Jersey Banks Face Huge Costs Over EU Savings Tax Directive

by Jason Gorringe, Tax-News.com, London

20 May 2003

A senior Jersey banking spokesman has admitted that gearing the industry's systems up to be compliant with the requirements of the European Union Savings Tax Directive will be a huge challenge, according to a Jersey Evening Post report.

Jersey Bankers Association representative and Barclays director Martin Scriven has warned that whether the island opts for a withholding tax or exchange of information, the burden of rewriting systems will be very costly, and he fears it will ultimately have to be borne by the client. He also fears that getting systems up and running in time for implementation of new Know Your Customer rules in January 2004 will be "hugely challenging, if not quite impossible," according to the JEP.

"We do look with an element of concern from a purely operational point of view. It will mean a huge cost to the industry which is not going to develop any more business and will ultimately reflect on the customer base. It is causing huge concerns within individual institutions," observed Mr Scriven.

Complicating the industry's planning is the issue of which option the island's authorities will eventually decide to take with regards the EU Savings Tax Directive. Scriven points out that there is a risk that other jurisdictions such as the Isle of Man or Guernsey (which has already opted for a withholding tax) could have a competitive advantage if there is not uniformity regarding the issue.

"The interesting thing is that one of the options for withholding tax makes exchange of information optional, so from the clients' perspective they might take the withholding tax route. I would advise that we should be in the camp that is more advantageous for our clients."

However, Scriven pointed out that on relative terms, any negative impact on Jersey would be manageable due to its small market share in comparison to other financial centres such as Switzerland.

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