THE UK Chancellor fired a warning shot across the bows of off-shore tax havens yesterday as he announced a major review of how they transact business.
In a pre-budget report designed to show that he was taking robust action to address the fallout of the credit crisis, Alistair Darling said that jurisdictions would have to show that their tax regimes met international standards. The review, he added, would not examine the constitutional relationship between the UK and Jersey, Guernsey and the Isle of Man.
‘The recent financial turbulence has highlighted potential problems with overseas territories and Crown dependencies such as the Isle of Man and the Channel Islands,’ said Mr Darling. ‘They attract banking customers with lower taxes without contributing to the United Kingdom Exchequer.’
And in what is likely to have been an oblique reference to the Isle of Man’s request to the Treasury to help them compensate savers who lost their cash as a result of the collapse of Kaupthing Singer & Friedlander, Mr Darling added: ‘At times of stress, depositors need to know who will compensate them. The British taxpayer cannot be expected to be the guarantor of last resort.’
Within a short time of Mr Darling’s comments being broadcast, senior Jersey politicians were playing down their significance. They said that the review was good news for Jersey as it would be an opportunity to show how well regulated the Island was as a finance centre. The more high-profile the review was, the better, as Jersey would come out head and shoulders above the majority of its competitors.
• Picture: Mr Darling delivering his speech to the Commons yesterday
Article posted on 25th November, 2008 - 3.00pm
19 Article Comments
Now maybe it all collapses, must build the new finance centre fast before we find out it is useless.
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I’m afraid this is very bad news for finance in general and Jersey in particular.
At a time of low confidence the last thing we need is a year of further uncertainty.
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“At times of stress, depositors need to know who will compensate them,” said Mr Darling. “The British taxpayer cannot be expected to be the guarantor of last resort.”
But that is precisely what the UK taxpayers has done in the case of Icesave (and Northern Rock) – and what the Guernsey taxpayer will have to do in the case of Landsbanki Guernsey Ltd.
Guernsey really doesn’t have much option but to do so if it wishes to salvage anything from the reputation of its international finance centre, which lies in tatters.
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You missed out the “worldclass” statement that usually accompanies the states comments.
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This is good test for Jersey – will 800 years of loyalty to the crown now pay off – I hope so!
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Absolutely nothing to worry about at all.
The doomsday hunters are just on the prowl again but it won’t make a blind bit of difference to Jersey and its prosperous finance industry.
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I seem to remember the fulfillment industry taking a bit of a battering a little while ago and the SoJ did not really stand up for it, as most of the jobs were low paid. That was one industry which died a death at the behest of HMRC. Maybe our leaders rolled over on that one to protect the Finance Industry?
Still there is one industry which will bring in bucket loads in an instant and that is gambling; all it needs is a pack of cards and a change in the law, Jersey will be rolling in it.
Just think; luxury weekends from the UK and the bucket end of the market with cheap flights from every regional airport in the UK. Miles of slot machines dispensing million pound jackpots.
Add quickie weddings, even quicker divorces and recognise same sex relationships, nirvana!
With more space than Monaco and still a little less expensive, we could all have an absolute whale of a time. Seriously this industry would be far less pompous and stuffy and unlike all those who stash their money offshore the casinos will not mind paying a little gambling tax on their mega profits.
We could wipe out the need of Social Security payments and domestic income tax would be a pittance or zero. (We could all be 11Ks). Jeremy Clarkson or the Stig could do the illuminations; I can see this really catching on big time. Plemont used to accommodate the lower end of the market; bused from the airport we need not even know they existed; with all you can eat and free Chubby Brown, we wouldn’t even smell the Old Spice or hear the clink of Brown Ale bottles and While Stilettos.
Is this anymore immoral than the finance industry? I think not, seriously who could object to bringing such prosperity to the island? If we don’t Guernsey will.
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Mr Darling raises a startling comment, which is fundamentally about the question of offshore contributions to the severe measures that his government has taken, which ultimately affect the British taxpayer, but thus not so far those of us in Jersey, whom may benefit from those measures.He says, about Crown Dependencies such as Jersey, that “they attract banking customers with lower taxes without contributing to the United Kingdom Exchequer.” I would surmise that he is aiming at seeking the erosion of the “special relationship”, embodied in the Treaty of Rome.
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All these people who think the finance industry is going to crash because of the latest uk comments needs to work in a bank or trust co for a while and see for themselves why the SOJ are not worried. The due dilligence required on new clients is extremely high. In fact now i think of it i bet the same people moaning about how finance is going to crash are the very same people who moan about having to fill in such lengthy forms and provide two or three items of ID wehich is done to protect you and the banks from illegal activity.
On the other hand Tintin, i love that idea a proper casino would be great. I dont means some dump with a few slot machines but one with bars, slots, poker tournaments, shows. It would be a refreshing change to open an entertainment centre rather than shut it down.
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After finance comes fulfilment.
A cut of 2.5% on UK VAT will render the Jersey fulfilment industry less attractive to shoppers; a cut of 45 pence or 14 percent. OK it is only for fifteen months, but this could well obligate slim profit margins.
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I think the issue of alleged concern is not the standard of the client; it is more to do with Jersey attracting significant business (bank deposits) but without adequate investor protection. At least this is the stick they are going to beat us with. The States made a big mistake going cap in hand to the UK and other jurisdictions asking to piggy back on their investor protection if one of that jurisdiction’s banks went belly up, this was then compounded by issuing a statement purporting to give a 100% guarantee to all island residents. This gross error of judgement was then exacerbated by including any potential freebie from other jurisdictions within this guarantee. Then the States did an Ireland by essentially guaranteeing 10 billion of deposits with a reserve of 600 million.
At the very least this smacks of a lack of joined up thinking and at worst bears a striking resemblance to a rabbit caught in the headlights. I think the basis of the UK argument will be that you cannot call yourself a legitimate offshore jurisdiction if you have to go cap in hand to others’ for investor protection. Or for that matter protect your own residents but not those you have encouraged to deposit money within your jurisdiction.
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Bring on independence.
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It is quite obvious that with most major countries pumping billions into their economies in an effort to try and save major companies, stave off a major slump etc that they are going to be on the look out for any tax pounds, dollars, euros etc that may be getting away due to the judicious use of tax shelters.
And the UK might actually like independence, if a bank with a branch in Jersey went belly up they could walk away from that bit with a clear conscience leaving the island to clear up the mess.
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Surley the problems with the finacial crisis is more to do with irresponsible lending to folk who can not afford to make the payments. That has occurred because the U.K. F.S.A. didn’t do what they are paid to do. Jersey is being used as a whipping boy and whilst the financial industry on the Island isn’t entirely blameless, the UK Government should look at themselves in the mirror for the problems that have occurred.
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I agree with PS, in fact I would go further to say that the people who moan about Jersey’s finance industry should refer to the filling in of their Social Security Forms, if just to get an idea of the due diligence forms we have to fill in for any new outside clients.
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Mr Darling and his mates do not care if your due diligence forms are four or forty pages long.
The fact is that they have a hole that needs filling with money and just like the Conservative government in the 1980s that ended the gilt edged fund lark or the demand for the defence contribution after the Falklands they intend to have some off Jersey.
Also they intend to save some City jobs, if that means that bank staff in Jersey are ‘put out to grass’ I really do not think they will be losing any sleep over it.
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The point the chancellor chooses to miss is that the KSFIOM depositors are NOT asking for compensation. We are asking for the half a billion quid that the FSA enticed to London and then froze in placing KSFUK into administration back! With that money the IoM bank would not be insolvent.. Suggesting we want COMPENSATION a clever way for Mr Darling to deflect blame for causing the problem in the first place.
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But there’s no Prudential regulation (ie lending to capital) over here of the SIVs, conduits, hedgies, CDOs, CBOs etc which love the offshore financial centres. We are happy to provide the facilities and legal structures to allow them to let rip. A request for a utility bill or two sort of misses the point doesn’t it! Dublin is the worst in the European zone for this but we’ve chipped in to the carnage of the “originate and distribute” model. Still its made our corporate lawyers extremely wealthy so that’s ok then.
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Nick I am not sure if KSFIOM is Icelandic Bank or an American radio station. Darling is merely stating that a supposedly independent jurisdiction cannot expect to have the UK and other countries bail out Jersey resident depositors (leaving all those foreign account holders high and dry). He is also making the argument that Jersey should not have been in this situation in the first place. Quite frankly he has a very good point.
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