Jersey Finance Chief Speaks On OECD Process

by Jason Gorringe, Tax-News.com, London

18 April 2002

Following the Channel Island jurisdiction's commitment to the OECD harmful tax initiative just before the February 28 deadline, Jersey Finance chief, Phil Austin, has explained why the Island took so long to formally commit to the process, and laid out the criteria necessary for Jersey's cooperation in international tax reforms.

Writing in the FT Adviser earlier this month, Mr Austin explained that:

'The need for a commitment to a level playing field, together with the policy shift brought about by the intervention from the United States, were the prime reasons why the negotiations in reaching an agreement with the OECD took so long,' citing the fact that the multilateral body has so far failed to obtain a commitment from member countries such as Luxembourg and Switzerland, and seems to be bringing little, if any, pressure to bear on the errant nations.

'It is true that some jurisdictions reached agreement quite early and were seemingly happy to make very general commitments,' he continued, perhaps referring to the Isle of Man, which committed to information exchange in December 2000, arguing that it would be easier to influence the system requirements from within.

'But Jersey was determined that any commitment it gave had to be totally transparent and that the language in the level playing field clause was robust enough to protect its competitive position.'

He explained that the jurisdiction's cooperation with international initiatives is conditional on the cooperation of all of its major competitors within the financial services sector, and that further discussion is needed on the definition of civil tax matters before any legislative changes are made.

'The Jersey finance industry welcomes measures that improve standards in this way,' he concluded. 'However, if the OECD cannot persuade some of its own prominent members, and others, to comply, then it cannot expect the likes of Jersey, which has already given an in principle agreement, to move out of line and leave itself less competitive.'

Meanwhile, the jurisdiction also faces pressure from the United Kingdom and the European Union over information sharing on non-resident savings interest and taxation. Following a surprise ultimatum issued by UK Paymaster General, Dawn Primarolo, Policy and Resources President, Senator Pierre Horsfall, has professed himself surprised by the UK's 'bully boy' tactics.

'Even if we were minded to comply, we would not be in a position to do so within that timescale,' he explained. 'Such a commitment to change the ground rules of the finance industry would have to be part of the democratic process and would have to go through the States. That cannot be done overnight.'

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