The critical question that Jersey Guernsey and the Isle of Man must answer

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Alastair Darling has announced his independent review of British offshore financial centres.

Over the last few weeks traffic on the site from Jersey, Guernsey and the Isle of Man has been very high. The message has been consistent. Those who support the financial services industry in these places say they are well regulated, transparent, fully cooperative and doing everything that is asked of them. They say there is absolutely no tax evaded money within them, and they do not want such business. They deny there is an offshore problem or that they have anything to do with creating problems for the developing world.

Yesterday the OECD firmly disagreed, even with regard to those locations that have signed Tax Information Exchange Agreements.

But to me there is just one question that really needs answering by these places, and it is this. If they are so adamant that they are committed to fully transparent and accountable financial services why do they steadfastly and persistently refuse to fully exchange information under the terms of the EU Savings Tax Directive, an option that is completely and openly available to them, but which they refuse to embrace?

There is only one possible explanation for their action, and that is the desire of Jersey, Guernsey and the Isle of Man to protect tax evaders using accounts in their domains from discovery by their domestic tax authorities. No other explanation is possible.

Now we know that the EU wishes to extend the Savings Tax Directive to all companies and all trusts, a matter on which I will write more next week after I have made a presentation to the EU Parliament on the issue. This measure is particularly targeted on offshore jurisdictions including Jersey, Guernsey and the Isle of Man.

These three jurisdictions (and others like them) have a choice if we are to believe that they are as transparent, accountable and clean as they claim. They can fully embrace the existing EU STD by committing themselves to full and open tax information exchange and we will call that a step in the right direction. They can then welcome the new STD with open arms, with its extended commitments to full information exchange and say that it will help them eliminate all tax evasion, and we will praise them.

But if they do neither we will know exactly where they stand. You can either be on the side of tax evaders on this issue, or on the side of upholding the rule of law in your neighbouring countries. There is no ambiguity. It is one or the other. Right now Jersey Guernsey and the Isle of Man are firmly positioned on the side of the evaders.

They have a choice. They can change their minds. But will they, and very soon? That is the question to which we need an answer. That is the question that this Commission must pursue. Without a positive answer no undertaking given by any of these jurisdictions has any meaning. I can be as blunt as that.