Jersey, Guernsey and Isle of Man Dig Heels In Over Tax Reforms

Lisa Ugur, Tax-news.com. London

07 May 2000

Prior to the recent report by the Organisation for Economic Co-operation and Development (OECD) on harmful tax havens, both Jersey and the Isle of Man had made it clear that they would defy pressure to conform over regulatory and disclosure standards and not follow the example set by the six offshore jurisdictions which wrote to the OECD to avoid being named and shamed on its blacklist. Now Guernsey has joined the fray and all three have reiterated this stance, saying they will not reform their tax regimes unless other countries with similar fiscal arrangements followed suit.

At a private meeting last week with Treasury and Inland Revenue officials, the islands rejected their inclusion on the now infamous list, branding the list as "seriously flawed" and the European Union as "unfair and immoral" for supporting the OECD decision. Frank Walker, Jersey's chief finance minister said ' This smacks of protecting the big jurisdictions and attacking the small ones. There seems to be one rule for some and one rule for others - this is pretty dodgy morals.'

The meeting was not the first time Walker had spoken out against the OECD list. On its publication he said 'At the heart of this list is a call for an international exchange of information on tax matters and we have always said that we are fully prepared to co-operate with the OECD or anyone else - provided that co-operation is conducted on a level playing field basis. However, we cannot allow our economy to be wrecked by putting it in a position where we are no longer competitive with other major financial centres such as Luxembourg and Switzerland, both of whom are OECD members.' Jersey's protests are so vehement because the island feels it has a sound domestic taxation system, based on a rate of 20%, and yet a number of jurisdictions which evaded the list have no direct taxation structure at all.

Jersey, Guernsey and the Isle of Man are not saying that they will not co-operate with the OECD but simply that they are still unclear as to what the Paris-based organisation expects of them, or in other words the OECD needs to clearly define the goal posts before the islands commit themselves to anything. Laurie Morgan, chief finance minister of Guernsey, said 'We have agreed to continue our dialogue with the OECD and to keep each other informed to present a fairly united front. But our message is that we will not be pushed around by international organisations telling us how to tax our population and run our country.'

Echoing Mr Morgan, Jersey's Policy & Resources Committee president Senator Pierre Horsfall, said there was no need for the island's finance industry or its clients to be concerned: 'This is a technical list and the basis for future discussions. We will continue the dialogue with the OECD but it must be on an open and transparent basis - and we must be assured that there truly is an international level playing field. The OECD has a worldwide reputation for fair and rigorous economic analysis but this initiative is simply not in accord with this reputation.'

The three islands have unanimously stated that they consider it futile to reform their tax regimes unless reforms were part of a concerted effort across the board and have indicated that countries such as Switzerland and Luxembourg and any other country that offered attractive tax regimes should reform as well. Switzerland has already firmly stated that it will not reform its banking secrecy laws and Luxembourg has given no indication that it will make changes either, so there's a problem already.

It is hardly surprising that the OECD report has so riled the Channel Islands. Guernsey has pointed to tax affairs in the Cayman Islands, which it said had worse standards of regulation than those practised by the Channel Islands and yet had not been included in the list of tax havens (because of the vague commitment to co-operate). The islands could have avoided making the list but said they were not prepared to sign a letter committing themselves to changes without knowing what to expect.

Jersey's Senator Horsfall sums up the mood not only in Jersey, but in Guernsey and the Isle of Man as well when he says 'Jersey is a high quality, well-regulated finance centre committed to meeting international standards. On the regulatory front it has demonstrated this time and again. But on tax, just as every member state of the OECD is busy defending its national interest, so will Jersey.'

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