The use of so-called offshore financial centres rarely makes for positive stories in the media. In Britain, almost every newspaper, with the exception of the Financial Times, chooses to paint a picture of such jurisdictions being used to hide money or to avoid tax liabilities.
Whilst the media puts across a very one-sided view, politicians in the UK, Europe and the US have been keen to be seen to be acting against the use of international finance centres for illegitimate reasons. This has resulted in a noticeable increase in regulation and calls for public registers of corporate ownership with a view to increasing transparency.
What the media doesn’t appear to understand is that there are many and varied reasons for using international finance centres. At their heart, “tax neutral” jurisdictions like Jersey, enable international trade and global living. They are a key element of the globalised world and play an important part in the smooth running of business worldwide.
Many reasons for using Jersey
Families often use structures such as trusts and foundations to plan for the future. They want to ensure their wealth is protected from misuse or squandering by future generations. Some individuals and families that live in less politically stable parts of the world use international finance centres as a safe haven for their assets because they are unable to trust the financial systems where they live.
At the corporate level, tax neutral status and a wide range of double taxation agreements serve to help entities, such as funds, pool their globally-sourced resources without placing extra tax burdens upon them. Taxation of investors’ gains will still take place in their home countries, in accordance with their local laws but the role that Jersey plays in enabling the gathering of a fund’s capital without taxation in the island itself, is crucial to ensure that the fund is able to minimise its costs.
As well as the advantages created by tax neutrality, well-run jurisdictions play host to thousands of leading professionals. Lawyers, accountants, investment managers and trustees are just a few of the professions that can be found operating from a place like Jersey.
Such a wealth of talent, expertise and experience is enormously helpful to businesses, families and individuals whose interests are complex and often require an understanding of the laws of different nations. If you can find the help you need in an international finance centre, then it makes a compelling case for using one.
Most importantly, leading jurisdictions, of which Jersey is definitely one, work closely with authorities around the world to ensure that tax avoidance and criminality don’t take place. Jersey has held a register of beneficial ownership of companies for nearly thirty years, which is far in advance of almost every other financial centre in the world.
The island has chosen not to make all of the registers public but also makes no secret of the fact that the appropriate authorities are able to quickly and easily request information to help them with their investigations. Such cooperation has seen Jersey receive plaudits from a range of countries, including the US.
It’s not about selling newspapers
Jersey’s approach to new regulations, whether for Anti-Money Laundering, KYC, FATCA or the Common Reporting Standard, has been to engage cooperatively and openly, whilst also sticking to the principal that transparency doesn’t have to mean a loss of privacy. This approach is working well, with clients understanding the need for them to provide increasing amounts of information, whilst also knowing that their personal data will remain confidential, only to be used by authorities when it is needed and not available to the general public.
This may frustrate the media, which naturally wants to know everything but we believe that Jersey provides a balance that works well for both our clients and the authorities. It’s just not an approach that helps to sell newspapers!