Offshore finance – a view from Jersey

Ben Bestgen, a Scots lawyer who relocated to the sunnier climes of Jersey where he now works for Appleby, gives SLN readers the low-down on offshore finance and corporate substance in this year’s Annual Review.

Offshore finance came under scrutiny following the release of the Panama Papers in 2015, but the details of the work of international financial centres was lost in the ensuing furore.

In his article, Ben addresses the points detractors make against IFCs saying that critics “should note that well-regulated IFCs like Jersey, with regulatory frameworks comparable and in certain instances more sophisticated than the UK, are worlds apart from the scourge of the ‘Wild West economy’ of the 1970s.”

He goes on to detail the benefits of Jersey to the UK and EU.

“Excluding foreign investment into the UK, Jersey acts as a conduit for roughly €188 billion of investment into EU countries, supporting an estimated 88,000 jobs on the continent (based on data gathered between 2014 and 2016).”

As for Britain, “Jersey contributes about £14 billion to the UK economy directly, not counting the several hundred billions of foreign investment in UK assets through Jersey, up- streamed deposits and referred business from Jersey banks to UK banks. Roughly £5 billion in tax is generated for HMRC through trade and corporate activity with the island. Financial activity from Jersey supports directly and indirectly an estimated 250,000 jobs in the UK.”

Jersey is also “at the forefront of combating international money-laundering and terrorist financing” and operates a “sophisticated regime for capturing ownership information about corporate entities used in its jurisdiction”.

The island is, in addition, signed up to measures aimed at increasing transparency: the OECD’s Common Reporting Standards as well as its Base Erosion and Profit Shifting framework (BEPS), which comes into force in 2017/18.

As Ben writes: “BEPS facilitates automatic exchange of ownership information between tax authorities (instead of the current “on request” standard) and provides countermeasures against aggressive corporate tax avoidance, transfer pricing and tax-treaty abuse. In light of that, well-regulated IFCs with a commitment to high international standards are increasingly attractive for those seeking to do good business on a global scale.”

Ben has also recently contributed a chapter to Jersey Fund Finance 2017 along with Appleby partner James Gaudin.