It’s not only banking secrecy that’s dead. Tax avoidance – the industry that helped Jersey become so prosperous – now appears to be on its last legs as well.

You will note that I’m being very careful about using the term tax avoidance and not tax evasion, which has always been illegal and which Jersey has gone to great pains to steer clear of.

However, Dennis Healey once said that the difference between tax evasion and tax avoidance is the thickness of a prison wall, and now the distinction is even thinner than that.

Indeed, it’s so thin that the UK’s Financial Secretary to the Treasury was able to use the terms interchangeably at a conference in Jersey last week. Not only that, but his comments show that he views tax evasion/avoidance as being on a par with money laundering and terrorist financing. The fight against one is a fight against all three, and all tools will be made available in the fight. Money laundering and tax will be ‘mutually reinforcing’, he said.

The Financial Secretary and his colleagues in the UK government clearly mean to change the rules of the game so that taxpayers can’t use hitherto legitimate ways of minimising their tax burden.

‘Whether you are a corporation or an individual it has become increasingly unacceptable for you to use your resources to avoid your fair share of the (tax) burden,’ the minister said. So all those wealthy individuals and companies that have used complicated tax structures devised by expensive Jersey lawyers, and others, could be in for a hard time.

It’s not surprising that the UK government, like many other cash-strapped governments around the world, want to squeeze every last penny of tax out of their taxpayers, particularly those who, through clever planning, have reduced their liabilities to a fraction of what Her Majesty’s Revenue and Customs would like to collect. The government needs the money, and their need will get even worse as colossal debts mount up. So we can only expect the pressure on taxpayers (and international finance centres) to increase and the difference between avoidance and evasion to narrow even further.

That’s what the Holy Grail of international tax transparency is all about. It’s so that the tax authorities in one country can see through the tax arrangements of their citizens and corporations in other countries. Ostensibly this is to check that those arrangements are legitimate and above board and that there is no tax evasion going on unbeknown to the home country. That was the basis on which Jersey adopted the new standards.

The Jersey authorities could rightfully say that the Island has nothing to hide because one of the specialities of our finance sector was to devise schemes to ensure any tax saved was achieved well within the law. So it didn’t make any difference if outside tax authorities knew about it. It was all perfectly legal.

But what happens now there is little difference between avoidance and evasion? Legitimate tax avoidance schemes are now ‘unacceptable’, in the words of the UK minister. So transparency will just be used to help the UK tax authorities, and others, to track down the tax schemes that were previously considered lawful and make sure they become unlawful.

Lord Clyde must be spinning in his grave, because it was he who said: ‘No man in this country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or to his property as to enable the Inland Revenue to put the largest possible shovel into his stores.’ How things change when you have a cash-strapped government.

So what are the implications for Jersey?

Well, obviously any kind of blatant tax planning is now considered ‘unacceptable’, even if it remains perfectly legal.

Because we want to be good global citizens and embrace transparency (after all, our livelihood depends on it), HMRC will know about the complex and clever structures previously used to achieve a saving in tax. These will be targeted and even if they manage to withstand the full forces of tools used in money laundering and terrorist financing, it might simply not be worth it. Therefore the options that Jersey is able to provide its clients will be much diminished at the cost of an unknown amount of business.

What damage there will be will depend on the illusive level playing field and where the taxman draws the line between what is considered acceptable and unacceptable. How far will the minister allow the rules to be bent?

For example, the current mantra is that Jersey does not offer tax avoidance; it offers tax neutrality. But whatever way you look at it, that’s a tax advantage. Will it still be acceptable in the more determined efforts to squeeze taxes out of UK domiciled individuals and corporations?

Or is acceptable tax planning simply what the Chancellor of the Exchequer and the Financial Secretary of the day says it is? This may not carry much weight in Singapore or Luxembourg, who will not be pushed around, but the Crown Dependencies can certainly be pushed around by the UK government.

There was no mention of this in the Financial Secretary’s speech in Jersey last week. In fact, he praised the work Jersey has done to adopt international standards of tax transparency, and even said that there should be a much more level playing field so that Jersey and other similar jurisdictions are not unfairly targeted for criticism or comment. Perhaps he forgot that it was his boss, the Chancellor, who described our fellow Crown Dependency, the Isle of Man, as a ‘tax haven in the Irish Sea’.

A much better, but more unlikely, way to ensure everyone adopts new tax standards is for there to be a global consensus on what is considered acceptable tax planning.

We’re a long way away from that, and it may be that UK individuals and corporations will vote with their feet before any such global consensus can be reached.

Jersey’s finance industry is no longer driven entirely by tax, although it is still an indispensible part of the infrastructure, as the fuss over zero-ten proves.

The kind of global changes the minister was talking about will take years to achieve. However, few people predicted how quickly new tax information rules could be adopted in the past year or so. So it would be a good idea to start planning now for this brave new world.

Peter Body is editor of Business Brief magazine