Jersey States Urged To Show 'Determination And Resolve' Over EU Tax Dispute

by Jason Gorringe, Tax-News.com, London

19 April 2002

Jersey's President of Policy and Resources, Senator Pierre Horsfall, on Wednesday urged the States authorities to rise to the challenge of negotiating with the UK and the European Union over a controversial savings tax directive with 'determination and resolve'.

Events came to a head earlier this week over European Union plans for the exchange of information on non-resident savings interest, when UK Paymaster General, Dawn Primarolo, issued an ultimatum to the Channel Island jurisdiction's authorities to comply in advance of an EU Code of Conduct Group Meeting on Thursday, or risk bad publicity and possible British sanctions.

However, the Island's concerns that EU members such as Luxembourg and Switzerland have not agreed to the proposals have not yet been addressed. In addition, Jersey's de facto Chief Minister pointed out, a decision of such significance for the jurisdiction's financial sector could not be taken by him alone, and would require full consultation, thus making the deadline suggested by the UK government impossible to meet.

'The exempt company has been a cornerstone of our tax regime for over 40 years and is the foundation on which the success of our finance industry has been built,' he explained. 'Our competitive position on bank deposits would be jeopardised if we moved to automatic information exchange but our two major European competitors, Luxembourg and Switzerland, did not.'

Speaking to States members on Wednesday, Senator Horsfall revealed that the UK government threatened to make potentially damaging reference to the Island on Thursday, but said that Ms Primarolo had hinted in conversation that she 'might be prepared to think again' if the Policy and Resources Committee agreed to share all the fiscal review papers and background work with Treasury officials. Once again the Senator said, he refused to agree to such a move as the decision was not his to make alone.

He told the House that he had written to the British government, warning of the consequences of a public declaration that the jurisdiction is 'uncooperative':

'There is a very real danger that we would come under intense political pressure to withdraw, publicly, from the search for agreement on the tax package,' the letter warned. 'The alternative to this potentially very damaging state of affairs is your acceptance of the sufficiency of my word, given in good faith, and our using this incident as a turning point for building a better mutual relationship.'

Senator Horsfall told politicians that he had also protested the fact that Jersey is being singled out for criticism, emphasising that Jersey's position is no different than that held by Guernsey and the Isle of Man.

'For Jersey to be singled out adversely, in the manner that both you and your officials have indicated may be done on 18 April, would not only be unfair, but also disproportionate and unreasonable. It would also provoke intense adverse reaction in the States of Jersey, and indeed the whole Island,' he told Ms Primarolo.

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