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A new debate for a new era

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By Senator Philip Ozouf – Jersey is one of the world’s leading offshore centres for Wealth Management. Reliability, political and economic stability, and a sophisticated and comprehensive infrastructure of laws have kept Jersey at the forefront of global finance for over 50 years. In recent years we have also witnessed a ‘flight to quality’ in the wake of the financial crisis, where the global move towards more stringent regulation has played to Jersey’s strengths and helped us to get on track for growth.

Our strong position has had wide reaching benefits for other centres. A recent Capital Economics Report, commissioned to assess the value of Jersey to the United Kingdom (UK), revealed the significant benefits reaped by the UK in terms of jobs, capital and inward investment, that are directly attributable to Jersey. It showed that 84% of the island’s financial services are carried out in the sterling zone with two-fifths of the total assets managed coming from markets beyond the EU. Consequently, Jersey is responsible for almost £_ trillion of foreign investment into the UK, which is 5% of the total stock of foreign-owned assets in the country.

Evidently, the majority of global investments from Jersey go into the UK, but if Jersey did not facilitate these transactions they would likely migrate to other offshore centres. These figures are compelling, and now that Jersey is in a positive position, it is the perfect time to focus on actively pursuing inward investments in the emerging markets and further boosting economic activity for Jersey and the UK.

Low taxes are vital drivers of economic growth and our unique tax structure means that we have the ability to leverage the value of global trade. This competitive edge will allow Jersey to act as a tax-neutral conduit for business migrating from North America and Asia to Europe, as well as between China and Africa, and Latin America and the developed and developing world. By building stronger alliances with the City, Jersey can also harness London’s dominance in the world of finance, together securing an even more competitive UK/Jersey proposition to effectively compete with centres such as Hong Kong, Singapore and New York.

In light of our plans for growth, and also current performance, the following economic forecasts can be made for the immediate-to-long term:

  • In just 2-3 years, it is expected that economic performance growth will be resumed relative to long-term trends, so that growth rises to 1% by next year and 1.5% by 2016.
  • In this time, it is also expected that the long-term relationship between average earnings and RPI will also be restored. According to OBR forecasts, these are broadly in line with those predicted in the UK.

Despite Jersey’s excellent track record, we have often been wrongly labelled as a ‘tax haven’, with the implication being that so-called ‘tax havens’ are lacking in transparency, are uncooperative and have poor regulation. Following the recent report described above, and also the G8, this debate has now well and truly moved on.

It was during the recent G8 that a historic meeting took place between the UK Prime Minister and our Chief Minister. This was a good opportunity to explain directly to The Rt Hon. David Cameron, the G8 members and the international media, that Jersey is not a tax haven and that, unlike a number of G8 countries, it already has a Beneficial Ownership Registry and can be part of the solution for improving global standards, as well as promoting growth.

As far as the agenda on transparency is concerned, it is now more widely recognised that Jersey largely complies and is already ahead of a number of the G8 nations.

The signing of a UK-Jersey FATCA-style agreement, and the disclosure agreement with the UK, now puts our position on, and absolute commitment to, tax evasion (illegal in Jersey for more than 10 years) beyond doubt. We are also prepared to tackle unacceptable tax avoidance, which we do not welcome in Jersey.

The other message that we were able to get out clearly as part of our G8 communications was the importance of our stable and sustainable public finances.

One of the main reasons the world continues to be in such economic difficulty is because politicians and parliaments have spent unwisely. Jersey’s record of prudent public financial management is a powerful differentiator.

The past few years have been difficult, with substantial challenges to Jersey’s economic model including the introduction of the zero-ten scheme, and of course, the impact of the financial crisis. The issues we have faced and difficult decisions we have had to make have taught us many valuable lessons.

At a time when many countries in the world have debts of over 100% of their GVA, Jersey’s balance sheet represents net value assets exceeding 100% of GVA. Together with plans for balanced budgets, we are ahead of most other jurisdictions in many ways, including economic fundamentals.

While Europe continues to be in turmoil and the UK and US are only just beginning to see small signs of recovery, Jersey is already in a strong position, meaning we can offer a level of stability and tax certainty to investors that other jurisdictions cannot provide.

Added to our first-class reputation and financial strength as a jurisdiction, Jersey also boasts some impressive features as a finance centre.

Well-located in a central time zone that spans business working hours across both Eastern and Western time zones, Jersey has a tax-neutral environment, without Capital Transfer Tax, Capital Gains Tax, Value Added Tax, Withholding Taxes or Wealth Taxes. This provides an ideal environment for global trade, where Jersey acts as an efficient conduit for cross-border investment.

We also have a unique constitutional position, which means although we are loyal to the British Crown, we are not part of the UK and do not participate in the British Houses of Parliament. This autonomy has been preserved over the last 800 years and means that we have our own, democratically elected government and judicial system, based on common law principles.

Jersey employs the largest number of finance industry professionals in any offshore centre (nearly 25% of the total workforce), meaning it has an exceptional level of expertise. With over 50 years’ experience in providing private wealth management and trust expertise, Jersey’s trust law (established in 1984) is a model for others. We additionally have over 40 international banks, over 1,380 funds under management and over 100 Jersey companies listed on stock exchanges around the world. All of the major accountancy firms have a significant presence in Jersey as well as five first-tier legal practices.

To build on this foundation and bring the many opportunities we have to fruition, it will be important to raise productivity within the wealth management sector through innovation and investment in our infrastructure.

One of the major investments we have already committed to is ‘Gigabit Jersey’. Gigabit Jersey is a pioneering programme that is set to transform communications in Jersey by bringing super-fast broadband to every home and business over the next 3-5 years. By creating a universal fibre-optic network, Jersey will soon be one of the best-connected places in the world.

We are also investing in the development of a new International Finance Centre, which will provide a world-class district for our premier industry.

Whilst other countries are still concentrating on deficits and debt, we are putting in place strategies for growth, investing significantly in our finance industry and business environment and, in turn, international businesses are choosing to invest in us as we look forward to a positive and confident future.

Of course, this is still conditional on there being a manageable number of job losses within the finance sector and a positive economic outcome from negotiations with the UK, including FATCA. However, as our 800-year-old relationship with the UK grows ever stronger alongside our international reach, Jersey is more than capable of staying ahead of the game and securing growth for those who do business with us.

Senator Ozouf is Jersey’s Treasury and Resources Minister

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