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Channel Islands Defend Reputation In Washington

by Mike Godfrey, Tax-News.com, Washington

25 May 2007


Senators Frank Walker and Mike Torode, the respective leaders of Jersey and Guernsey, have submitted statements to the United States Senate defending their reputation as legitimate, well regulated and well respected offshore finance centres.

The statements were submitted to the Senate Finance Committee Hearing, which was convened to discuss offshore tax evasion as a result of Bills that have been introduced seeking to restrict the use of offshore tax havens to inappropriately avoid Federal taxation.

“Jersey is a long standing international finance centre providing a wide range of financial and professional services and in compliance with international standards," Walker said in his statement. "It is no part of Jersey’s policy to assist directly or indirectly the evasion of taxes properly payable in other jurisdictions. Such business is actively discouraged.”

Senator Walker drew the Committee’s attention to the fact that Jersey has entered into a tax information exchange agreement with the United States, and has a well recognised good relationship with the US administration on financial crime matters generally. He has emphasised Jersey’s determination to strengthen this relationship.

“Our good name and reputation is of huge importance to us," he stated. "I have told the Senate Finance Committee of our compliance with international standards of financial regulation, anti-money laundering and combating financing of terrorism and of our cooperation in the pursuit of those engaged in financial crime. I have said that our good track record should be recognised and that our present good relationship with the US, which is to our mutual advantage, should not be damaged by what in our view would be unfair discriminatory legislation."

Fourteen miles from the coast of France and eighty-five miles from the coast of England, Jersey is an island of forty-five square miles in area with a population of nearly ninety thousand people. The Island’s economy traditionally has depended on agriculture and tourism, but latterly it has become increasingly dependent on the provision of a wide range of financial and professional services on a worldwide basis. However, Jersey is not the only offshore jurisdiction to have attracted unwanted attention from US legislators as they seek to close the 'tax gap' between legally owed and paid taxes.

Under one bill introduced into the US Congress, the Internal Revenue Code of 1986 would be amended to treat controlled foreign corporations established in any territory considered a tax haven as domestic corporations. Another bill introduced by Senator Carl Levin, a long-standing critic of offshore financial centres, would restrict the use of offshore tax havens and abusive tax shelters to inappropriately avoid Federal taxation. As part of this second bill, Jersey and Guernsey are included in an initial list of "offshore secrecy jurisdictions".

In a similarly-worded statement, Mike Torode, Walker's counterpart in Guernsey, said that it was and important opportunity for Guernsey to "set the record straight".

"I made it very clear that we are in no way a so called ‘tax haven’ but a responsible international finance centre maintaining the highest regulatory standards and that a Tax Information Exchange Agreement has been in place with the United States since 2002," he said. "This is particularly relevant, given that the hearing highlighted information exchange as being a key solution in dealing with the problem. It appears that the ‘tax haven’ label has been taken from an OECD list published in 2000 which is now out of date as Guernsey was declared a co-operative jurisdiction by the OECD in 2002."

Torode concluded by stating that: "I have suggested in the strongest possible terms that Guernsey’s name should not appear on any list of non cooperative jurisdictions which might in the future be formulated by the US Treasury Department which is a potential outcome if these Bills are successful in the Senate."

A comprehensive report in our Intelligence Report series examining offshore confidentiality is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report1.asp

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