A challenge can often be viewed as an opportunity. A downturn can be a chance to streamline your business. A budget cut can prompt a rethink that tunes up your organisation. And a changing regulatory environment can be seen as an opportunity for Jersey to demonstrate its high standards.
We are in a good position to use the shifting landscape of global standards to attract more business. In short, I see the challenges facing Jersey now as opportunities.
Regulatory changes
2013 saw jurisdictions and international organisations working hard to show they were tackling tax evasion, tax avoidance, harmful tax practices and aggressive tax planning. Their aim was to ensure that all taxpayers pay their fair share of taxes.
At the G20 summit in St Petersburg a Tax Annex to the Leader’s Declaration stated that the G20 has been at the forefront of efforts to establish a more effective, efficient and fair international tax system. Jersey is inevitably caught up in these global efforts to strengthen international cooperation on tax matters. We have always made it clear that we want to comply with international standards.
As standards have developed we have been happy to commit to them. We welcome the global approach that is now central to these initiatives. When the world at large is expected to respond to such initiatives, we benefit. The emphasis now is less on so-called ‘tax havens’ and more on non-cooperative jurisdictions, or those with discriminatory tax measures.
We benefit from the attention focussed by the G20 and the OECD on profit shifting by companies like Starbucks. This shines the spotlight on jurisdictions like Ireland, Luxembourg, the Netherlands and the USA. We are already meeting many of the standards that others are now being expected to emulate. If there is a global approach our competitive position can only be enhanced.
Value to Britain
The UK is our most important political and economic partner. Last year it demonstrated that it wants to be seen as a leader in the fight against tax evasion and aggressive tax avoidance. We have worked hard to strike the right balance: complying with relevant international standards and ensuring their global application.
We can now look back and judge that, despite the uncertainty in the run-up to the G8, we are in a stronger position now than we were at the end of 2012. We managed to promote our island and demonstrate to the international community that Jersey is a cooperative jurisdiction; that we share with the UK a zero tolerance of tax evasion and a commitment to transparency.
This was recognised by David Cameron when he told his fellow MPs that he did not think it was fair any longer to refer to us as a tax haven. We have made it clear that we do not want to be associated with tax schemes that are likely to damage our reputation. We have set up a Sound Business Practice Committee, made up of representatives from government, the regulator and the industry.
Our improved relationship with the UK was demonstrated when the Chancellor, George Osborne, supported efforts to remove Jersey from the French blacklist. The impact of this support cannot be underestimated.
Beneficial ownership
Following the G8 Action Plans, the UK has announced its intention to set up a Public Central Registry of the beneficial ownership of companies. Unlike many of our competitors, Jersey already requires anyone forming a company here to disclose the ultimate beneficial owner to the Company registrar.
We also licence trust and company service providers. They are obliged to know the ultimate beneficial owner of those they serve. Some of the G8/G20 countries themselves have a lot to do to catch up with us on this.
If all countries have a central register of the beneficial ownership of companies, available to law enforcement agencies, then Jersey can benefit from a level playing field. People will form their company where the best support services are, not where lower standards apply. We believe our approach is the best approach. We don’t see the need for a public central register and we are seeking the views of industry on this.
McKinsey
2013 saw the completion of a jurisdictional review, supported by McKinsey. It warned of tough challenges ahead. It emphasised the importance of sustaining the existing core business while also exploring new growth opportunities. Last year Ministers visited the UAE, the United States, Qatar, Israel, Madeira, China, and France - building business and cultural links around the world.
In an increasingly uncertain environment, our political stability can help retain our long standing appeal. We have met one of the key recommendations made by McKinsey – for government to work more closely with industry and regulator to support the islands largest industry.
I believe the system we now have in place has enhanced cooperation between us. This is essential, as the Financial Services Industry is key to Jersey’s economic health. Banks, trusts, fund management and administration, legal firms, accountancy firms and investment advisory services – these institutions are by far the largest contributor to the economy.
The quality of professional support from legal and accountancy firms is significant, particularly for a jurisdiction of our size.
In short – the industry is important to all of us.
That is why we have enhanced the financial services team in my department. So we can support the industry, enable legislative change, maintain international standards, provide the infrastructure to support growth, support innovation, develop the skills needed for the future, raise Jersey’s profile on the international stage and protect our reputation through engagement with governments and international bodies.
The opening of the Jersey London office is playing a key role in enhancing relationships with ministers and senior policy officials in the UK, just as the Channel Islands Brussels Office is building strong relationships with EU ministers and officials and developing their understanding of the islands.
We are not complacent - and this important work will continue.
Challenges
We are not short of challenges, but if these challenges are common to all jurisdictions, including our main competitors, and if there is a level playing field, we have little reason to be concerned. Businesses will look for quality services and professional expertise, and Jersey is strong on both.
We have a good story to tell. That is why we were invited to be one of four vice chairs of an international body that assesses jurisdictions on transparency and tax information exchange. That role now includes working on the new international standard of automatic exchange of tax information.
These positions bring many reputational benefits. There is much to be gained by engaging positively with the international community - as we have done.
Anecdotally I am being advised by different sectors of the finance industry that activity is picking up. The key focus is now on business growth rather than on cost cutting. We have seen increased investment in the early part of the year with a couple of very large acquisitions and new business set-ups.
Government will support this growth, by delivering a supportive environment in which the industry can flourish.
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