an existential crisis as a result of the UK's decision to leave the EU. Of course, things aren't exactly what they appear at first glance. The Channel Islands have similar, but largely unique, relationships with the EU, in that they aren't member states but belong to the customs union. However, neither belongs to the VAT area, and both have harmonized elements of their legislation with EU law. Therefore, they've had had long experience of dealing with the bloc as third countries. Interestingly, perhaps these developments show that there are options for the UK beyond the much-discussed Norwegian and Swiss Brexit models. The Channel Island model perhaps? The EU has long been paranoid that Brexit would lead to the emergence of a large tax haven on its doorstep. But perhaps those claims aren't as fanciful as they seem.
Apr 11, 2017 Jersey: aberratesIt seems to be an in-born trait of the governing class that they possess selective hearing. Sometimes, it feels like they just never listen. But perhaps on certain occasions, for political expediency, they are choosing not to hear. I've written before about how the evidence in support of tax amnesties is far from convincing. Most academics who have recently studied this subject have concluded that, ultimately, tax amnesties are self-defeating, largely because they erode tax compliance over the long-term, rather than encourage it. And, right on cue, Indonesia – a serial amnesty user – has just reinforced the point by reporting an underwhelming response to its latest tax amnesty. Little wonder then that tax compliance levels in Indonesia remain at historically low levels, and attempts to widen the tax base are proving largely fruitless. It's a shame therefore that Jersey has gone and blotted its copy book by announcing a tax amnesty of its own, just days after Indonesia reported its latest flop. Offshore is not the most popular place around the world right now. But that doesn't detract from the fact that Jersey, with its lack of party politics, seems generally a soundly governed place, and has a largely unblemished record in this column. However, it may not have done itself many favors with this decision. Still, I suppose everyone is allowed an off-day now and again.
Dec 07, 2015 Jersey: responsiveTalking of paradis fiscal, in the early days of the Internet, many offshore jurisdictions talked the talk with their aspirations to be at the forefront of the e-commerce revolution. But not many of them walked the walk, as evidenced by the relatively small number of offshore e-commerce hubs in existence today. Perhaps when it came down to it, some of these isolated rocks just didn't have the resources needed to build the necessary telecommunications infrastructure, nor the skills base to operate it. However, there are a number of jurisdictions, most of which can still be classed as "offshore," which have quietly gone about the business of carving out their own niche in an increasingly digitalized world. Antigua and Barbuda, Gibraltar, and Malta stand out as having made a success of their e-commerce strategies, with all three now by-words for the offshore e-gaming and internet gambling industries (although in poor old Antigua's case, its industry has been hobbled by US legislation and Washington's indifference to numerous WTO rulings in the Caribbean jurisdiction's favor, but that's for another time!) The Isle of Man is arguably the most successful offshore e-commerce jurisdiction, where the sector now accounts for almost one-quarter of the island's gross domestic product, according to the Government. Given that economic diversification is so important for these small territories, most of which lack natural resources and are highly exposed to external economic shocks, an encomium goes to Jersey this week, which has decided to proceed with its plans to develop an e-gaming industry. Although, it's a qualified encomium in a way, Jersey must be careful that it's not coming too late to the party. Its competitors, including the Isle of Man, are well established, and the regulatory and tax currents aren't exactly favorable for offshore e-gaming at the moment. Still, recent history suggests that the authorities in Jersey – and the other Crown Dependencies for that matter – seem much abler in responding to their territory's economic needs than most other countries. Perhaps it's the absence of party politics.
Jul 13, 2015 Jersey: enablerSpeaking of tax havens (or international offshore financial centers, as they prefer to be known these days), there's been some interesting reports published recently showing just how important they are in channeling investment between various parts of the globe, and particularly from rich countries to developing and emerging economies. The island of Jersey has long publicized its role as a conduit for investment for London and the wider UK economy. But according to a study by management advisory firm Investment Consulting Associates, Jersey plays a substantial role in routing investment in the global economy. The report highlighted that Jersey-originated foreign direct investment (FDI) supported 94 greenfield projects between 2003 and 2014. These projects had an aggregated value of USD13.34bn and created over 39,000 foreign jobs. The disproportionate amounts of FDI received and transmitted by offshore financial hubs was also highlighted recently by the United Nations Conference on Trade and Development (UNCTAD) in its latest World Investment Report. This states that 30 percent of cross-border corporate investment stocks (FDI, plus investments through special purpose entities) have been routed through "conduit countries" before reaching their destination as productive assets. Interestingly, the growth in what UNCTAD terms "transit investment" grew sharply in the second half of the 2000s, despite the fact that the OECD's campaign against tax havens was well established by then, and has continued to grow even though that campaign has intensified. However, while the report states that action against international corporate tax avoidance is "imperative," it goes on to caution the likes of the OECD and the EU to "consider carefully" the risk of negative effects on investment flows, especially to developing countries, posed by the BEPS project. "Insufficiently calibrated measures may deter necessary investment for development that might otherwise have taken place," the report observes. "Offshore investment hubs have come to play a systemic role in international investment flows: they are part of the global FDI financing infrastructure. Measures at the international level that might affect the investment facilitation role of these hubs, or that might affect key investment facilitation levers (such as tax treaties), need to take into account the potential impact on global investment and incorporate an investment policy perspective." There are those who will argue that investment would still take place regardless of whether tax havens existed or not. But we can't be sure how investment flows would be affected if these conduits became blocked or removed from the global financial architecture altogether. In fact, it is probably dangerous to assume that everything would carry on as normal. It would be ironic indeed if one of the consequences of the BEPS project was less corporate investment flows to low income countries, hampering their development.
Feb 26, 2015 Jersey: proving them wrongOffshore financial centers are often cast as the villains in the seemingly endless debate about tax avoidance. Except that it isn't really a debate anymore, is it? Tax evasion is universally condemned, and rightly so. And it is almost a heresy these days to say that there is nothing wrong with avoiding tax. But perhaps the real rogues in the piece are the "big islands", as OECD Director-General Angel Gurria recently described the large and not-so-transparent countries, which like to sit in judgment over supposedly opaque low-tax jurisdictions. Never mind the Cayman Islands and its famous (or infamous, depending on one's point of view) Ugland House. If you want anonymity, you could do much worse than incorporate a company in Delaware or Nevada. Granted, for the most part, we also don't know who the ultimate beneficiaries of offshore companies are, because such information is not public knowledge. But at least in the most reputable IOFCs, by law, this information is collected and held in a systematic way, and it is there for law enforcement authorities to scrutinize should they need to. This is more than can be said for a number of the holier-than-thou rich countries. The irony in all this is that politicians enter this territory thinking that they can't lose by vilifying tax avoiders and tax havens. Yet, often, it isn't the safe, high moral ground they think it is, as the UK's Labour Party has found to its cost. In fact, the tactic seems to have backfired spectacularly amid allegations that some of Labour's major donors have indulged in tax avoidance. Even the Miliband family themselves are under the spotlight. Depressingly predictable stuff. Meanwhile, the IOFCs have quietly got on with business, and it could be argued that some of them are now indispensable components of the world financial machine, directing investment between the major onshore economies, which in turn support taxable economic activity and jobs. (Read the 2013 Capital Economics report about Jersey's contribution to the UK economy if you're skeptical.) After another successful year for its finance industry in 2014, low-tax Jersey is now home to the largest number of non-UK companies listed on the FTSE 100 index. However, across all three of the LSE's markets, low-tax Guernsey has more non-UK entities listed than any other jurisdiction globally. It's been more than 15 years since the OECD turned its ire on the world of offshore, but pockets of it seem stronger than ever, which stands as a testament to the willingness of IOFCs to adapt to new political and economic realities. In fact, there were five percent more offshore companies in the world in 2014 than on the eve of the financial crisis. Offshore is dead; long live offshore!
Nov 14, 2013 Jersey: being transparentOctober 25: Guernsey and Jersey have both signed inter-governmental agreements with the UK to improve the automatic exchange of tax information between the jurisdictions.
Aug 08, 2013 Jersey: sucks upThis week the OECD even congratulated Jersey (Channel Islands of course, not New England) for its support of the transparency program, which had me rubbing my eyes, and is a testament to what engagement can bring you, whereas you can fairly say that San Marino was rather ostrich-like when the storm clounds threatened. Jersey has managed to preserve its standing and its business fairly well untouched by the "anti-offshore" pogrom of the last 20 years. Perhaps more importantly, though, it saw early on that the "offshore" that was going to survive would be one based on corporate business, rather than the traditional "wealth protection" model, and crafted for itself a series of specialist niches in which it is now well established.
Apr 18, 2013 Jersey: shuts the doorsWell, that's all very serious stuff, trade, so let's turn to L'Isle Joyeuse for a little light relief. There are 2,000 islanders looking for work, sorry about that, yet there are 500 vacancies in the financial sector. Sounds as if Jersey is doing well, and all reports agree on that, so what is going on? Jersey has a population of 95,000, of whom 12,000 are employed in the financial sector. GDP per head is about USD60,000; a mid-sized family home with a small garden will set you back USD1.5m. EU nationals can work in Jersey, but you can only get long-term residence if you own a property; non-EU nationals would need a work permit, and very few are issued. Jersey agrees there is a skills gap, and has got various training schemes to try to fill it. But you have to wonder if there isn't local resistance (NIMBYism it's called in English – Not In My Back Yard) to the sort of moves that would be needed to break the log-jam. Long-term, it's not in Jersey's interest to restrict the entry in this way of say, Russians, with financial skills. Anyway, just to amuse myself I looked to see what sort of house I could find, assuming I was a Russian banker made redundant in the Square Mile in London, and there's quite a nice one available this week, just big enough, although no tennis court, USD5m. Unfortunately my redundancy package was only USD3m, so it's no go. Think I'll spend the summer going to Wimbledon and Henley. And Sochi should be fun in February. Then I'll look for work again in the spring next year. Things should have settled down a bit by then.
Mar 14, 2013 Jersey: back on track?In a week that saw the EU blasting a massive hole in its own foot with the bankers' bonus rules (a big, black mark if it was a country) and the UK admitting that its purchase of Royal Bank of Scotland will end up costing taxpayers gazillions of pounds, Jersey's banking sector seems to have turned the corner on a difficult period, with modest growth in deposit levels. The fund management sector is looking healthier, as well. It's hard to be sure about the consequences of the EU's current regulatory feeding frenzy, but it may mean good news for Jersey. You can argue it both ways: the AIFMD (Alternative Investment Funds Management Directive) will make offshore locations like Jersey less attractive as a base for EU fund management; on the other hand, an existing fund manager with say a base in London or Luxembourg and significant world-wide business may decide to split in two, and put its non-EU business in Jersey (or Guernsey or Bermuda or wherever) in order to escape the strait-jacket of AIFMD. And the same goes for the banking regulations. It was the bonus aspect that got all the attention this week, but actually that's only a minor part of the new regime, which has appallingly onerous requirements in all sorts of directions. As with funds, it may be that non-EU banking will benefit strongly from the new regime. Singapore and Hong Kong beckon, of course, but Jersey (and Andorra and Monaco) have an advantage for EU-based depositors, so we may see expansion of Jersey's banking capacity in the next five years.
Feb 14, 2013 Jersey: huddles upA couple of weeks back I was suggesting rather facetiously that rich specks of rock in the Caribbean ought to merge their governments, and, lo and behold, here are two specks of rock in the English Channel doing just that. Jersey and Guernsey are making moves towards sharing certain aspects of their administration. I'm not claiming any credit, and I don't even know how many readers we have on the islands; it's just an idea whose time has come. Why would you have two prisons, for instance, with two sets of correction officers? Two tax authorities, when they have identical corporate taxation systems? Two statistical offices? Two telecommunications ministries just about equally far behind the times? Something else I can't understand is why there can't be a market in countries, or at least in their administration. I see why the Greeks wouldn't want to hire Goldman Sachs to put a couple of hundred islands on the market (although that's exactly what they ought to do), but why wouldn't some islands in Melanesia or the Caribbean want to invite bids to take over and run their pension systems? Fidelity would offer however many billions for a 20-year contract, and the voters (who would share out the money) would have the say-so, just like shareholders. Then what about armies? There have always been mercenaries, but the idea has been somewhat buried by nation-hood. They don't have armies in Jersey or Guernsey; it is contracted out to the British government, which actually proves my point very neatly. Instead of getting constantly smaller, perhaps the Ministry of Defence should start recruiting again and offer its services to some of those African countries which constantly fail to shoulder their UN responsibilities, turning up weeks late and with half the required number of soldiers to join the latest peacekeeping force.
Dec 20, 2012 Jersey: showing some spineFull marks to Channel Islands Jersey and Guernsey for standing up to the UK's bullying over FATCA, and by the same token, a black mark to the UK. The UK Treasury regards the UK's offshore dependencies (Jersey, Guernsey and the Isle of Man) as so many little puppy dogs to be ordered around at its convenience, despite frequent reports showing that they provide tens of billions of pounds' worth of benefit to the mainland every year through tax-efficient investment which would otherwise flow to Hong Kong or elsewhere in the world. The UK shows no gratitude or recognition whatsoever, on the contrary, punishing the islands whenever it can. Recent outrages include changes to the Isle of Man's VAT settlement which worsen the IOM's finances by at least GBP100m a year, standing by with arms folded while the EU's Code of Conduct Committee (Star Chamber) forced changes to the islands' income tax regime, and the use of British courts to abolish low-value consignment relief (which actually forms part of settled EU directives) for the islands, but not for anyone else, which chopped hundreds of jobs away from these tiny economies, at the behest of UK retailers. I ask myself, why don't they quit, and demand full independence from the UK and the EU? Especially now that the rolling tide of financial EU directives is impinging more and more every day on their economies. The AIMFD is just one example of the wave of nannying, obstructive and unnecessary legislation which will harm the islands for decades to come. The dependencies have very large cash balances saved up from the good years, even if they are running temporary minor deficits, and can well afford to stand on their own feet.