Jersey really is a great place. It’s been a pleasure to be here — and I’m not expecting to change my mind after a meeting with local politicians this morning.
Last evening I spoke at a meeting in St Helier, talking, seemingly to the audience’s pleasure for 30 minutes and taking questions for more than 75 minutes after that, the while thing only slightly delayed by local television interviews.
I was honest — as I predicted I said Jersey is in a mess. I’ll publish the text of my talk later — simply because I forgot to bring the final electronic version with me. But what was interesting to me were the questions; questions that revealed deep concerns for this island, its people, its future and for social justice here and elsewhere.
Much of what I said has been published before, and I won’t repeat it. But I also dealt with independence — which I think would be a disaster for this island which is going to need all the friends it can get over the years to come: the problems that finance leaving here will cause — as will happen, and how the States needs to ensure that people are protected from the negative equity in housing that will follow, forcing banks to take this risk: and the fact that replacing zero / ten is going to be harder than local politicians in the ruling party seem to think or at least say.
This last point is crucial. This time, as I pointed out, they need to have the courage to not adopt a solution “Made in Douglas, Isle of Man”, not least because the VAT sharing agreement that let the Isle of Man propose zero /ten in 2000 has now been holed below the waterline.
And they can’t easily adopt territorial taxation because they know this will require their tax authority to ask where a Jersey company actually is — and prove it. This is something they have always refused to do to date — simply saying '”it’s not here — it’s elsewhere” and so have turned a blind eye to its activity and the possibility it might not be “elsewhere” but actually “nowhere”. Under territorial tax this deliberate turning of the blind eye could not happen. In that case the local tax authority here would have data to say where Jersey companies really were — data they could then be required to information exchange, and that would, of course, open up all sorts of unattractive possibilities for those using Jersey.
But those risks already exist. As I also pointed out, the one thing people in tax say they want is certainty. But Jersey’s politicians have made it clear that they will hang on to zero / ten like dying people clinging to the ropes of the lifeboat. Or in this case, they will hope against hope that the EU might decide that tax haven abuse in personal tax law is still abuse but legal when the identical abuse is unacceptable in business tax law. In the meantime though they will be in constant battle with the UK, who is duty bound to demand reform, and this will for some time to come remove all certainty from the Jersey tax system — which will hang in limbo for years potentially whilst a decision is made at the extraordinarily slow pace that typifies Brussels. And throughout that time no one will bring business to Jersey when thy have no idea what the future holds. The indecision on tax of local politicians will kill finance whatever the outcome in other words.
Or as I put it, in that case what have they got to lose by looking at my Plan B?
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Richard
You seem to be using a different definition of “territorial”. The residency status of a company will be irrelevant. The only question will be whether or not it has income or profits of a Jersey source. That’s a “yes or no” test. No Jersey-source income or profits – no tax. Jersey-source income or profits – subject to Jersey tax. That’s how a territorial tax system operates (see Singapore, Hong Kong, the UK’s new CFC provisions and I think possibly Gibraltar’s new tax regime).
My understanding is that all Jersey-connected companies would have to file an annual tax return to state their level of Jersey-source income or profits, even if a “nil” return.
I’m intrigued to find out what definition you might be using.
How many turned up in Jersey last night (excluding members of the media)?
@Rupert
I guess about 100 came
And yes, I’m using your definition of territorial
Where did you earn your income? That’s the question. You can’t so “not here” without saying where
And that means the data will be on file
Remember – these companies file no return at all now – and that’s not chance. That’s deliberate to make sure Jersey does not know
A Hong Kong tax return does not require you to identify the territory in whcih profits arose. It is simply not a requirement
I think your PLAN B for Jersey is so unrealistic and such a big a tangent from all its competitors its leaning towards stupid. I work in the industry and clients do not want their financial affairs made public and its got nothing to do with tax. The situation is fine as it is. The JFSC knows who is here and who is doing business and should there be a problem be it tax evasion of money laundering then the procedures for dealing with it are there in law. Confidentiality does not mean fraud Richard and in anycase, no family trust in the world is publically viewable.
Richard
Richard
I disagree. You can easily say “not here” without stating where from. It would be a criminal offence not to declare it. If it was “here” then by definition the income would have been paid by another Jersey business or Jersey person so its easily verified and will be picked up from that source if not declared by the recipient. Jersey has no reason to know where the income has been derived from outside of Jersey as it will have no tax jurisdiction over such non-Jersey income. Territorial systems elsewhere do not require evidence of where the income has been derived from – merely that its “not there”.
Incidentally, were you aware that Gibraltar, seemingly with EU approval, has abolished tax on savings income as part of its territorial regime, obviously for both residents and non-residents of Gibraltar?
@Richard Murphy
I think you may be underestinating the Government in both Jersey and the IOM.
It is quite possible that a tax return will include a “not here” tick box.
They already do it with 0/10 whereby you tick “non-resident” and no further questions are asked.
My guess is we’ll replace 0/10 with territorial tax. Will it be found to be harmful in 5 years time…..sure it will.
Will the Government care…..of course not, they’ll blame The EU & The UK move on to the next great idea.
@Richard Murphy
Although a guest on a charming island presided over by an equally enticing government you appear to have maintained your unbiased composure and remained steadfast in opinion.
As Marcus Aurelius observed (Book 1 – Debts and Lessons – Gregory Hays) …
“To recognise the malice, cunning and hypocrisy that power produces and the peculiar ruthlessness often shown by people from (seemingly) good families”.
@PJM
Ah, so there will be perpetuation of a tax haven by deliberately ignoring illegality at cost to local taxpayers
Silly me for not realising that this could be the solution to the problem
Me thinks the EU might not be amused – but thanks for warning me
The point is that other jurisdictions operating a territorial tax system do not require you to identify where precisely profits accrue, if not in those jurisdictions.
If it is good enough for Hong Kong, it is good enough for the Crown Dependencies
@Jamie
Well, what a surprise – you think that what’s going on now is just fine
But Jersey has a £100 m deficit
And an illegal tax system
And a finance industry in the doldrums
As is the Jersey economy as a whole
And there is no plan from anyone (bar me) to get out of this mess
But it’s all fine
When are you getting your head out of the sand?
Our government won’t care if the EU’s amused or not.
Short term policies will be the way forward unless the UK decide to get really tough but I don’t see that happening.
This government can’t plan the building of a mini roundabout, what chance do they have in planning a future stable and acceptable tax framework.
We can only pray the upcoming election introduces real talent into the government but unfortunately apathy will probably ensure more of the same.
Whilst the regulation of financial products based on the Isle of Man, Jersey and Guernsey remains hopelessly inadequate the head of the Financial Services Authority (FSA) has called for a “radical rethink” of consumer protection in the UK, including the possible imposition of fee caps and bans on some retail financial products.
The FSA has historically adopted a “light touch” approach for the regulation of financial products, emphasising full disclosure, but the financial crisis and a series of mis-selling scandals have forced politicians and regulators to reconsider.
“The way we do things now is not good,” Lord Turner, FSA chairman, told the Financial Times as the regulator prepared to issue a formal discussion paper on consumer protection. “We may have to put what is expected into rules to make it easier for us to say what is not [acceptable].”
French regulators recently announced plans to put written warnings on products they consider too complex for retail investors. In the UK, regulators have already begun shifting to “more intrusive” supervision of financial products. The FSA now asks more questions when companies record large gross margins on the sale of a particular product, and is also increasing scrutiny of bundled products and sales of related-party investment products by financial advisers.
WARNING: Only invest/deposit your money in a well regulated environment.
This does NOT include off shore tax shelters!
@Gutbucket
No
This has to pass the EU
And that’s something quite different
And don’t think we won’t be lobbying them
Because we will be
Well, it seems like you want a basic premise of all other territorial tax systems to be denied to the Crown Dependencies, which makes your true agenda rather obvious. It will be easy enough for Jersey companies to tick a Guernsey box, or vice versa, so off you go
Richard, the £100 Million deficit has been created by an inflationary over paid Civil Service and the Finance industry is not in the doldrums in fact far from it because I work in it and I am taking in new business as we speak. So where you get this nonsense from half the time I really don’t know but I can see now why many people in Jersey practically ignore your opinions these days. They are simply not accurate and sensational at the best of times.
@Gutbucket
Good to see the promulgation of abuse is alive and well
@Jamie
So you are quite independent of the fact that the government is going bust and has an urgent need to raise revenue?
Of course you aren’t
The only people who look stupid here are those who have got it persistently wrong – not the likes of me who has been persistently right