Memorandum from Jersey Finance Limited
INTRODUCTION
1. Jersey Finance is a non-profit making
organisation jointly funded by Jersey's finance industry and the
States of Jersey whose role is to represent Jersey's finance industry
around the world and to promote the Island as an International
Finance Centre.[251]
JERSEY'S
ROLE AS
AN INTERNATIONAL
FINANCIAL CENTRE
2. Jersey is a leading international finance
centre which started as a provider of financial services for non-residents
almost fifty years ago. During this period the Island has developed
into a global leader in the provision of financial services and
more recently has extended its professional expertise beyond the
servicing of individual clients. A gradual specialisation in large-scale
institutional client business, servicing the equity and debt financial
markets in a number of other countries, has been successful due
to the island's acknowledgement that legislative transparency,
appropriate regulation, service innovation and stability is fundamental
to supporting financial services.
3. The services provided are complementary
to those provided by the City of London with which Island-based
financial institutions and professionals work extremely closely.
These services are no different from those performed in London,
New York, Tokyo or Frankfurt and play an important role in facilitating
international investment.
4. The main areas of business now undertaken
in Jersey include:
— international banking services;
— global custody and security services;
— mutual fund management and administration;
— trustee services and company administration;
— investment management and advice;
— bond note and other structured debt
issuance;
— insurance and re-insurance;
— pensions and employee benefits; and
— accountancy and legal services.
5. The States of Jersey's determination
to attract high quality business to the Island, and the support
offered by the sophisticated and comprehensive infrastructure
of laws and regulations, combine to promote investor confidence.
Jersey is perceived as a top-tier international financial centre
due to its strong expertise and history as a well-regulated and
transparent financial jurisdiction[252]
with a recent study on behalf of the City of London[253]
ranking Jersey in the top twenty financial centres globally. The
Island has never seen the need to enact bank secrecy legislation
as other countries have done, and has applied the normal rules
of client confidentiality that apply in common law jurisdictions,
including the UK.
EXECUTIVE SUMMARY
6. There is no theoretical or practical
evidence to suggest that Offshore Financial Centres (OFCs) threaten
financial stability.
7. Jersey meets or exceeds all of the relevant
international financial standards for financial stability and
transparency expected from the world's leading financial centres.
8. International finance cannot be divided
meaningfully into offshore and onshore because of the volume of
foreign financial capital managed and fiscal regimes offered by
the world's centres whether islands or mainland states. The nature
of the financial services business undertaken in Jersey, and many
other financial centres both onshore and offshore, is, in certain
respects, broadly similar and many of the world's largest onshore
financial centres such as the City of London, Ireland and in Switzerland
are located in jurisdictions which offer low tax regimes to non-residents.
"Dividing the world into onshore and offshore financial centres
is difficult because "it is a matter of degree, not substance,"
to quote one European bank regulator".[254]
9. Regulatory and legal frameworks vary
widely from country to country, and only some financial centres
enact banking secrecy laws (Jersey does not). Therefore it is
more appropriate to distinguish between well regulated and poorly
regulated financial centres rather than between offshore and onshore
financial centres. Well-regulated centres co-operate with foreign
tax and other authorities and have sound, transparent supervisory
controls which still manage to confer appropriate client privacy.
Poorly regulated ones hide behind secrecy laws to avoid co-operation
with legitimate investigative approaches from foreign authorities.
10. In many cases OFCs have implemented
stricter regulatory controls than onshore centres since transparency
plays an important role in the way in which OFCs differentiate
themselves and attract capital from worldwide investors. A recent
IMF study found that, on average, supervisory standards in OFCs
were "superior to those of other jurisdictions".[255]
11. OFCs act as a conduit helping in the
flow of global capital world-wide. There is also evidence that
OFCs provide further benefits to worldwide financial markets by
increasing economic activity and the competitiveness and efficiency
of the banking system in nearby jurisdictions.[256]
12. Jersey has been consistently recognised
as a mature and well regulated jurisdiction by respected international
bodies including the IMF and the Financial Stability Forum and
the UK Home Office who carried out an extensive analysis of the
British Crown Dependencies in 1999. The most recent assessment
by the IMF concluded that the Island's ability to comply with
global standards was high.
13. Whilst Jersey adheres firmly to the
principles of confidentiality for legitimate investors, Jersey
has never had banking secrecy laws. Jersey has implemented measures
to ensure that it can co-operate when investigations are underway
into criminal and fraudulent use of the global financial services
system. This system has proven practical and effective in dealing
with legitimate information requests in the past.
14. Jersey has legislation in place which
complies with anti-money laundering and counter terrorist financing
standards consistent with other leading financial centres.
ANSWERS TO
SPECIFIC QUESTIONS
To what extent, and why, are Offshore Financial
Centres important to worldwide financial markets?
15. OFCs are specialist financial centres
which have developed considerable professional expertise in financial
services and frequently act as conduits in helping the flow of
global capital world-wide. For example, a high proportion of the
capital that reaches the City of London, the world's largest financial
centre, through the money markets and the major financial institutions,
does so via an offshore jurisdiction such as Jersey. Such funds
are borrowed for trading purposes, generating profits which are
then taxed domestically in the UK. Much of this inward investment
might not reach the UK but for the partnership relationship that
has been forged between finance professionals in the City and
those in Jersey.
16. Funds that have been directed through
Jersey or other OFCs into an onshore jurisdiction are also frequently
borrowed by governments and multinational businesses to finance
projects, many of which are in developing countries and are supporting
their growth and infrastructure.
17. There is evidence to suggest that OFCs
complement onshore jurisdictions. Research by economists from
Harvard Business School and the University of Michigan found that
the presence of OFCs increased economic activity in nearby onshore
jurisdictions rather than diverting it.[257]
A further paper which studied the banking sectors of 221 countries
and territories found that the nearer a country was to an offshore
jurisdiction, the more competitive and efficient its banking system
appeared to be.[258]
To what extent does the use of Offshore Financial
Centres threaten financial stability?
18. Financial stability is most threatened
by liquidity shortages, negative investor sentiment, political
instability and poor financial regulation/application of law.
There is no evidence to suggest that the existence of OFCs threatens
financial stability. Recent events have shown the importance of
liquidity in markets and the capital from financial centres such
as Jersey is used by neighbouring onshore finance centres and
assists the flow of liquidity around the world. Jersey is making
a positive contribution to many of the major world economies through
its role as a leading offshore partner to the major financial
centres.
19. Jersey has been recognised for the quality
of its regulatory controls and its financial regulator, the Jersey
Financial Services Commission, has strict supervisory controls.
The most recent assessment by the IMF[259]
concluded that the Island's ability to comply with global standards
was high. The British Crown Dependencies including Jersey are
described by the IMF as 100% compliant or largely compliant in
their supervisory capabilities for anti money laundering regulations,
97% compliant in banking, 96% observed or largely observed in
insurance and 89% implemented and broadly implemented[260]
in securities business, consistently ahead of the progress of
other similar jurisdictions overseas.
How transparent are Offshore Financial Centres
and the transactions that pass through them to the United Kingdom's
tax authorities and financial regulators?
20. As discussed above, we make the distinction
between well-regulated centres, both onshore and offshore, which
co-operate with foreign tax and other authorities and have sound
supervisory controls and poorly regulated centres which hide behind
secrecy laws. In many cases OFCs have implemented stricter regulatory
controls than onshore centres since transparency plays a more
important role in the way in which OFCs differentiate themselves
and attract capital from worldwide investors. In a recent study
the IMF found that, on average, supervisory standards in OFCs
were "superior to those of other jurisdictions".[261]
Furthermore, a study undertaken for the Commonwealth Secretariat
in 2007[262]
found that the legal and administrative frameworks available for
tax information exchange in OECD countries are not superior to
those in OFCs.
21. The recent independent study by London
Business School into Jersey[263]
found that amongst finance industry professionals from around
the world the transparency and stability of the regulatory platform
were two of Jersey's perceived strengths.
22. Jersey has never had banking secrecy
laws such as those which restrict meaningful access to the beneficiaries
of trusts and funds registered in the jurisdiction. The rules
that Jersey applies to protect the confidentiality of client affairs
are similar to those applied in many onshore centres where respect
of a client's privacy is naturally of importance and information
remains private under legitimate circumstances. However, Jersey
has shown its willingness to co-operate with international measures
designed to facilitate transparency and is fully committed to
the principles of transparency and information exchange promoted
by international bodies such as the Organisation for Economic
Co-operation and Development ("OECD"), Financial Action
Task Force ("FATF") and International Organisation of
Securities Commissions ("IOSCO"). Indeed the Secretary
General of the OECD praised Jersey for its efforts in this regard
in a recent article in the Financial Times.[264]
23. A double tax arrangement (`DTA') has
existed between Jersey and the UK since 1952. This DTA contains
a provision under which the tax authorities of the UK and Jersey
may exchange information in order to prevent fraud or assist in
the administration of statutory domestic tax provisions against
legal avoidance of income tax.
24. Jersey entered into the Criminal Justice
(International Co-operation) (Jersey) Law 2001 which is a gateway
through which information can be passed to other jurisdictions
in the event of fraud including fiscal fraud.
25. Jersey is one of 35 jurisdictions that
have made commitments to transparency and effective exchange of
information and are considered co-operative jurisdictions by the
OECD's Committee on Fiscal Affairs (see Appendix 3).These "participating
partners" work together under the auspices of the OECD's
Global Forum on Taxation to develop high international standards
for transparency and effective exchange of information in tax
matters. Furthermore, in his testimony before the Senate Finance
Committee on Offshore Tax Evasion,[265]
Jeffrey Owen, Director of the OECD's Centre for Tax Policy and
Administration, singled out Jersey and Guernsey as examples of
jurisdictions that have implemented high standards of transparency.
26. The Island has endorsed the concept
of the Tax Information Exchange Agreement, a series of agreements
between countries designed to facilitate information exchange
in appropriate circumstances. However in doing so, Jersey acknowledges
that a series of tax agreements between nations will only work
successfully if the concept is embraced and implemented wholeheartedly
by all competitor jurisdictions, not only those located offshore,
but also in many financial centres such as Switzerland, Hong Kong
Singapore, Luxembourg and Austria. At present, there is a need
to bring pressure to bear on other financial centres to comply.
27. Jersey's financial regulator has also
signed memoranda of understanding or statements of co-operation
with fellow regulators in 31 territories including with the United
Kingdom's Financial Services Authority. This sets out the process
by which the Jersey authorities work with the regulator in the
UK when investigations are underway.
To what extent does the growth in complex financial
instruments rely on Offshore Financial Centres?
28. The growth in complex financial instruments
has been driven by innovations in large international financial
centres such as New York and London. Where financial centres like
Jersey have been involved in the use or development of complex
financial instruments it has been to implement, administer and
refine the structures necessary to support the concepts created
elsewhere.
How important have the levels of transparency
and taxation in Offshore Financial Centres been in explaining
their current position in worldwide financial markets?
29. If international competition amongst
OFCs were confined to fiscal incentives then the jurisdictions
with the lowest taxes would lead—this is not the current
position. Competition is also driven by the clarity and simplicity
of underlying laws, including framework, fiscal and regulatory
aspects. Jersey has focused and clear laws which create greater
certainty for users.
30. Transparency is important to any jurisdiction
in terms of providing comfort to investors about clear, functional
and appropriate regulation. Knowledge of a regulator's processes
and robust practices attracts capital.
31. While the fiscal regimes of OFCs have
certainly had a role to play in the early development and growth
of these jurisdictions, including the jurisdiction of Jersey,
there are many other factors that play an equally important role
in attracting funds from international investors. Business is
attracted to Jersey for the following reasons:
— stability—political, economic
and fiscal;
— respectability—selection of
business, institutions of stature, comprehensive and up-to-date
legislative framework, international regulatory standards;
— security—secure relationships
with the UK and EU, confidentiality for legitimate business through
customary law;
— fiscal—general prevailing income
tax rate of 0% for resident and non-resident companies with individual
Jersey residents individual tax residents in Jersey taxed at 20%,
no capital, transfer or inheritance taxes;
— flexibility—speed of response
to market needs, government/industry "partnership",
approachability of government; and
— quality—quality of service
reflecting skills/experience of the workforce, the judicial system,
high standard of international communication links, proximity
to the City of London and other European finance centres.
32. Client confidentiality is essential
to any financial centre and it will certainly play a role in attracting
investment to financial centres, both onshore and offshore. Jersey,
like other financial centres, adheres to strong principles of
client confidentiality and the privacy of each person's financial
affairs. However, Jersey is fully committed to the principles
of transparency promoted by international bodies and has implemented
measures to ensure that it can co-operate when investigations
are underway into criminal and fraudulent use of the global financial
services system.
How do the taxation policies of Offshore Financial
Centres impact on UK tax revenue and policy?
33. Jersey has for many years operated an
effective tax rate of 0% for international businesses providing
our customers with fiscal neutrality and certainty. Jersey does
not seek to tax non-residents as they are not reliant on the public
services paid for by tax revenues raised by the States of Jersey
and therefore it would be morally unethical to do so.
34. Jersey has recently amended its fiscal
policies in order to comply with the principles of "roll-back"
and "stand-still" as required under the EU Code of Conduct
on Business Taxation, notwithstanding that the Island is not part
of the EU and is therefore unable to a large extent to benefit
from a single market. During the process of change, Jersey worked
closely with the UK Treasury to ensure that its future fiscal
policies adhered to all the principals of the Code. We would therefore
expect that HM Treasury are conversant with Jersey tax policies
and are comfortable that they do not pose an undue burden upon
UK tax revenue.
Are British Overseas Territories and Crown Dependencies
well-regarded as Offshore Financial Centres, both in comparison
to their peers and international standards?
35. Jersey has been consistently recognised
as a mature and well regulated jurisdiction by respected international
bodies including the IMF and the Financial Stability Forum ("FSF")
as well as the UK Home Office who carried out an extensive analysis
of the British Crown Dependencies in 1999. As referenced above,
a recent report prepared on behalf of the City of London ranked
Jersey comfortably within the top twenty financial centres globally.[266]
36. The IMF visited Jersey in 2003 and concluded
that "the financial regulatory and supervisory system of
Jersey complies well with international standards".[267]
The Island's regulator was commended for its efforts in upgrading
standards for banking, insurance, securities and anti money laundering
and combating the financing of terrorism. There is an ongoing
process of scrutiny with which Jersey is happy to co-operate.
For example, the IMF is scheduled to return to assess the Island's
regulatory capabilities again later this year.
37. The Foreign and Commonwealth office
in its report "Managing Risk in the Overseas Territories"
published last year,[268]
acknowledged that the British Crown Dependencies, which include
Jersey, had introduced measures which meant they had reached the
status of "zero non compliance" with international standards.
38. Furthermore, the recent study by London
Business School[269]
into Jersey conducted extensive research amongst professionals
from a range of backgrounds and concluded that "Jersey is
regarded as one of the best players amongst offshore jurisdictions
due to its well regulated environment and history in Europe".
To what extent have Offshore Financial Centres
ensured that they cannot be used in terrorist financing?
39. The Financial Action Task Force (FATF),
an inter governmental body whose purpose is the development and
promotion of national and international policies to combat money
laundering and terrorist financing, drew up a new international
standard in the wake of the terrorist attacks of 11 September
2001 to address money laundering and terrorist financing.
40. In Jersey, legislation is in place which
complies with these international regulatory and anti-money laundering
and counter terrorist financing standards and this is periodically
reviewed by the IMF. The most recent review was in 2003 when the
IMF concluded that "the financial regulatory and supervisory
system of Jersey complies well with international standards".[270]
41. The Terrorism (Jersey) Law 2002 came
into effect in September 2003 and updates to tighten the rules
have followed. These and other regulations introduced this year,
place Jersey on a par with leading financial centres such as London.
42. Jersey has been recognised in its efforts
by the FATF. Jersey is not a member of FATF but through its representation
on the Offshore Group of Banking Supervisors (OGBS) actively engages
with FATF both in terms of policy formation and in the evaluation
of anti money laundering standards.
43. Jersey's joint Financial Crimes Unit
is a member of the Egmont Group, the international affiliation
of Financial Intelligence Units established to combat the threat
of money laundering. Countries have to go through a formal process
in order to be recognised on this international body.
44. Jersey was also one of the first jurisdictions
to regulate its trust and company service providers to ensure
they are fit and proper for their roles. The Society of Trust
and Estate Practitioners (STEP) believes this is an important
part of the debate over money-laundering regulation. If practitioners
are competent they will more easily identify suspicious transactions
and they will be better equipped to encourage high standard good
practice. In contrast trust and company service providers are
currently not regulated in the UK.
What are the implications for the policies of
HM Treasury arising from Offshore Financial Centres?
45. Jersey offers, inter alia, a
tax neutral platform through which business may be conducted.
As detailed in above, Jersey has only one main double tax arrangement
(DTA) and that is of limited scope. It therefore does not offer
any form of DTA shopping. Jersey has also undergone a major change
to its fiscal policies in order to comply with the principles
of "roll-back" and "stand-still" as required
under the EU Code of Conduct on Business Taxation, notwithstanding
that the Island is not part of the EU and is therefore unable
to a large extent benefit from a single market. During the process
of change, Jersey worked closely with the UK Treasury to ensure
that its future fiscal policies adhered to all the principles
of the Code.
46. Although Jersey was a major recipient
of business that took advantage of the low value consignment relief
for VAT purposes, the Island subsequently revised its policies
to discourage businesses setting up in the Island to take advantage
of this relief, thus ensuring that HM Treasury did not need to
take any formal counter-preventative measures against the Island.
What has been and is the extent and effect of
double taxation treaty abuse within Offshore Financial Centres?
47. Jersey has two double tax treaties:
one with Guernsey the other with the UK; and a very limited treaty
with France in relation to shipping and transport.
48. The UK treaty was signed in 1951 and
is limited in its operation. In particular, there are no provisions
relating to income from immoveable property, dividends, interest,
royalties or capital gains. Furthermore, there are no tiebreaker,
discrimination, or pension clauses.
49. Due to the limited nature of the treaty,
there is little scope for wide spread double tax arrangement abuse.
It should further be noted that Jersey was not a jurisdiction
to locate offshore trading partnerships which was subject to a
clamp down in this year's UK Finance Bill. We do not believe that
the treaty is abused otherwise it is likely that HMT and HMRC
would have sought to materially renegotiate it since its introduction.
To what extent do Offshore Financial Centres investigate
businesses and individuals that appear to be evading UK taxation?
50. As discussed above, we make the distinction
between well-regulated centres, both onshore and offshore, which
co-operate with foreign tax and other authorities and have sound
supervisory controls and poorly regulated centres which use banking
secrecy laws to restrict legitimate enquiries. As a well-regulated
centre, Jersey has measures in place to co-operate with investigations
into cases of alleged tax evasion and has assisted with many overseas
prosecutions.
51. The judicial authorities from overseas
Governments can also seek assistance where a tax fraud has been
perpetrated, taking advantage of the provisions of the Island's
Investigation of Fraud Law, which allows for assistance including
exchange of information in cases of serious or complex fraud including
tax fraud. In 2007, Jersey's Attorney General dealt with some
30 requests.
52. Similarly, the Criminal Justice (International
Co-operation) (Jersey) Law allows the Jersey authorities to assist
when criminal investigations are underway in other jurisdictions
including the UK. The scope of the Law covers tax evasion and
other fiscal crimes.
19 June 2008
APPENDICES
APPENDIX 1
TERMINOLOGY
EU Code of Conduct on Business Taxation
| The Code of Conduct requires Member States to refrain from introducing any new harmful tax measures ("standstill") and amend any laws or practices that are deemed to be harmful in respect of the principles of the Code ("rollback"). The code covers tax measures (legislative, regulatory and administrative) which have, or may have, a significant impact on the location of business in the Union. More details can be found here.
|
FATF | Financial Action Task Force: An inter-governmental body whose purpose is the development and promotion of national and international policies to combat money laundering and terrorist financing.
|
FSF | Financial Stability Forum: Brings together senior representatives of national financial authorities, international financial institutions, international regulatory and supervisory groupings, committees of central bank experts and the European Central Bank to promote international financial stability through information exchange and international co-operation.
|
IMF | International Monetary Fund
|
OECD | Organisation for Economic Co-operation and Development
|
OGBS | Offshore Group of Banking Supervisors
|
Privacy | Information remains private under legitimate circumstances
|
Secrecy law | Legal principle under which institutions are allowed to protect personal information about their customers
|
STEP | Society of Trust and Estate Practitioners
|
Tax neutrality | A tax system which does not impose an additional liability over and above existing tax obligations on the investor.
|
| |
APPENDIX 2
INFORMATION ON TYPES OF BUSINESS DONE IN JERSEY AND THEIR
SCALE
— Jersey has 48 banks drawn from the 500 leading
banks in the world, 1311 investment funds and 187 trust company
businesses as at 31 December 2007.
— Bank deposits: GBP212.3 billion as at 31 December
2007.
— Net Asset Value of funds under administration:
GBP246.1 billion, as at 31 December 2007.
— The total value of funds under Investment Management:
GBP78.8 billion, as at 31 December 2007.
— Financial sector accounts for over half of all
tax revenues.
— Jersey has more than 13,000 people employed in
the finance sector.
JERSEY FUNDS ASSOCIATION—STATISTICS, PUBLISHED JUNE
2008
| Classification by Fund Type | Number of
Funds
| Number of
Separate Pools | NAV
£ Millions
|
Collective Investment Funds |
| | |
Closed-ended | 499
| 599 | 87,507 |
| Open-ended | 640 | 2,225
| 144,177 |
| | |
|
| Collective Investment Funds Sub-Total |
1,139 | 2,824 | 231,684
|
| | |
|
COBO Funds |
| | |
Closed-ended | 187
| 192 | 9,823 |
| Open-ended | 44 | 60
| 4,535 |
| | |
|
| COBO Funds Sub-Total | 231
| 252 | 14,358 |
| | |
|
| Total | 1,370 | *3,076
| 246,042 |
| | |
|
| |
| |
APPENDIX 3
INTRODUCTION TO JERSEY FINANCE
Formed in 2001, Jersey Finance is a non-profit making organisation
jointly funded by Jersey's finance industry and the States of
Jersey. Jersey Finance's role is to represent Jersey's finance
industry around the world and to promote the Island as an International
Finance Centre. It acts as a central communications point, offering
journalists and anyone connected with the Finance Industry, both
locally and internationally, with up-to-the minute information
on issues affecting Jersey's Finance Industry.
Jersey Finance is the gateway for the Industry, Government
and the Financial Services Commission in the handling of all technical
matters. Through its technical division, Jersey Finance co-ordinates
the consultation process and review by the Industry of proposed
legislation and regulation. The trade associations continue to
play a key role in the process. The organisation also performs
a role in market intelligence and feedback on the changing requirements
of the world's financial centres.
APPENDIX 4
LIST OF OECD "PARTICIPATING PARTNERS"
35 JURISDICTIONS COMMITTED
TO IMPROVING
TRANSPARENCY AND
ESTABLISHING EFFECTIVE
EXCHANGE OF
INFORMATION IN
TAX MATTERS
THE 35 COMMITTED
JURISDICTIONS ARE:
| ANGUILLA(1)
| COOK ISLANDS(3)
| MALTA |
SAN MARINO
|
ANTIGUA AND BARBUDA
| CYPRUS |
MARSHALL ISLANDS
| SEYCHELLES
|
| ARUBA(2) |
DOMINICA | MAURITIUS
| ST. LUCIA
|
BAHAMAS
| GIBRALTAR(1)
| MONTSERRAT(1)
| ST. KITTS & NEVIS
|
BAHRAIN
| GRENADA |
NAURU | ST. VINCENT AND THE GRENADINES
|
BERMUDA(1)
| GUERNSEY(4)
| NETHERLANDS ANTILLES(2)
| TURKS & CAICOS ISLANDS(1)
|
BELIZE
| ISLE OF MAN(4)
| NIUE(3) |
US VIRGIN ISLANDS(5)
|
BRITISH VIRGIN ISLANDS(1)
| JERSEY(4) |
PANAMA (SPANISH), (ENGLISH)
| VANUATU |
CAYMAN ISLANDS(1)
| LIBERIA |
SAMOA |
|
LETTER FROM THE OECD'S SECRETARY GENERAL, DONALD J. JOHNSTON, TO THE MINISTER OF FINANCE OF ARUBA, DR. ROBERTICO R. CROES.
| | | |
1. OVERSEAS TERRITORY OF THE UNITED KINGDOM.
| | | |
| 2. ARUBA, THE NETHERLANDS ANTILLES AND THE NETHERLANDS ARE THE THREE COUNTRIES OF THE KINGDOM OF THE NETHERLANDS.
| | | |
3. FULLY SELF-GOVERNING COUNTRY IN FREE ASSOCIATION WITH NEW ZEALAND.
| | | |
| 4. DEPENDENCY OF THE BRITISH CROWN.
| | | |
5. EXTERNAL TERRITORY OF THE UNITED STATES.
| | | |
| |
| |
APPENDIX 5
THE GLOBAL FINANCIAL CENTRES INDEX RATINGS
Table 2 | Financial Centre
| GFCI 3 Rank | Change in Rank
| GFCI 3 Rating | Change in Rating
|
| The GFCI | |
| since GFCI 2 | | since GFCI 2
|
| Financial | |
| | | |
| Centre Ratings | London | 1
| — | 795 | -11
|
| Centre Ratings | New York |
2 | — | 786 |
-1 |
| The Top 50 | Hong Kong | 3
| — | 695 | -2
|
| singapore | 4
| — | 675 | 2
|
| Zurich | 5 |
— | 665 | -1
|
| Frankfurt | 6
| — | 642 | -7
|
| Geneva | 7 |
— | 640 | -5
|
| Chicago | 8
| — | 637 | -2
|
| Tokyo | 9 |
1 | 628 | 3 |
| Sydney | 10
| -1 | 621 | -15
|
| Boston | 11
| 1 | 618 | -3 |
| San Francisco | 12
| 2 | 614 | 6 |
| Dublin | 13
| 2 | 613 | 8 |
| Paris | 14 |
-3 | 612 | -10 |
| Toronto | 15
| -2 | 610 | -3
|
| Jersey* | 16
| 7 | 607 | 35 |
| Luxembourg | 17
| — | 605 | 9
|
| Edinburgh | 18
| 2 | 604 | 17 |
| Guernsey& | 19
| 4 | 603 | 31 |
| Washington DC | 20
| -2 | 597 | 8 |
| Isle of Man | 21
| — | 597 | 14
|
| glasgow | 22
| New | 592 | New
|
| Amsterdam | 23
| -7 | 585 | -14
|
| dubai | 24 |
-2 | 585 | 10 |
| Cayman Islands | 25
| -1 | 575 | 11
|
| Gibraltar | 26
| New | 574 | New
|
| British Virgin Islands |
27 | New | 574 |
New |
| Hamilton | 28
| -3 | 573 | 11
|
| Melbourne | 29
| -10 | 573 | -15
|
| Montreal | 30
| -2 | 560 | 22
|
| Shanhai | 31
| -1 | 554 | 27
|
| Stockholm | 32
| -6 | 553 | -1
|
| Vancouver | 33
| -2 | 548 | 23
|
| Brussels | 34
| -7 | 548 | 2 |
| Munich | 35
| -6 | 546 | 11
|
| Bahamas | 36
| New | 544 | New
|
| Monaco | 37
| New | 522 | New
|
| Milan | 38 |
-7 | 520 | 1 |
| Bahrain | 39
| 3 | 514 | 59 |
| Helsinki | 40
| -9 | 512 | -6
|
| Johannesburg | 41
| — | 511 | 48
|
| Madrid | 42
| -10 | 509 | -7
|
| In GFCI 2 Jersey and | Vienna
| 43 | -11 | 507
| -8 |
| Guernsey were grouped | Copenhagen
| 44 | -9 | 502
| 14 |
| together as the Channel | Oslo
| 45 | -11 | 495
| -5 |
| Islands | Beijing | 46
| -10 | 493 | 11
|
| Qatar | 47 |
-3 | 491 | 51 |
| Mumbai | 48
| -10 | 481 | 11
|
| Rome | 49 |
-13 | 471 | -8 |
| Osaka | 50 |
-18 | 469 | -33 |
Note: Scores have been rounded to the nearest whole number, so where there is an apparent tie, centres have been placed according to their underlying scores.
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APPENDIX 6
"A tax haven that needs to clean up its act": Angel
Gurria, The Financial Times, 20 February 2008
A TAX HAVEN
THAT NEEDS
TO CLEAN
UP ITS
ACT
BY ANGEL
GURRÍA
Freer, more open and better integrated financial markets
have benefited people and companies around the world. They have
lowered the cost of capital and encouraged greater competition
in the provision of financial services. But they have also facilitated
distortions such as money laundering and tax evasion.
Financial cases such as Enron, WorldCom, Parmalat, Siemens,
the investigations into BAE Systems and now the German tax evasion
inquiry have revealed serious weaknesses in governance and market
functions. Some of the issues are for companies to address. But
governments must also play their role in setting the rules and
enforcing standards.
As new technologies shrink geography, opportunities have
opened up for dishonest taxpayers to use tax havens to evade their
tax obligations. Jurisdictions characterised by strict bank secrecy
and a policy or practice of non-co-operation with law enforcement
in other countries prosper by attracting brass plate banks, anonymous
financial companies and asset protection trusts. But they do so
to the detriment of the integrity of the world financial system
and such behaviour is no longer acceptable. Money laundering and
the misuse of corporate vehicles for tax evasion and other ways
of exploiting financial markets for personal gain have expanded
to the point where they threaten the political and economic interests
of sovereign states. It is time for the governments of countries
where such practices are prevalent to accept their responsibilities
and crack down on them—or face the consequences.
Most Organisation for Economic Co-operation and Development
governments have responded to the threats posed by financial crimes
by enacting legislation to detect and deter such practices and
by strengthening their law enforcement and tax enforcement capacity.
Money laundering has been criminalised and financial institutions
are required to report suspicious transactions. Stricter regulatory
and supervisory measures have been put in place and access to
beneficial ownership information and trust formation rules has
been strengthened in most OECD countries and in many offshore
financial centres. Almost all the jurisdictions identified as
potential tax havens by the OECD in 1998 have committed to the
principles of transparency and effective exchange of information.
Only three still remain on the OECD's list of unco-operative tax
havens: Liechtenstein, Monaco and Andorra.
Now the cat is out of the bag. The disclosure of tax evasion
schemes running through Liechtenstein's oldest bank has confirmed
what tax authorities suspected. The affair has tarnished Liechtenstein's
attractiveness as a financial centre, not just for legitimate
investors but also for tax evaders, who know their affairs will
now come under increased scrutiny by all countries. Liechtenstein's
next moves are critical. It can continue to ignore the trend towards
greater co-operation in combating tax evasion in the hope of recapturing
the business of tax evaders. Or it can work to restore its reputation
in the international community by establishing a network of bilateral
tax agreements to improve co-operation.
At present, Liechtenstein's system of foundations and other
entities that hold private wealth facilitate a culture of secrecy.
But things are already changing. As a result of the campaign by
the Financial Action Task Force, an international anti-money-laundering
group, Liechtenstein now obtains information on the beneficial
owners behind these foundations. For the moment, it is still not
making that information available to other countries for tax enforcement
purposes. But a decision to change tack is within the government's
reach.
In Wednesday's FT, Otmar Hasler, the Liechtenstein prime
minister, announced further steps, in the context of its negotiations
with the European Union, that may lead to more co-operation in
matters involving fraud, including tax fraud. This would be a
step in the right direction. Other financial centres, such as
Jersey and the Isle of Man, have made great strides in strengthening
their bilateral tax co-operation and are thriving. I hope Liechtenstein
continues down this path of greater co-operation. By implementing
high standards of transparency and tax co-operation, Liechtenstein
will not only rebuild faith in its financial services sector but
may also gain benefits for the remaining 70 per cent of its economy.
So why wait and pay a high price in terms of reputation and standing
in the international community?
The writer is secretary-general of the Organisation for
Economic Co-operation and Development.
251
A full description of Jersey Finance can be found in Appendix
3. Back
252
London Business School study May 08 "The Jersey Finance Strategy
Project-Future of Finance 2015". Back
253
Mark Yeandle, Alexander Knapp, Michael Manelli and Ian Harris
of Z/Yen Group "The Global Financial Centres Index"
prepared for the City of London. See Appendix 5 for table. Back
254
Source: The Economist: A special report on offshore finance, 24
February 2007 p7. Back
255
Source: The Economist: A special report on offshore finance, 24
February 2007 p15. Back
256
Rose, Andrew K and Spiegel, Mark M., "Offshore Financial
Centres: Parasites or Symbionts?". Haas School of Business,
May 2005. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=725881 Back
257
Mihir A Desai and James R Hines Jr, "Do Tax Havens Divert
Economic Activity?" Economics Letters, Vol 90, No
2, pp 219-224, 2006.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=704221 Back
258
Rose, Andrew K and Spiegel, Mark M, "Offshore Financial Centres:
Parasites or Symbionts?" Haas School of Business, May 2005.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=725881 Back
259
IMF Country Report No. 03/369 November 2003.
http://www.imf.org/external/pubs/ft/scr/2003/cr03368.pdf Back
260
Compiled by Jersey Finance based upon IMF information. Back
261
Source: The Economist: A special report on offshore finance, 24
February 2007. Back
262
Stoll-Davey Camille, "Assessing the Playing Field: International
Cooperation in Tax Information Exchange", Commonwealth Secretariat
Economic Paper 77. Back
263
London Business School study May 08 "The Jersey Finance Strategy
Project-Future of Finance 2015". Back
264
"A tax haven that needs to clean up its act": Angel
Gurria, The Financial Times, 20 February 2008. See Appendix
6. Back
265
Written testimony Jeffrey Owens, Director, OECD Center for Tax
Policy and Administration before Senate Finance Committee on Offshore
Tax Evasion, 3 May, 2007.
http://www.senate.gov/finance/hearings/testimony/2007test/050307testjo.pdf Back
266
Mark Yeandle, Alexander Knapp, Michael Manelli and Ian Harris
of Z/Yen Group "The Global Financial Centres Index"
prepared for the City of London. See Appendix 5 for table. Back
267
IMF Country Report No. 03/368November 2003.
http://www.imf.org/external/pubs/ft/scr/2003/cr03368.pdf Back
268
Managing risk in the overseas territories: Foreign and Commonwealth
Office No 0004 2007-08 16 November 2007.
http://www.nao.org.uk/publications/nao_reports/07-08/07084.pdf Back
269
London Business School study May 08 "The Jersey Finance Strategy
Project-Future of Finance 2015". Back
270
IMF Country Report No. 03/368November 2003.
http://www.imf.org/external/pubs/ft/scr/2003/cr03368.pdfBack
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