Extracts from a speech by Geoff Cook at the Adam Smith Institute, 4th November 2009 :-
In the year 1204 King John of England and Duke of Normandy lost most of his French possessions following defeat in battle; the people of Jersey were faced with a choice; would they remain part of the Duchy of Normandy, as had been the tradition until that time. Or would they throw their lot in with King John, their Duke, descendent of William the Conqueror.
Jersey decided to remain loyal to King John, and was rewarded with significant constitutional freedoms; which have to this day extended to the right to set it’s own taxes and customs duties.
Jersey receives no financial support from the United Kingdom and was the only part of the British Islands along with Guernsey to be occupied during the Second World War; the last time in fact that Jersey’s income tax was amended to the current rate of 20%, which has stood for over 50 years.
Jersey was known in the 1950’s as the honeymoon capital of the UK , and more recently for the Jersey Royal Potato, and as the home of that most endearing brown bovine of creatures, the Jersey cow.
In the 1960’s as UK firms increasingly went overseas, Jersey developed a finance industry, servicing the needs of British expatriates. For 50 years this industry has developed and has become one of the worlds leading niche international finance centres. It now employs 13,000 people in banking, wealth management and fund administration.
It is this history that has put Jersey at the very heart of the G20 agenda; with Banks, Bankers Bonuses and ‘Tax Havens’, at times competing as the pejorative of choice.
But we are no strangers in Jersey to international scrutiny: We were subject to requests to amend our tax arrangements under the OECD Harmful Tax Competition programme back in 1998.
More recently the EU Code of conduct group on business taxation appear to have indicated that our tax system may not meet with the ‘Spirit’ of the EU code of conduct. This is interesting given the current fiscal framework has been built in a very transparent manner over a period of years, and especially as the UK had previously indicated our tax system did meet code requirements.
In Jersey we have a diversified tax base including corporation tax, income tax, property taxes, customs duties, and a goods and services tax. Of course we offer benign tax treatment to non residents, as do a large number of other countries including many EU members. It is certain for example the United Kingdom and the US could not fund their significant budget deficits with out offering tax free returns to overseas investors.
What is more in Jersey we have a strategic reserve of £582m. We fixed the roof whilst the sun was shining; and we put money aside for the rainy day we knew would eventually come. We have an economic stabilisation fund of £140m, which our Finance Minister has committed to deploy, only on the advice of an independent panel of experts.
Ergo we have 18 months income in the bank and no debt!
But we need to distinguish here between tax transparency and tax competition. Jersey is no friend to tax evaders and criminals. We have achieved the highest ratings of any country under the IMF FSAP inspections, and have been a leading and willing participant in the OECD Tax Information Exchange programme. Last year we filed over a thousand suspicious transaction reports and cooperated in over 700 investigations
Tax evaders should not be able to use jurisdictions to hide none disclosed wealth. Recently published research conducted by Professor Jason Sharman, of Griffith University Sydney, proves that Jersey has a better record of fighting this kind of activity than many larger countries, including the UK. Some commentators have observed the debate over tax transparency and tax competition looks very much like big countries with large budget deficits, (the high tax, high spend, large government countries, and their trading blocs and agencies) seeking to impose their view of the world on smaller less powerful nations.
It is after all much more difficult to keep raising taxes if your citizens are mobile, and can move themselves and their wealth to a more attractive environment .
Clearly there is a continuing sense of moral outrage as a result of countries sliding into recession, unemployment still rising, and already strained national budgets in the US and Europe coming under intense pressure, as a result of the financial crisis.
This appears to be one of the key drivers for the continuing focus on ‘tax havens’.
Given this backdrop it is not surprising that the subject of tax receipts and cross border activity has come to the fore, as cash strapped governments look for solutions. The truth though, however unpalatable, is that the crisis had its roots anchored firmly in debt taken on in the major western deficit economies.
This had everything to do with central bank interest rate policy and financial supervision, and nothing whatever to do with Financial Centres, such as Jersey.
So why the linkage with ‘Tax Havens”? or as they might be more appropriately titled, ‘International Finance Centres’ or IFCs.
The criticism is usually fed to the media and politicians by anti business groups, opposed to tax competition and free markets in mobile international capital. Ironically these critics are inclined to attack globalisation, multinationals of all types, and are the authors of the protectionist clamour that the G20 has vowed to avoid;
I quote from the Berlin Summit:-
“All countries have a duty to resist protectionist tendencies and to work towards a tangible further opening of world trade”
Now it is true many banks and hedge funds have operations in international finance centres. They provide a cost effective, tax neutral administration platform in a well regulated environment. Blaming IFCs for what has happened in the US and UK makes no sense. There is no credible connection.
Jersey competes for business on exactly the same basis as the 70 other countries who offer some kind of benign tax neutral regime to the o