But there is more work to do. Arab Banker spoke to Geoff Cook, the CEO of Jersey Finance, about Jersey’s strategy and ambitions to expand its work in international markets, including in the Middle East.
ARAB BANKER: What is the concept of Jersey’s International Finance Centre (IFC)?
GEOFF COOK: Our aim is to provide a well-regulated platform for global financial services that is based on transparent laws that are consistently enforced, strong regulation that is in line with the international standards, a competitive tax environment for both companies and individuals, and strong supporting infrastructure in the form of accounting firms, law firms, IT expertise, and a professional workforce.
In the delivery of this platform, we enable financial services firms to serve their customers better, make more profits and, in the process, enhance the prosperity of the island of Jersey.
It is important to note that Jersey has been providing services to international financial companies for more than 50 years. Jersey Finance, the organisation that I lead, was created in 2001 as a focal point to promote Jersey’s IFC in our key markets, but international finance in Jersey goes back to the 1960s when international financial markets, such as the Eurobond market, were first established.
Don’t IFCs have a bit of a bad name these days?
Questions have been asked of IFCs in recent years, in particular regarding transparency of financial transactions and tax reporting, and anyone who reads the newspapers knows that some IFCs have been falling short of international expectations. But a lot of IFCs, and Jersey is one of them, have responded well to the higher standards that have been developed over the last ten or 20 years.
I want to be very clear: Jersey welcomes high standards. Strong regulation and transparency are among our competitive strengths. There is no place in Jersey for illicit wealth. The type of institutions that we want to attract are those who want to work in a forward-thinking jurisdiction.
The international financial community has recognised our strength in this area. The World Bank has cited us as an example of best practice in the recording and monitoring of beneficial ownership information; the International Monetary Fund has said that we are “in the top division of International Finance Centres, including those in the G20 and EU”; and Moneyval – the Council of Europe’s organisation for assessing compliance with international standards on money laundering and the financing of terrorism – placed us in the top tier of its jurisdictions, judging us to be compliant or largely compliant in 48 of its 49 assessment areas.
Can you explain your relationship with the British Government and with the European Union?
We are a ‘Crown dependency’ (‘Crown’ here refers to the British monarch). This means that we are not part of the United Kingdom and can set our own laws and tax rates and sign our own treaties. Of course, we do have a close relationship with the United Kingdom and culturally we are very British, and English is the principal language spoken here.
We are not a member of the European Union (EU), although in practice we have close relations with the EU and we are currently a member of the customs union for free movement of goods.
Our relationship with the EU and its member states is very important to us and we expect that those relationships will suffer no practical damage as a result of the United Kingdom’s withdrawal from the EU.
These close relationships with the UK and with EU member states is one of the distinctive features of Jersey as an IFC and it is particularly relevant to financial institutions that are based in the Middle East and Africa, who want that proximity to financial markets in London, Paris and Frankfurt while taking advantage of the benefits that a well-regulated and competitive tax environment has to offer.
What are the tax benefits that Jersey offers?
Jersey offers a tax-neutral environment with no capital transfer tax, no capital gains tax, no value added tax, no withholding taxes and no wealth taxes.
The standard rate of corporate tax in Jersey is zero, with higher rates for regulated financial services companies, who are taxed at 10%; and a 20% rate for utility companies and income specifically derived from Jersey property rentals or Jersey property development.
There is no tax levied on non-resident individuals and personal tax for most resident taxpayers up to a maximum of 20%. Overseas-born high-value residents are taxed on their worldwide income at a rate of 20% on the first £725,000 of income and 1% on any further income.
Our taxation platform is simple and transparent. It enables investors to pool their capital through Jersey without incurring any additional layers of taxation when making cross-border investments. Within this environment, we take tax compliance very seriously as part of the general approach of adhering to the highest standards of financial regulation that I mentioned earlier.
What can Jersey offer apart from low tax rates?
Low tax is a fundamental part of our business environment, but we know that it is not enough. In fact, studies that we have done on international investors indicate that tax is often not the principal reason for choosing one IFC over another.
Local expertise is an important factor for international investors. There are currently 13,000 people working in Jersey’s financial sector. We have a large number of world-class lawyers, accountants and IT firms here. It is easy to find trustees who are experienced and will take their responsibilities seriously.
We also offer stability. We have a democratic and open political system, independent judges, and vibrant civil society. Of course, we move with the times – not least in respect of implementing the latest financial regulations and standards – but if you come back to Jersey five years from now you are not going to find a different political system, a different judiciary and a radically different society.
I would add that we also offer considerable expertise in respect of shariah finance. We recognised early the attraction of shariah-compliant finance for existing or potential clients in the Middle East and Asia and we have ensured that our laws accommodate shariah-compliant transactions, and many of the financial service firms that are based here have developed considerable expertise in shariah-compliant structures.
What type of firms are currently operating out of Jersey?
We have a wide range of firms that includes banks, investment funds, private wealth managers and family offices. We have issued 28 banking licences and more than 40 fund administrators are based here. All the major accounting firms are here, as are seven first-tier legal firms and several well-known trust companies.
How do you want to see Jersey Finance develop over the next five years?
The GCC is an area that we are particularly focused on at the moment. We know from our own research and that of others that GCC investors are putting more focus on internationalising their wealth-planning strategies and diversifying their investments. We think that our combination of investor-friendly laws and regulations, low tax, strong human infrastructure and political stability makes us an obvious choice for such investors.
We’re particularly focused on succession planning in the GCC. We did some research on this last year and found that 55% of financial professionals that are working with family businesses in the GCC identified succession planning as the most critical issue facing wealthy Middle Eastern families today.
More generally, we expect that cross-border financial flows will continue to increase, that the wealth of high-net-worth individuals will grow, and that these trends will be particularly pronounced in regions such as Asia, the Middle East and Africa. Globally, we expect to see political instability in many countries and regions and this will only increase the attraction of a financial centre such as Jersey.
Finally, I would mention digital innovation and fintech. We recognise that this is going to be a big factor in the growth of new financial products and services in future. Digital Jersey is tasked with developing Jersey as an international centre of digital excellence. They recently signed a memorandum of understanding with the world’s largest cryptocurrency exchange and more generally will be contributing to the development of distributed ledger technology in our financial system. That’s an initiative that we at Jersey Finance fully support and we are excited about the opportunities that fintech will offer to Jersey-based firms.