The Jersey Evening Post notes:
The latest statistics for the Island’s finance industry show a marked decline in both bank deposits and funds.
In the three months to 31 March, bank deposits fell by £10.1 billion to £195.9 billion. The net asset value of funds under administration decreased by £26 billion to £215.1 billion over the quarter and the total number of funds fell by 59. Company registrations were down by 24.4 per cent compared to the same period last year.
Jersey’s economic model is predicated on significant real growth to make its zero/10 tax model work. If it fails the black hole I have long predicted in its finances will become a reality.
The local goods and services tax will have to rise substantially. And even so I doubt its ability to make good the cost of providing zero tax to non-residents. Put simply, the model is broken.
Just as the many comments from people on this site saying business is booming in the place shown to be exactly what they are — untrue.
Michael Foot please note.
And this can only get much worse when the new European Union Savings Tax Directive comes into force, as it will.
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£200 billion in deposits another £200 billion in funds … and the EU Savings tax in Jersey was applied to far less than £10 billion.
Jersey must do 90% of its banking for those middle-east Sheiks that they setting up foundations for, or the other favourite excuse, that most clients have opted for voluntary exchange info (that one cracks me up) 😯
Let’s see how well the Channel Islands holds up when all those amateurish “tax planning” methods (sorry, “wealth planning”) are rendered ineffective by the revised EU Savings Tax directive.
Collective Investment Funds have driven Jersey’s growth for the last 5/6 years. You cannot expect growth of 40-50% a year to continue forever. But if you think taxation is the driver, you’re wrong.
Private client work is all res non-dom, Arabs and increasingly Indians.
Mark
You won’t be able to extrapolate a tax figure from what are effectively FUM figures. EUSD is only taken on income e.g. Interest. Most funds will be earning some form of capital gain like an equity fund for example. EUSD is also only payable on income earned by an individual, not a company nor most forms of Trust. This is the way it is applied by all countries under the EUSD.
Donkey
We know that
That’s precisely why I could and did extrapolate the figures here
http://www.taxresearch.org.uk/Blog/2009/03/02/tax-havens-cost-the-uk-at-least-4-billion-a-year-2/
Richard
PS Paul: we don’t believe you – and we have no reason to do so, because it’s so obviously untrue
I have the impression that all too many people are sleep-walking into the revised ESTD. Once they begin to wake up to the implications there will be a not inconsiderable amount of panic because the effects will be seismic for many. There may well be a rapid and massive bale-out from all the jurisdictions within the ambit of the Directive in favour of the likes of Hong Kong, Singapore and Dubai. With so much potential new business in prospect it must be doubtful that these places will submit to any strong-arm tactics by the EU to also implement the provisions.
Richard
You state that Paul’s comments are untrue. On what basis do you make that statement? His comments are totally accurate.
@Donkey
An apt user name if I ever saw. Don’t assume others on this board are also an ass.
Safely project one-third of deposits are ultimately for EU-residents (even if held via a Panamanian IBC). Assume one-eighth of funds generate interest for same. That’s some £80 billion. Yet Jersey applied savings tax withholdings on less than £5 billion…. 😯
Gee, I’m impressed you picked up that the EUSD is applicable only to individuals. Mmmh, maybe tax avoidance consultants worked overtime with amateur plans involving IBCs (the one method you noted), but also non-UCITS or “non-UCITS equivalent” from Caribbean,Discretionary Trusts & Foundations, Partnerships, Structured products, Cerificates of swaps, Static basket of bonds, artificial channelling of payments through Singapore, low risk insurance wrappers, capital redemption bonds, variable annuities and short-term reverse convertibles.
BTW, how much of the Swiss Fiduciary Deposits are ultimately for EU-residents (50%?). They too use the same avoidance techniques.
Unfortunately for those erudite fiduciaries reading this board, the jig is up. 😆
Paul,
Your comment “Private client work is all res non-dom, Arabs and increasingly Indians” is classic material for “a night at the apollo”.
Donkey,
Take the time to note that the revised EU Savings tax for structured products will specifically and categorically include to capital gains e.g. increase in value of options, or income from written calls. Effectively this will result in a 50% tax on capital protected structured notes.
So sad. There goes the neighbourhood. 🙁
Richard,
If you don’t think that CIFs have been the driver of growth over the last 5 years then look at the figures since the expert fund regime was launched in 2003. Each fund will generate significant annual fees for lawyers, custodians and administrators in Jersey, as well as Jersey directors and accountants.
An average legal start up fee of £50k and annual admin and custody of £50-100k each is not unusual. Each fund is likely to bring at least £250k into the Island’s economy every year. I can’t recall how many expert funds have been launched – its probably around 300, so that’s £75m minimum a year into the Island. And its not tax driven.
Just do the maths before saying what I claim is obviously untrue.
Rupert
Prove it
Put all the data, cards face up on the table
I seem to remember all you lot saying Jersey was booming only weeks ago
That’s now been proven to be utter rubbish
And candidly, I think your claims here are just the same
Richard
Paul
Please tell me why the funds business is not tax druiven
Detail please
Not your usual ‘because I said so’ stuff
Chapter and verse why it is not, remembering that tax is multi-jurisdictional
Richard
Richard
I think all CI financial services businesses saw a very quiet period in Q4 of 2008 and Q1 of 2009. But since G20 and Chancellor Darlings Budget in April everybody seems to be extremely busy, apart from those businesses who are heavily involved with real estate and whose transactional activity is very low indeed at the moment until the UK property market really turns. I hear that this is the main reason behind the redundancies announced by Ogiers. But US Dollar-denominated and Euro-denominated investors with equity are starting to pile into UK property as they can generate rental yields of around 7.5% from deals financed at around 4% per annum. Its a no-brainer and yes they are using Channel Islands fiduciary and fund structures. Believe me, it is starting to get very busy indeed and the prospects look very good for some time to come.
Many London law firms are making redundancies in the property and mergers and acquisitions sectors. That does not mean that the UK is finished as a jurisdiction. It simply means that law firms were over-staffed in a sector which is suffering an economic downturn. News of Jersey’s death is extremely premature.
You overlook some obvious factors when commenting on Jersey’s cash and funds statistics. Investors everywhere have abandoned cash in favour of corporate bonds primarily, so of course the cash deposits figure is down. Also, huge amounts of Jersey’s deposit base is held in Dollars and Euroa’ not just sterling, and currency volatility will have affected the sterling figure substantially. Re offshore funds, everybody knows that equity prices fell circa 40% since last year, property prices have also fallen substantially everywhere, and hedge funds and private equity funds have seen big falls in investment values and as Jersey funds invest enormously in these markets of course the value of all Jersey funds has fallen quite a bit. How could it be otherwise ?
None of these figures indicate the collapse of Jersey’s finance industry. They simply reflect the global state of financial markets in recent months. Your analyse of cause and effect is fundamentally flawed.
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