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Crown Dependencies Welcome Foot Report Findings

Monday, November 2, 2009

The British Crown Dependencies have welcomed the findings of the UK government's review of the dependencies, published on October 29, which recognizes their economic benefit to the United Kingdom, and efforts to achieve compliance with international standards.

The report, authored by Michael Foot, examines the opportunities and challenges facing the British Crown Dependencies (Guernsey, the Isle of Man, and Jersey) and six Overseas Territories (Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, Turks and Caicos Islands), with regard to:

  • Financial supervision and transparency;
  • Taxation, in relation to financial stability, sustainability and future competitiveness;
  • Financial crisis management and resolution arrangements; and
  • International co-operation.

Commenting on the release of Foot's findings, Financial Secretary to the UK Treasury, Stephen Timms stated that:

“I welcome Michael Foot’s report which comes amidst a real step change in the international determination to tackle tax and regulatory havens under the UK’s leadership of the G20."

He continued: "This report sends a strong signal to overseas financial centres that they must ensure that they have the correct regulation and supervision in place, while also ensuring their tax bases are more diverse and sustainable to withstand economic shocks – this is essential to their long term stability.”

In his report to HM Treasury, Foot highlighted that:

  • The Crown Dependencies make a significant contribution to the liquidity of the UK market, providing net financing to UK banks of USD332.5bn with Jersey by far the largest net contributor;
  • The Crown Dependencies’ decisions to build up reserves in recent years of growth has increased their resilience;
  • The Crown Dependencies have good frameworks for tackling money laundering and terrorist financing, as recognised by the Financial Action Task Force (FATF);
  • All Crown Dependencies had met the Organization of Economic Cooperation and Development (OECD) standard for tax transparency by the G20 meeting in April 2009, and are encouraged to continue to negotiate further TIEAs;
  • The UK should call on all EU member states and third party countries to move to automatic exchange of information under the EU Savings Tax Directive, and so enable Jersey and Guernsey to introduce automatic exchange by ending the current transition period;
  • The UK should take the lead internationally in encouraging improvements to international standards and transparency of beneficial ownership;
  • The UK ‘tax gap’ due to suspected tax avoidance is significantly lower than previous estimates – rather than GBP11.8bn previously claimed, this is now estimated to be no more than GBP2bn globally (with any avoidance through offshore centres being an unidentified component of this);
  • Jurisdictions should consider whether an Ombudsman scheme is justified;
  • Jurisdictions that propose to offer protection to retail depositors must ensure that compensation schemes can be understood by those depositors.

Responding to the report, the Isle of Man’s Chief Minister, Tony Brown, applauded the findings as a “positive, constructive, and independent assessment".

Brown commented: "We welcome its broad findings which recognise the work that the Isle of Man has done over the past decade and acknowledges that our actions to diversify our economy, measure and control public spending and build financial reserves during periods of economic growth have provided us with the resilience we have today.”

“It is especially pleasing that many of the main recommendations of the report align with policies the Isle of Man already has in place or is committed to implementing.”

Brown added: “I am also pleased that Foot was able to acknowledge that the Isle of Man makes a significant contribution to the UK economy, by providing a gateway to route funds to the City and by servicing the financial needs of many UK nationals living abroad.”

Geoff Cook, Chief Executive of Jersey Finance, commented:

"This latest review has demonstrated once again that Jersey’s financial services industry has good resilience in the face of a severe economic downturn, and that it has a regulatory regime of a high international standard, capable of evolving to meet changing global requirements. The positive findings of the British Offshore Financial Centres Review are a further endorsement in a year during which Jersey has been placed on the ‘white list’ by the OECD for meeting agreed international tax standards and been classed by the IMF in the ‘top division’ of international finance centres, for the quality of its regulatory and supervisory regime."

For his part, Guernsey’s Chief Minister Lyndon Trott said of the review that:

“In my view this report vindicates the position of Guernsey and the other Crown Dependencies. Foot finally confirms the issue that the three Crown Dependencies do provide a positive economic benefit to the UK.”

“Once again an independent expert has found Guernsey to be a favourable, compliant and transparent international financial centre, which can offer high quality professional services for the benefit of the global economy.”

Trott also welcomed comments from Lord Bach, Minister for the Crown Dependencies at the Ministry of Justice, who described the report as "considered and helpful".

“Bach has expressed his confidence that the Crown Dependencies will continue to lead in terms of meeting new financial standards. I too am confident that we will continue to be regarded as an example for other offshore financial centres to follow,” Trott concluded.