I am just back from a few days in Jersey. Branded a ‘tax haven’ by much of the media, many would assume tax would be a large focus of the financial services industry on the island.
Indeed, most people outside of the industry who I spoke to about the trip made a comment about tax, or tax dodging to be more precise.
Is this a problem?
International financial centres (IFCs) like Jersey are performing well. There are strong flows of new business and existing clients are largely being retained.
The outside reputation does not seem to be impacting the island at all.
This may be because tax is no longer a driver for most offshore work. In fact, very few of my conversations in Jersey mentioned tax at all.
The industry appears to have far greater concerns and sees bigger opportunities in other areas.
But what are these areas of concern and opportunity?
Understandably, there is a large focus on MONEYVAL, which is conducting an inspection of the island this autumn. Fears of being placed on the ‘grey list’ and what this could do for Jersey’s reputation are clear.
Regulation is a key focus for both the island as a whole and the industry operating within it. From regulations affecting private trust companies (PTCs) to the Register of Overseas Entities (ROE), there is a lot to consider – and it seems compliance staff are hard to come by.
Meanwhile, the key drivers for most clients appear to be stability and privacy.
Recent events in the banking sector, from Silicon Valley Bank to Credit Suisse, have highlighted just how important stability is for clients.
Jurisdictions that demonstrate they can offer this stability will likely fare very well in the coming years. It seems Jersey’s reputation as a stable jurisdiction is already serving it well.
In terms of privacy, this is still a major concern for a lot of high net worths.
While many governments are pushing ahead with public registers in the name of transparency, those that opt to keep these private – while allowing appropriate access to authorities – may well see an influx of clients.
It is clear there are many reasons IFCs are popular and, in light of this, the tax haven tag really does not feel apt.
Moreover, given it is usually brandished by those in the UK, I would urge caution about those in glass houses…
It would be near impossible to argue that there is no money laundering or questionable tax dealings in the UK. Some would suggest there is even more onshore than there is in many IFCs.
Either way, it certainly feels like the ‘tax haven’ tag is outdated and demonstrates a lack of understanding of the offshore industry.
