This week the finance sector has been rocked as the Island attracted criticism and made headlines internationally for its role in an alleged tax avoidance scheme involving US tech giant Apple, which – according to a data leak dubbed the Paradise Papers – received advice from Esplanade-based law firm Appleby.
Concerns have also emerged over whether Jersey will meet the criteria required to avoid being added to an EU tax blacklist of non-co-operative jurisdictions, which is due to be published on 5 December, because of questions over the ‘economic substance’, or real business activity, of companies operating in the Island.
Commenting on the stories surrounding the Apple/Appleby case, Senator Ian Gorst said the increasing international scrutiny of offshore finance was why the Island had signed up to several international standards in recent years.
‘All the reporting that I have seen has said that there has been no illegality in regard to anything conducted in Jersey,’ he said.
‘If we take the Apple case, we know that they notified the Irish and US authorities they had changed their tax residency. That’s an important starting point but we know that capital flows and where people pay tax has been the subject of much conversation by international standards bodies.
‘This is why we signed up to the OECD BEPS [the Organisation for Economic Co-operation and Development’s base erosion and profit shifting reporting measures], why we have already brought forward legislation for country-by-country reporting and why we signed up to the Common Reporting Standard.’
Earlier this week, the Chief Minister called on the International Consortium of Investigative Journalists to hand over the documents they have relating to the Apple/Appleby case, so the States could investigate the matter.
A tweet from the ICIJ on Wednesday, however, again confirmed their position of not sharing documents with governments.
‘I think that they do need to consider, if they think there is wrongdoing, that the appropriate authorities should be given that information, so that they can rightly investigate it,’ said Senator Gorst in response.
‘My point is that if there is [any wrongdoing] then we are fully prepared to investigate it. It is really important that we trade as an international finance centre and meet relevant international standards.’
The Chief Minister said that his keenness for the Island to meet international standards was why he had also brought up the issue of economic substance earlier this week, which is a key factor being considered by the EU Code of Conduct Group responsible for drawing up the blacklist.
At present substance tests are carried out by the Jersey Financial Services Commission when handing out licences to businesses, but Senator Gorst would like to see this practice enshrined in law.
‘The conversations we have been having with Europe and elsewhere – and we have answered questions from the Code Group – is that the regulator is looking at substance,’ he said.
‘Substance, by the way, means different things for different structures. A substance test for a trading company is different from that for an investment holding company.
‘They [international bodies] know that the regulator does this. They know that we have 30,000 companies administered here and we have 13,000 employees, so we are not just a brass-plate operation.
‘But I have been saying this is perhaps the moment in time where we should show that not only does the regulator do these tests, but to demonstrate that we are not a haven for rogue operators, we should think about how we might put those tests onto a legislative footing.’
He added: ‘This would give more confidence that they know we are doing these tests and we know it is important. So, we are going to take the natural next step in proving this to the world.’
Senator Gorst also said that Jersey was working with authorities in the UK to make sure that they were ‘confident’ that abusive and aggressive tax schemes are not operating here.
