INTERNATIONAL tax lawyer Richard Hay is well known on the conference circuit and is often outspoken in his defence of small international finance centres like Jersey.

A recent article he wrote in the IFC Review highlighted many of the issues facing the Island and, most importantly, indicated a way of avoiding the near constant criticism levelled at international finance centres.

One comment in his article struck me as being particularly relevant in the continuing debate about the value of IFCs like Jersey. That’s because so far the detractors are winning the argument by clearly articulating the dangers associated with the misuse of IFCs and tax havens. Not many people are putting the other argument.

‘Small IFCs need to work harder to show that they are constructive partners in the global economy,’ Mr Hay wrote. Few would disagree, but so far few have done much about it. Mr Hay suggests what needs to be done.

The first prescription is pretty obvious – small IFCs like Jersey need to identify and work together with natural allies. In Jersey’s case, the most natural of allies is just a few miles away in Guernsey, and perhaps even our cousins in the Irish Sea could also be considered natural allies. But how much effort is made by all three to work together to put forward a united front against misinformed and even hostile criticism? We say we work together with Guernsey, and when a crisis blows up, we sometimes do.

But there is no consistent approach to join forces against a common enemy. We can’t even agree a common policy on the EU savings tax directive and zero-ten, so that there’s still a danger that our opponents can ‘divide and rule’.

Some of the bigger countries must also think that it’s a bit of a joke having to negotiate a tax information exchange agreements separately with both Jersey and Guernsey. After all, 95% of the contents of the agreement will be exactly the same. Is it really beyond the wit of Channel Islanders to negotiate TIEAs jointly, while still taking account the few differences between the islands which might need to be considered?

Perhaps we just like to be in a position to negotiate our own international agreements, with the permission of the UK, of course. We don’t want Guernsey taking away or even sharing any of the prestige and the glory (and vice-versa, of course). Had we also combined our efforts on Low Value Consignment Relief we might also have seen it coming earlier.

As Mr Hay writes: ‘It is not necessary for co-operating centres to adopt congruent positions; it is enough to share and pool implementation.’

Mr Hay’s second point is that small IFCs should publish better information. ‘Small financial centres provide little aggregated data on financial flows to support policy analysis,’ he says. ‘IMF and similar bodies accordingly find dark spots around small IFCs when they move the lens across the global financial landscape. Economists and policy makers fear what they do not understand; improved data would ameliorate an understandable tendency to colour in greyed-out areas with dated stereotypes.’

I can only humbly agree. It seems we have to wait for the UK government to launch yet another investigation into the islands before we get any useful information about their contribution to the UK and the City of London in particular. I am very well aware of the scarce resources available in Jersey’s public service, but this is quite important. It’s not just about statistics.

The third step suggested by Mr Hay is for the IFCs to explain why they should be seen as constructive partners in the global economy.

Those working in the finance sector in Jersey presumably don’t think that all the island does is take advantage of tax loopholes so that we can pinch some of the UK’s taxes as well as deprive downtrodden Third World countries of much-needed revenue. Yet this is the impression many people get from the media and critics such as the Tax Justice Network.

The Island has a good story to tell about its success as an offshore finance centre and the contribution it makes to the global economy, but not many people are telling it. Of course, it’s difficult to get a message like this across when all the public and the media seem to want to believe is what the Tax Justice Network tells them. However, perhaps no one has come up with a coherent message that is told time and time again.

Certainly in all the years I’ve been attending conferences and seminars, it is only fairly recently that anyone has tried to explain how Jersey contributes to global economic growth rather than hampers it.

The message, according to Mr Hay, should be that ‘international financial services centres (large and small) supply the basic plumbing necessary to support the trade and investment activity which has fuelled the leap in global prosperity over recent decades’.

Mr Hay’s next suggestion is for the IFCs to adjust their strategy to take account of shifts in global power. This particularly means expanding support for the emerging market economies, which are going to produce two-thirds of global growth over the coming decade. Jersey has made a good start with its work in the Gulf, India and China, but this is an expensive business and there’s a danger resources will be spread too thinly.

Mr Hay has plenty of other advice for IFCs to cope with dramatic global changes. For example, centres like Jersey tend to concentrate their efforts on providing services for larger enterprises, and it’s often a case of the bigger the deal, the better we like it. However, as Mr Hay points out, it’s the small and medium-sized enterprises that will produce most of the growth in future, yet they are the ones who find it most difficult to access the capital markets and are largely ignored by IFCs.

‘IFCs which successfully promote SME finance will find that they are more welcome members of the global community,’ Mr Hay says.

Peter Body is editor of Business Brief magazine