The Jersey Evening Post reported yesterday (sorry, no permalink and reproduced in the public interest as a result) that:

THE Treasury department has 18 months to find a way to tax non-resident companies, according to Scrutiny review chairman Senator Jim Perchard.

As things stand under the 'zero-ten' system, shareholders of Jersey firms will pay tax on company profit as if it was personal income, but non-resident shareholders of non-Jersey firms will pay no tax at all.

Senator Perchard said that would give 'foreign' firms an unfair advantage and was 'morally indefensible'.

He says that Treasury Minister Terry Le Sueur has to come up with a way to tax non-local firms, or Jersey-owned companies will just transfer ownership overseas and pay no tax at all.

Finance companies will pay a fixed ten per cent under the 'zero-ten' proposals, but Senator Perchard said that some of the revenue from non-finance firms was under threat, because they could shift ownership out of Jersey and pay nothing.

This is fascinating stuff. Firstly, Jersey thinks there's morality in taxation. Second they don't like ring fences that can be exploited at cost to Jersey. Third they don't like people going offshore to avoid (let alone evade) tax. .

I happen to agree on all these things. But given that Jersey has consistently denied there is any morality to tax, that ring fences are fine (the whole Jersey economy having been built on them) and that facilitating non payment of tax is the whole basis for structuring your financial services sector all this is a touch ironic.

The reality is that the clock is ticking for Jersey. They know they're going bust within a few years because they have no clue how to fix their upcoming tax gap. So now they are panicking, And they can see that the writing is on the wall ethically and financially for their tax haven. It's only time before the financial services industry begins to leave the sinking ship.