Jersey Calls For OECD To Clarify Conditions

Mandy Robinson, Tax-news.com, London

06 October 2000

In three months time the Organisation for Economic Co-operation and Development (OECD) is set to remove some of the first jurisdictions from its list of so-called "harmful" tax havens that have conformed to the Paris-based organisation's demands. Although one of the jurisdictions to make positive changes to its finance sector over the past few months, Jersey is uncertain of its position on the list come Janauary.

The final deadline for the list of 35 jurisdictions deemed to operate harmful tax regimes by the OECD is July 2001 - if they remain on the blacklist after that time, they may face punitive sanctions. The OECD has laid out terms and conditions which the jurisdictions must pledge to conform to before their removal from the list.

Jersey is convinced it should come off the list but the confusion lies with the OECD, says Jersey Policy & Resources chief executive, John Mills, who explained Jersey needed to be aware of precisely what conditions the OECD was proposing, but the vague nature of the conditions prevented Jersey from signing its name on the dotted line. However, he said it was clear that if the OECD threatened Jersey with sanctions 'we must remove that threat or we cannot negotiate.' He was adamant that while Jersey was willing to have a "constructive dialogue" with the organisation, the jurisdiction would not enter talks with the issue of sanctions hanging over the discussions.

Jersey has certainly been one of the more outspoken jurisdictions in condemning the list (the OECD's behaviour was once described as "fiscal colonialism" by Chief Executive of the Jersey based Basel Trust Corporation, Ben Bendelow) but the OECD claimed the dependency, along with Guernsey and the Isle of Man, fell short of acceptable standards of transparency and exchange of information with overseas tax authorities and all three have until next summer to agree to mend their ways.

Since that time, Jersey has instituted a new finance body to promote and defend its financial industry. The new body, which will work parallel to the existing Jersey Financial Services Commission, has the working title Promoco, and will receive about £500,000 from the Jersey States in its first year, and subsequently will be equally funded by the government and by voluntary donations from the finance industry itself.

Jersey has also acted to increase the transparency of foreign incorporated companies, many of which are administered from Jersey without the Commission's knowledge. Soon all will have to disclose their presence by submitting details such as their names and registered office addresses. A new law dealing with the exchange of information with other tax authorities is also under consideration.

And just this month, Jersey was praised for its good practice in combating money laundering throughout the island's financial system. The appraisal comes in a report produced by the Offshore Group of Banking Supervisors, which used 40 criteria set out by the Financial Action Task Force (FATF).

Frances Horner, head of the OECD’s tax competition unit, said: 'We would hope by January to be able to announce the tranche of jurisdictions which are no longer on the list ... there is a lot of misunderstanding about what we are really asking jurisdictions to do - we are not asking them to raise tax rates or destroy their economies.'

Clearly, Jersey feels it has implemented changes to its finance industry that will satisfy the OECD, but the organisation is holding its cards close to its chest and for the time being, Jersey can only wait with bated breath.

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