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Independent review of British Offshore Finance Centres endorses Jersey’s high standards of regulation

29 October 2009

An independent report into British Offshore Finance Centres has endorsed Jersey’s high standards of regulation and significant contribution to the UK market.

The final report of Michael Foot’s Review of the opportunities and challenges facing the British Crown Dependencies (Guernsey, Isle of Man, Jersey) and six Overseas Territories (Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, Turks and Caicos Islands) is published today (29 October 2009).

Jersey’s Chief Minister Senator Terry Le Sueur said: ‘This report is a welcome independent endorsement of the high standards and robustness of our financial regulation and acknowledgement of the large regular flow of funds from Jersey to the UK. We are encouraged that our positive assessments by the IMF and OECD have served to highlight Jersey as a well-regulated and leading finance centre.

‘We also welcome Michael Foot’s recommendation that the UK should lead the drive to ensure a level playing field by calling on all EU Member States and third countries to move to automatic exchange of information under the EU Saving Tax Directive, and by taking the lead internationally in encouraging improvements to international standards of transparency of beneficial ownership.’

Minister for Treasury & Resources Senator Philip Ozouf said: ‘The report highlights the Crown Dependencies, particularly Jersey, as examples of good practice in medium-term fiscal planning and as having a better track record than other jurisdictions in forecasting future budget positions.

‘We agree that no jurisdiction can afford to be complacent and that as tax regimes evolve in each jurisdiction these should be aligned with international ‘best practice’ taxation models in the global landscape. We will be studying the report in detail and expect to address these issues as part of our review of the Island’s fiscal strategy.’

In his report to HM Treasury, Michael Foot sets out his findings for the British Crown Dependencies and Overseas Territories, highlighting that:

  • the Crown Dependencies make a significant contribution to the liquidity of the UK market, providing net financing to UK banks of $332.5 billion; Jersey is by far the largest net contributor 
  • the Crown Dependencies’ decisions to build up reserves in recent years of growth has increased their resilience 
  • Jersey’s very positive IMF assessment, rated as compliant or largely compliant with 15 of the 16 ‘key and core’ FATF recommendations 
  • all Crown Dependencies had met the OECD standard for tax transparency by the G20 meeting in April 2009, and are encouraged to continue to negotiate further TIEAs
  • the UK should call on all EU Member States and third party countries to move to automatic exchange of information under the EU Saving Tax Directive, and so enable Jersey and Guernsey to introduce automatic exchange by ending the current transition period 
  • the UK should take the lead internationally in encouraging improvements to international standards and transparency of beneficial ownership, citing the lack of adequate monitoring of beneficial ownership in Delaware and the lack of regulation for most trusts in the UK 
  • the UK ‘tax gap’ due to suspected tax avoidance is significantly lower than previous estimates – rather than £11.8 billion previously claimed, this is now estimated to be no more than £2 billion globally (with any avoidance through offshore centres being an unidentified component of this) 
  • jurisdictions should consider whether an Ombudsman scheme is justified 
  • jurisdictions that propose to offer protection to retail depositors must ensure that compensation schemes can be understood by those depositors
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