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Jersey quality

For the second successive year, Jersey intends to showcase its diverse and sophisticated range of financial services to intermediaries when an industry delegation visits London in the spring.

Building on the success of the first London conference organised by Jersey Finance Limited in May 2002, the decision to return is an indication of the value and importance of the UK intermediary market to the island&#39s leading industry.

Marketing activity by the offshore finance centres in general is set to intensify and a brief review of the global picture in respect of financial services, will shed light on why this should be the case.

The international focus on eradicating fiscal crime and money laundering – the EU&#39s far reaching review of harmful tax measures and its desire to bring the EU members closer economically through increasing tax harmonisation – the analysis of international financial centres by global bodies such as the Financial Stability Forum, the Financial Action TaskForce and the International Monetary Fund, are all factors that help keep offshore finance centres on the political radar.

There is a growing awareness that when differentiating between financial centres and making choices, the quality of regulation, the willingness of some centres to co-operate on a global scale and the calibre of the skills base available in the location, are among the most critical factors.

In these circumstances, it is less surprising that finance centres have been marketing their services more proactively because jurisdictions need to demonstrate that they meet the criteria I have just outlined above. Some will be successful and others will not be able to meet international obligations or maintain the skills required and overtime are likely to fall away.

Costs, of course, still play a part. The importance of comparing the cost of doing business is evident in the competition that has arisen between centres over the level of corporate rate tax.

There was a flurry of activity in 2002, particularly among the British Crown Dependencies – Jersey, Guernsey and the Isle of Man – which are proposing a move to a corporate rate tax of zero to meet the requirements set out by the European Union in its tax package, the so called code of conduct. Zero will be the headline rate but there will be special rates for certain sectors such as finance.

I doubt that any of the leading centres will allow their competitive position to be eroded by implementing corporate tax rates that are uncompetitive with other centres. In Jersey, the policy and resources committee, the leading Government committee, believes that, subject to ultimate States of Jersey Parliamentary approval, Jersey will be able to accommodate the principles of the code of conduct, over a period, by moving to a zero rate of tax for companies generally but with a higher rate for financial services businesses and other special groups such as public utilities. The island will essentially be able to preserve the benefits of its current structures, but in a non-discriminatory manner which meets the EU&#39s objectives.

The decision by the European Union to agree on its savings tax directive will also have a long-term impact on the offshore financial centres.

The Channel Islands and the Isle of Man expressed a willingness to exchange information on the interest paid on EU residents&#39 savings, pro-vided that there was a level playing field among comp-etitors which included EU member states.

The decision to allow three EU members to opt for a withholdling tax beginning at a rate of only 15 per cent in 2004, rising to 35 per cent by 2011, is a new development and offshore centres will need time to study the agreement before announcing whether they are still willing to exchange information on the terms agreed last May. However, the island authorities are now in close consultation with the UK over the issue.

In answer to critics who predicted that, by creating a tougher regulatory environment, business would be driven away, we have seen business thrive. Many trust companies in Jersey are seeing increasing amounts of quality business and industry representatives tell us that the reassurance provided by our enhanced regulatory regime, which regulates the industry and helps protect the client, is a major and increasing attraction. By providing such a professional regime, we are able to give added confidence to the business introducer and help attract business from the quality end of the market.

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