On Tuesday 5 December, EU Finance Ministers at the meeting of ECOFIN, the Economic and Financial Affairs Council in Brussels, approved the outcomes of the initial screening exercise conducted by the EU Code of Conduct Group on Business Taxation.
The Code Group’s assessment resulted in the production of an ‘EU list of non-cooperative jurisdictions for tax purposes’ known colloquially as the ‘EU blacklist’.
17 jurisdictions have been identified as non-cooperative. Jersey, rightly, is not on that list.
The ECOFIN conclusions have confirmed Jersey’s status as a cooperative jurisdiction, engaged in a constructive dialogue with the EU and committed to complying with EU and international tax standards.
This outcome reflects the Island’s well-earned reputation for delivering the highest standards of tax transparency and information exchange. We have cooperated fully with the Code Group throughout their screening process, consistent with Jersey’s pursuit of a good neighbour policy with the European Union.
Jersey makes an important contribution to the EU’s growth story. The Island is a conduit for €188bn of foreign investment into the European Union (excluding the UK), equivalent to 4% of the bloc’s total net international investment. In addition, that investment supports in the order of 88,000 European jobs.
The process followed by the Code Group initially identified 92 countries for screening. Following a table-top review, the Government of Jersey received tailored questions from the Code Group Secretariat in June and August 2017, to which we provided detailed responses.
In November 2017 letters were sent to all jurisdictions, informing them of the outcome of the Code Group’s work. Where necessary, a political commitment was requested within a specified timeframe to addressing any concerns identified.
The Code Group considered three sets of core criteria against which jurisdictions were assessed.
The first were those that a jurisdiction should fulfil to be considered compliant on tax transparency.
This can be satisfied through commitment to the automatic exchange of information, Membership of the Global Forum on transparency and exchange of information for tax purposes, with a satisfactory rating, and signature and ratification of the OECD Multilateral Convention on Mutual Administrative Assistance. Jersey satisfies all these criteria.
The second set of criteria related to anti-BEPS measures being implemented. These criteria are satisfied by Membership of the Inclusive Framework on BEPS. Again, Jersey satisfies these criteria.
The third set of criteria were those a jurisdiction should fulfil to be considered compliant on fair taxation. Concerns were highlighted by the Code Group that Jersey did not satisfy Criteria 2.2, regarding the existence of tax regimes that facilitate offshore structures which attract profits without real economic activity.
In order to maintain our status as a cooperative jurisdiction, I have made a written commitment to address these concerns by the end of next year.
I have repeatedly said that Jersey is a jurisdiction of substance, and the Jersey Financial Services Commission undertake certain economic substance tests prior to the approval of new regulated entities.
Notwithstanding the positive work already being undertaken, I have made a commitment to discuss and address the concerns of the Code Group by the end of 2018.
This work may include changes to our regulatory and legal framework, and additional accounting and reporting obligations. We have already begun the necessary preparations to enact these measures, having regard to the Code Group requirements and Jersey’s best interests.
To ensure that this process will be completed by the end of 2018 the Government have produced a comprehensive timetable that includes consultation with industry, the publication of draft legislation, and scrutiny and debate by this Assembly.
That timetable is reflected in our most recent correspondence with the Code Group, which has been provided to States Members alongside the text of this statement.
This is not a time for complacency. Whilst the Island has achieved cooperative status, we must address the concerns of the Code Group within the agreed timetable.
ECOFIN has confirmed that the listing process is not a ‘one off’, but that jurisdictions will be subject to regular reassessment by the Code Group. We will be working to ensure that the Island’s interests continue to be well-represented in Brussels.
Since 2011, the Channel Islands Brussels Office (CIBO) has provided a permanent presence in Brussels, representing the Channels Islands to the EU Institutions. The work they have undertaken has been instrumental in our interaction with the Code Group, and in ensuring that officials and representatives of the Members States have an accurate understanding of Jersey’s constitutional position and the regulation of our financial services industry.
Alongside the Minister for External Relations, I will continue a regular programme of meetings in Brussels with representatives of the Commission, MEPs and the Permanent Representatives of Member States.
I should also emphasise that the government has worked closely alongside the Government of Guernsey in line with our joint commitment to engaging in Brussels and to meeting international standards. The Chief Minister of Guernsey and I have travelled to Brussels on several occasions, including meeting with Pierre Moscovici, the European Commissioner for Economic and Financial Affairs, Taxation and Customs.
I am certain that the close partnership between our two Islands will continue throughout our ongoing engagement with the Code Group and in other matters, including Brexit, in order to meet the common objectives of the Channel Islands.
Jersey’s reputation as a well-regulated and transparent jurisdiction, that supports the development and implementation of international standards, is of utmost importance to the Government of Jersey. In November our commitment to meeting the highest international standards was recognised by the OECD’s Global Forum when we were rated as ‘compliant’ across all ten areas reviewed; one of only six jurisdictions globally to receive this rating. We will continue to embrace the new rules that the global community identifies to address emerging risks and practices in cross-border finance.