Statement made by the Chief Minister in the States Assembly on Wednesday 20 March 2013:
I am making a statement about negotiations on the US Foreign Account Tax Compliance Act and on related negotiations with the United Kingdom. There will be reference to these matters in the UK Budget today.
As members will be aware, FATCA seeks to limit the evasion of US tax by placing reporting requirements on foreign financial institutions. Consultations with industry were completed last Friday, and it is clear that industry’s preference is for Jersey to enter into a FATCA intergovernmental agreement with the US. We have sought to negotiate such an agreement. This is similar to the one that the UK signed with the US last year, and to some 50 other agreements that are still being negotiated.
It is generally accepted that there are real benefits for financial institutions in reporting through an intergovernmental agreement as opposed to reporting directly to the US Internal Revenue Service. Guernsey, the Isle of Man and the Cayman Islands are among the jurisdictions to share this view.
Our negotiations have progressed well, and we recently initialed an agreement with the USA. The only outstanding matter is a jurisdiction-specific annex on which a response from the US is awaited. Therefore, financial institutions can be assured that they will be operating under the umbrella of an intergovernmental agreement and can plan accordingly. We hope to be able to sign the full Agreement, including the annex, shortly. The Agreement will then be presented to the States for ratification and the required regulations will be presented for adoption.
When the US Agreement is in force, financial institutions will have until 30 September 2015 to report information relating to calendar years 2013 and 2014.
The UK indicated to us, to the other Crown Dependencies and to the UK Overseas Territories that they wished to match the position being negotiated with the US; that is, they were seeking a FATCA-type information exchange on an automatic basis. They found it difficult to accept that we would be giving more information to the US than to the UK in the fight against tax evasion.
We were concerned that there would not be a level playing field globally. The UK clarified that they regarded FATCA as setting the new standard in international tax transparency. We understand that the UK will be pressing for this at the G8 meeting in June and at meetings of the OECD.
We, along with Guernsey and the Isle of Man, also had concerns regarding those UK residents who are non-domiciled for tax purposes (the so-called “res non-doms”). An alternative reporting arrangement for this category of taxpayers was sought because there were concerns about the potential loss of business to competitor jurisdictions. Such a loss would affect not only Jersey but also the UK economy.
There was also a concern regarding the internationally accepted view that jurisdictions should seek the same information from their own taxpayers that is being asked of another jurisdiction.
At all times we have emphasised to the UK that we are committed to supporting them in the fight against tax evasion. We emphasised our good track record, with tax evasion having been included as an offence under our anti-money laundering legislation since 1999. We mentioned our public statements, agreed with the finance industry, that Jersey neither needs nor wishes to accommodate those engaged in tax evasion. As a vice chair of the OECD Global Forum Peer Review Group (which assesses compliance with the international standards) we seek to lead by example. Members will be aware that Jersey has an internationally recognised reputation which has been confirmed in assessments by international organisations such as the IMF.
Having balanced all these factors, I am announcing to Members today that we have agreed a package with the UK similar to those committed to by the Isle of Man and Guernsey. This agreement will be referred to in the UK Budget today. The package is as follows
- an intergovernmental agreement that, apart from certain annexes, closely follows the Agreement with the US. Financial institutions will have up to September 2016 to exchange information relating to 2013 and 2014
- an alternative reporting arrangement for the “res non-doms” which will be included in an Annex to the Agreement. This will be finalised to the same timetable as the agreement currently being negotiated with the US
- a disclosure facility, full details of which will be published shortly, which will allow investors with assets in Jersey to come forward and regularise their past tax affairs
In addition to this package, the UK have indicated that they are happy to consider a possible renegotiation of our current Double Taxation Agreement.
The package of measures will put beyond doubt Jersey’s ongoing commitment to the fight against tax evasion. We have also recognised the special relationship that we have with the UK. We will watch with interest the efforts being made by the UK to promote a new global standard based on FATCA. Should such a standard be adopted internationally, we will respond appropriately.
For our future as an international finance centre, it is important that the international community continues to recognise Jersey as a jurisdiction that has high levels of compliance. Increasingly, the best financial institutions and investors will only want to be associated with such a quality jurisdiction. By reaching agreement with the US and the UK on enhanced information exchange we are making an important contribution to the future success of Jersey as an international finance centre.
We intend to continue engaging positively with the UK and other countries in the pursuit of the global objectives for transparency and international cooperation. Studies commissioned from Capital Economics and McKinsey have both shown how we contribute to the UK economy and to world financial markets. Ministers are at present completing an update of the Island's financial services industry strategy. This strategy is designed to continue to ensure the industry innovates, prospers and continues to be regarded as one of the world's financial centres.
I have absolutely no doubt that, working together, we in government, the regulator and the finance industry will ensure the continuing success of Jersey to the benefit of all Island residents.