Unwelcome headlines fuel Jersey anti-finance dissent

Reuters News
Posted: Nov 18, 2012 9:59 AM

By Dasha Afanasieva

JERSEY (Reuters) - Channel Island Jersey has done well from the finance sector, and many locals want to keep it that way, but some are calling for reform of the tax-haven model that feeds it at the expense of public coffers elsewhere.

With its mix of French and English streetnames, Jersey's capital, St Helier, seems an unlikely satellite to the financial hub of London, yet since the 1960s it has developed a formidable offshore banking and finance sector that now accounts for more than two fifths of the island's economy.

Its critics typically get short shrift.

"The stock phrase for anyone who complains about how things are here is 'There's a boat in the morning'," said Geoff Southern, a Socialist politician in the island's parliament who thinks it should be rebalancing the economy away from finance.

"People are scared to speak out for fear of losing their jobs," said Jersey native John Christensen, former economic advisor to the island's government and now a director of Tax Justice Network and campaigner against tax havens.

Richard Syvret, the founding director general of Jersey's financial regulator, is an unlikely fellow traveler with those who think the island has too many eggs in the finance basket.

"I do feel very much that Jersey is obsessed with money and the finance industry," he said over lunch in one of St Helier's many squares.

"I think a number of people would deny it, but ... the facts speak for themselves. We have devoted ourselves to it, and I think it's to our detriment."

Jersey, a 45-square-mile island off the coast of Normandy in France but a British Crown Dependency through a quirk of medieval history, sits outside the United Kingdom and the European Union.

As a self-governing parliamentary democracy, it runs its own tax regime, which charges no capital gains or inheritance taxes and, for most businesses, no corporation tax, either. Finance firms pay just 10 percent.


Jersey's government and financial regulators have fought hard over the years to dispel an image of shady offshore banking and criminal money held in secret accounts.

"Reviews from the IMF and independent academics show that we meet or far exceed regulatory standards," said Economic Development Minister Alan Maclean, sitting in Cyril Le Marquand house, a grey government building named after the politician and businessman credited with developing the finance industry in Jersey.

But Southern, from his office on Royal Square, commanded by a gold statue of George II, isn't convinced.

"It's clear that we've set up a system that facilitates tax evasion," he said.

Last week the island found itself written into unwelcome headlines after Jersey account details for more than 8,000 clients of Europe's largest bank, HSBC, were leaked to Britain's Daily Telegraph.

The newspaper said known criminals were among the account holders, while British tax authority HMRC is checking the list against its own records to root out tax dodgers.


The fact that the island's industry can thrive off money moved offshore at the expense of public budgets in places like Britain makes Southern, who was born in England, uncomfortable.

"Whenever I hear that GVA (the main measure of economic output on the island) has gone up, I think, 'That's three hospitals not built in Britain, because that's tax revenue the UK Treasury misses out on'," he said.

Others fear the island would struggle if it were thrust back on older sources of income - Jersey Royal potatoes and bucket-and-spade holidaymakers.

"If Jersey had to rely on its traditional industries - agriculture, tourism ... it wouldn't be the vibrant place it is today," said Robert Perchard, who runs a 300-cow dairy farm and is a director of the island's largest potato grower.

Enough's Enough
Walter E. Williams

His 80-year-old mother Anne, who has lived on 55 acres of farmland in the northwest of the island since 1957, thinks the island will find new ways to make ends meet.

"The Jerseyman has always been resourceful - and entrepreneurial," she said.

Margaret Thompson, a Scot who sells mansions to some of Jersey's wealthiest arrivals, has clung on to her Glaswegian accent after 33 years on the island, and wants to cling on to the status quo, too.

"People are happy with the way things are here," she said.

She believes families come to Jersey for a better lifestyle, not just the lower taxes.

Her views, like those of the Perchards, could well be tested in the coming years.

The European Union is exploring new tax structures that will remove the opportunity for companies to funnel profits through tax havens, while the opportunities for tax evasion by individuals are also narrowing.

Jersey is party to a few dozen information-exchange deals that allow the relevant countries to get evidence on tax evasion once they strongly suspect wrongdoing.

Fair tax campaigner Christensen believes Jersey will have to sign up to an automatic exchange of information that would lay bare the tax affairs of those banking in Jersey.

"If they don't sign up, the U.S. will come down on them like a ton of bricks," he said, "and then Europe will demand the same."

"Jersey is going to have to rethink its strategy."

($1 = 0.6310 British pounds)

(Reporting By Dasha Afanasieva; Editing by Will Waterman)