There’s a lovely page on the States of Jersey Treasury Department website that says with regard to its new law allowing the establishment of foundations:
Foundations (Jersey) Law 200-
Advice for Jersey residents considering registering a 'Foundation'
It is advisable that, if a Jersey resident is considering registering a Foundation or has any interest in a Foundation he or she should provide the Income Tax Office with full details as to the reason(s) for doing so and the purpose of the Foundation and seek pre-clearance from the Comptroller before going ahead.
Failure to do so will lead the Comptroller to take the view that creating a Foundation has as one of the purposes, or the main purpose, the avoidance of Jersey tax.
The Comptroller will counteract such avoidance under the provisions of Article 134A of the Income Tax (Jersey) Law 1961.
Comptroller of Taxes
12 December 2009
So now we have incontrovertible proof: Jersey has deliberately created a structure for the use of those not resident in its jurisdiction which it knows has the sole or main purpose of tax avoidance (at best) which they consider best tackled by use of a General Anti-Avoidance Principle (for that is what their section 134A is).
If you wanted proof that everything I and others have said here over many years is true — here it is.
This proves Jersey is, without doubt, a secrecy jurisdiction. Secrecy jurisdictions are places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain. That regulation is designed to undermine the legislation or regulation of another jurisdiction. To facilitate its use secrecy jurisdictions also create a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so.
How can any place claim to be internationally cooperative or compliant on tax when this is what they knowingly, deliberately and wilfully do?
Note the phrase 200- simply means the final date on which the law is to be approved by the UK’s Privy Council on behalf of the Queen has yet to be advised.
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So they take the view that the creation of a foundation by a local is deemed to be tax avoidance but that the creation of a foundation by a non-resident is deemed to be for “estate planning”?
This is hilarious! Can this be nominated for joke of the year so far?
I feel compelled to comment because I comment often enough to defend places like Jersey.
Well, nobody can defend this. I happen to disagree with the Comptroller – I think there are many legitimate uses of a foundation. But you cannot tolerate clear hypocrisy of this sort. If the Comptroller states publicly that it is Jersey policy that a foundation is prima facie a vehicle of tax avoidance then Jersey should not permit such vehicles. End of.
This requires a formal response.
Similar approach in Phil’s budget speech last month:
“A key part of the FSR is a review of business taxation. This was always
intended to be part of the Review but clearly recent events have increased our focus on this area. I am conscious that recent press speculation has created uncertainty in the finance industry and it is important that I respond to this.
First I want to clarify the following: –
ÔÇ? 0/10 has NOT been found to be non-compliant with the EU Code of
Conduct on Business Taxation;
ÔÇ? Secondly, I understand the fundamental importance of tax neutrality to
our Financial Services industry and the requirement that this be
maintained; and
ÔÇ? Thirdly, we have not agreed to move to a flat corporate tax rate of 10%.
However, we do understand that certain EU Member States have
questioned whether 0/10 could be interpreted as being outside the ‘spirit’of the Code.
The international tax world is changing. Jersey is already committed to the tax ‘norms’ of non-discrimination which is why we introduced 0/10.
However, we must be alert to this and understand the concerns that
have been raised.
The business tax review, which is an important part of our FSR, will
consider all options.
I repeat — nothing is ruled in and nothing is ruled out.
I will also consult widely on any proposed changes or alternatives to
0/10.
I recognise the importance of providing stability to the financial services industry and for that reason I want to say the following:
ÔÇ? We have already made some changes to our tax law to provide
certainty for funds — notably the tax exemption of collective investment
funds which is in accordance with international norms.
ÔÇ? I propose extending that further to securitisation vehicles — again
reflecting the treatment of such entities in other major jurisdictions.
ÔÇ? I will look for other precedents from established International and
European tax codes, not only to ensure compliance with international
standards, but also to ensure a level playing field for Jersey’s
businesses, trust and other structures.”
These are selling like hot cakes as well. Its great, we get more money coming in and it keeps my job going!
Matt, are you like that bloke from Lloyds, that BBC1’s Panorama highlighted as a basis of Jersey operations?
Oh dear.
Not at all. What Richard doesn’t like is that we are an independant Island that can introduce legislation when we like without hindrance. Thats no my problem its only his!
Matt
So you might think
But I assure you – I’m making very sure it’s your problem too
Maybe that’s why I’m on the way to the OECD right now
Richard
Matt
I’m not talking about ‘Richard’, I’m talking about the crass ignorance that you think is clever. It isn’t.
Come on Richard, go to the OECD, it won’t make a bling bit of difference.
What are they going to do, stop all countries supplying foundations?
Richard
Why do you allow the comments of “Matt” when he proudly peddles tax evasion products and an amoral outlook? Is it just to expose his ilk for what they are?
@James from Durham
For one reason – every time he writes he shoots himself in the foot
We’re told often these places are clean
He proves they are not
Sorry people but Foundations are not examples of tax evasion.
@Matt
They need not be
But the reality is they can be
And with secrecy no one will know which is which
The result is we quite rightly presume the worst because positive motives for foundations are very, very hard to find
Richard, our clients want confidentiality so you can accuse them of all sorts of illegal things but they have a right to privacy and besides we would not accomodate tax evasio and its as simple as that. Our licence makes us too much money so we don’t want any slip ups!
“The result is we quite rightly presume the worst because positive motives for foundations are very, very hard to find”
Go tell that to Bill Gates.
I will
I do have problems with his foundation – to which I understand he has not assigned the right to vote his shares
Was that a real gift to charity?
And I also have major problems with such foundations being sued to ‘capture’ match funding from government agencies, as he has done
This is not my idea of development
Let me start by saying that I don’t like trust jurisdictions introducing civil law vehicles such as foundations. Equally, I don’t like civil law jurisdictions introducing trust laws. Its a recipe for courtroom uncertainty. For that reason, I don’t think Jersey was wise to introduce foundations.
Having said that, there is one over-riding reason to use foundations, and that’s succession planning. As with a trust, its common to use foundations to achieve an orderly flow of wealth to the next generation, preventing for example irresponsible children from inheriting excessive wealth at a vulnerable age.
Yes, a trust can usually achieve the same thing, but many wealthy families live in countries where trusts are neither known nor recognised (most European countries, most South American countries, the Middle East etc) and, very simply, they are far more familiar with foundations to achieve their estate planning objectives. They could use Liechtenstein or Panama, for example, but prefer to use better-regulated jurisdictions such as Jersey. They could, ironically, use an onshore EU foundation in Holland, completely tax-free.
It is simply wrong to say that Jersey foundations are only used for tax evasion or other criminal purposes. It would be no more accurate to say that all trusts, companies and bank accounts are used for tax evasion. Some may well be, but the vast majority are not. Its just not logical or credible to conclude that all Jersey foundations are being used for illegal purposes.
Having defended that aspect of them, I still don’t like them being offered out of Jersey.
Rupert
Succession planning is usually tax avoidance
It also often abuses the laws of the place where the people involved are resident
It is not a ‘neutral activity’
And whilst you maintain secrecy I am quite entitled to assume nefarious activity. When there is opacity I will have to think otherwise
Sorry – but that is a logic you cannot defeat, and it is clearly based on truth
No one trusts a person who is seeking to subvert the law without their cards face up on the table
That is what Jersey permits. And it stinks
Richard
Yes it often involves tax avoidance, but of course that’s legal so not an issue.
You say foundations “often abuses the laws of the place where the people involved are resident”. Perhaps they could do, but equally they help wealthy families to ensure that foreign-situs assets actually pass to their heirs in accordance with the law of where they are resident, i.e. home forced heirship laws, rather than in accordance with the different succession laws where the assets are situated. This is important to many Muslims, as a very specific and very relevant example.
Nowhere in the world is as transparent as you would desire, so that comment of yours is taken as read as being your standard comment. But whilst I can’t defeat your claim, you cannot prove yours either. There are tens of thousands of UK-connected trusts administered in the Channel Islands and tens of thousands of such trusts which are fully UK tax-compliant. By your logic, even though though they are 100% tax-compliant, they must be all carrying out nefarious activity because you cannot see what they are are actually doing and who is behind them. Sorry but that’s nonsense.
I’m not trying to defend Jersey foundations – just trying to counter your claim that all of them are bound to be doing something illegal.
Richard,
While you state that Jersey “maintains secrecy” you do not provide any evidence to support the assertion. Jersey has banking confidentiality based on the principles set out in the chain of UK cases following Tournier: Jersey applies EXACTLY the same level of confidentiality to financial services as applies in the UK. Jersey has no statutes relating to banking secrecy or confidentiality. So if the UK changes its caselaw, Jersey will follow those developments.
Similarly, there is no evidence to support the claim that “succession planning usually is tax avoidance”. A significant volume of Jersey’s trusts ad foundations work – possibly the majority in my experience – relates to wealthy Arab families. There are no estate taxes in their jurisdictions. Typically, there is a family business and a large number of children, all of whom are different individuals with different skills. Usually the aim is to allow the family business to continue following the death of the patriach without dividing the family. But tax is not an issue at all.
@mad foetus
Please get real
Just go to secrecyjurisdictions.com for the evidence
We did the work to prove our case
You may have done the work to prove your case but you also chose the methodology you would use to capture the results.
In the end, I would prefer to trust the assessment of the OECD, or of the person appointed to provide an objective report to the UK government.
I would have thought that you could realise that it is not appropriate for the same body to be judge, jury and executioner. If you could find a body without affiliation to TJN that verified your methodology, it would give your judgment more weight.
@mad foetus
I’m sure you prefer the irrationality of the OECD grey list
Or the blatant bias of Michael Foot
But we offered open and transparent analysis, all data and cards on the table
They offered rhetoric
Now why not drop the rhetoric and deal with the facts
Did we get something wrong?
If so what?
Fair enough:
1. Does not provide banking secrecy;
phew – you got that right
2. Does not put details of trusts on public record;
NO JURISDICTION IN THE WORLD DOES
3. Does not comply sufficiently with international regulatory requirements
“SUFFICIENTLY” – according to you, no. According to the OECD, the IMF and the Foot Report, yes.
4. Does not require that company accounts be available on public record;
Public companies have to file accounts. Private companies have to file details of shareholders. But unless you transact with the company, why are the accounts of private companies relevant to anyone?
5. Does not require that beneficial ownership of companies is recorded on public record;
No, but the public authorities can access those details and frequently do.
6. Does not maintain company ownership details in official records;
No, but but the JFSC can access all of those records as every Jersey company must have a Jersey registered office that holds the KYC on the owners and the provider of that office is regulated and subject to criminal sanctions for breach.
7. Did respond to one of Tax Justice Network’s requests for information;
8. Does not participate in the European Union Savings Tax Directive;
YES IT DOES. It doesn’t write the EUSD, but it complies with what it is asked to do. If you think the EUSD shouldn’t allow a withholding tax option, then you should lobby the EU.
9. Has few tax information agreements;
Enough for the OECD.
10. Does not have adequate access to banking information;
“Adequate”? According to who? It has extended the UK Law on giving assistance to foreign courts to Jersey. So if you want any information in relation to a Jersey bank account, you have exactly the same right to get the same amount of information as you would have in the UK
11. Allows company redomiciliation;
That’s true, but its not clear why that is an issue. As long as the KYC is held in Jersey and available to the authorities, what is the issue?
12. Allows protected cell companies.
That’s true but again what’s the issue? They are used almost exclusively for collective investment funds. Is there ONE instance of a PCC being used to avoid/evade tax or launder money. Come on – just one instance?
So I factually disagree with your analysis but I also disagree with your methodology. It also ignores reports, such as that published by a left wing commentator in the Economist, that showed that it was harder to establish financial services business in Jersey that in the UK or US.
Had you chosen different questions you would have come up with a different result. Two obvious questions that you omit are:
Does the jurisdiction allow non-residents to establish a company other than through a regulated entity?
Does the jurisdiction permit unregulated persons to act as trustees for commercial purposes?
Because the regulation of company formation agents/corporate services providers and trust companies is the key to the whole of Jersey regulation. Many countries – the UK among them – have no control over the companies or trusts established there. In Jersey, the KYC in respect of all beneficial owners, settlors, beneficiaries, protectors etc is held on file and a sample of those files at each regulated entity is reviewed by the JFSC to make sure they are up to date.
So the upshot is that the UK gets 3 positive marks under your methodology because they do not allow company redomiciliation or PCCS and because they require annual accounts to be filed. And as we all know, for reasons you are always keen to point out, most annual accounts are invariably worthless anyway.
Yet there is no recognition of the fact that nobody knows who owns a UK company, whereas in Jersey it would be a criminal offence if that information was not held. That to me is a much more material difference and I think you would have to agree.
Those are the facts. If you choose the measures incorrectly you will get an incorrect result.