JATCo Welcomes Withholding Tax Recommendation

by Jason Gorringe, Tax-News.com, London

16 June 2003

The Jersey Policy and Resources Committee's decision to recommend a withholding tax in respect of the European Savings Directive has been welcomed by the island's largest financial services trade representative body, the Jersey Association of Trust Companies (JATCo).

Speaking to the Jersey Evening Post last week following P&R chief Frank Walker's announcement, JATCo president Richard Boleat commented: "P&R has been faced with a difficult decision and has consulted extensively. JATCo very recently sought its members' opinion and a significant majority supported the position that P&R have taken."

Mr Boleat continued: "The general feeling from members was that automatic exchange of information is a worthy goal, but adoption would need to be predicated on an entirely level international playing field. Jersey cannot be expected to adopt such a regime when no other competitor centres are doing so, and while major centres such as Singapore remain outside the scope of the directive."

The principle of a level playing field, or lack thereof, between member states and other nations caught up in the directive was a major factor influencing the P&R's recommendation to opt for the withholding tax. The preference within the finance industry was always for the withholding tax, with the option remaining for an individual to divulge banking information to their own member state. With Switzerland, Luxembourg and Belgium retaining the right to maintain a degree of banking secrecy by opting out of automatic exchange of information, and Guernsey and the Isle of Man following suit, the withholding tax was always going to be the most attractive of the two options for Jersey.

"Jersey does not wish to be seen as a haven for those who have something to hide. But the EU savings directive, which has allowed three member states to opt for withholding tax instead of automatic exchange of information, has not created a level playing field," Senator Walker observed.

He also confirmed that the withholding tax will be applied at the same rates and on the same timescale as Switzerland and the three other EU states. This will mean a 15% levy for three years from 2005, and 20% for the subsequent three years, rising to 35% beyond this.

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