It seems as if not a day goes by at the moment without Guernsey, one the three British Crown Dependencies (the others being Jersey and the Isle of Man), being labelled a ‘tax haven’ and so now we are determined to rid ourselves of this label by providing the facts about banking in the Island.
One recent media report noted that Luxembourg is now considering giving up ‘banking secrecy’ and moving closer to information exchange. The article went on to say that there are other places in Europe where this is still available and that Guernsey is ‘home to secret money’.
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The first thing to note is that an IMF report from early 2011 showed that Guernsey’s legal and regulatory framework has the highest level of compliance with the Financial Action Task Force (FATF) standards on Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) of any jurisdiction globally which has been assessed under the current criteria. This includes EU Member states such as the UK (and Luxembourg) as well as the US.
No banking secrecy
Turning specifically to banking secrecy, perhaps one of the most fundamental differences between Guernsey and jurisdictions like Switzerland is that we do not have – and have never had – banking secrecy laws. What is more, Guernsey has been actively engaged in a process of enhancing its provisions for tax transparency and exchange of information at a much quicker rate than many other jurisdictions.
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By GlobalDataThe Island signed its first Tax Information Exchange Agreement (TIEA), with the US, in 2002. Since then, we have extended our treaty network so that, to date, we have signed TIEAs with 41 jurisdictions, including most of the G20 and EU Mem-ber States.
However, the story does not end there because in the meantime, Guernsey’s position has also evolved further so that we were among some of the first jurisdictions to accept in principle an Intergovernmental Agreement (IGA) with the US in relation to the Foreign Account Tax Compliance Act (FATCA). These negotiations are well underway and are now awaiting finalisation.
Guernsey has agreed in principle to a similar enhanced reporting regime through an IGA with the UK, albeit with alternative reporting arrangements for non-domiciled UK tax residents (non-doms).
The three Crown Dependencies have all agreed in principle to this set of arrangements with the UK. We have seen much media coverage lately about the amount of money that the UK expects to be able to recoup in unpaid tax from the Crown Dependencies as a result.
HMRC £1 billion figure too high?
HMRC has said that the anticipated tax take is £1 billion over a five year period. This comes from a combination of the enhanced reporting and the disclosure facility.
It is not exactly clear how that figure has been derived but it is interesting that it is significantly less than each of the Liechtenstein and Swiss disclosure facilities are expected to recoup. We believe that the final figure will be less than that predicted. Firstly, the aspired returns from Guernsey under the European Savings Tax Directive since 2005 have been much less than was originally envisaged.
Secondly, Guernsey was, at the start of 2011, the first of the Crown Dependencies to move to automatic exchange of information and therefore banks in Guernsey and their clients have been conducting business under those arrangements for several years.
Less than a month after Guernsey signalled its intentions to sign a ‘FATCA’ style agreement with the UK, the G5 countries of the UK, France, Germany, Italy and Spain signed a similar agreement for enhanced reporting requirements between those jurisdictions. The UK’s Exchequer Secretary to the Treasury, David Gauke, specifically mentioned that this built on the agreements reached with the Crown Dependencies.
Far from being behind the curve, Guernsey is actually ahead of the game when it comes to transparency and exchange of information for tax purposes. Honest, legitimate clients who pay the appropriate taxes in the relevant jurisdictions have nothing to fear.
Fiona Le Poidevin is chief executive of Guernsey Finance.
