Originally published in Private Client Practitioner, Guernsey Report 2011
Guernsey is widely recognised as one of the leading offshore jurisdictions. How well has it fared during the global economic downturn and how can it remain at the top of its game. Peter Niven, Chief Executive of Guernsey Finance, takes a look at the island's current situation and next steps.
Mathematics professor John Allen Paulos mused that "uncertainty is the only certainty there is, and knowing how to live with insecurity is the only security." These words carry particular resonance as the world continues to pick itself up from the global financial crisis and economic downturn.
Guernsey cannot be completely immune from these worldwide issues, although the island has to a large extent remained resilient in the face of the pressures. Perhaps the most significant fallout for us though has been the increased focus on so-called "tax havens" or "offshore" centres.
I am very pleased to say that Guernsey is consistently recognised as being within the very top tier of international finance centres. There is still uncertainty over issues such as corporate tax rates and revisions to the EU Savings Tax Directive (EUSTD) but we are taking all steps possible to ensure that the island continues to be a leading international fiduciary centre.
Guernsey has been affected by the global economic downturn but we have perhaps fared better than some of our competitors. A great strength of ours is the breadth of finance business that is carried out in the Island. So, while business flows within one or two sectors may be adversely impacted, others may see an upswing or indentify new prospects. Now we are seeing greater stability across the sectors, including steady, if not spectacular, growth in business flows.
Today, Guernsey has a banking sector comprising 42 licensed institutions with total deposits of nearly £120 billion; a captive insurance industry that is the largest in Europe and fourth in the world; a funds sector with total business valued at more than £220 billion; an investment management and stockbroking sector with assets of more than £65 billion; and more than 150 licensed fiduciary providers, ranging from large multinational organisations to local, independent boutique operations, with excess of £300 billion worth of wealth and assets in trust.
The fiduciary sector has been a mainstay of Guernsey's finance industry over the last five decades and this heritage has developed an industry with significant experience and infrastructure.
This reputation for excellence has been a significant factor in Guernsey becoming the jurisdiction of choice for Qualifying Recognised Overseas Pensions Schemes (QROPS). Our well regulated trust providers offer schemes with major advantages for clients such as freedom of investment choice, flexibility of drawdowns, estate planning and fiscal benefits. In addition, the island's personal pension regime has over 25 year's experience and offers the security of HMRC and Guernsey Income Tax approval. In a similar way to QROPS and the related Qualifying Non-UK Pension Schemes (QNUPS) in recent times, there is great potential in being able to specialise within other niche areas such as film finance and intellectual property (IP) as they develop over the coming years.
What we are also seeing is that our practitioners are increasingly attracting clients from further afi eld. The traditional sources of the UK and Europe are being supplemented by new business from India, Russia, the Middle East and the Far East. We are working with the Guernsey government, regulator and industry to build key relationships and raise awareness of our offering in these regions so that we have access to a further pool of potential new business flows in the future.
This has led to Guernsey's government recently signing of a Memorandum of Understanding (MoU) with the Shanghai Municipal Financial Services Office and a Tax Information Exchange Agreement (TIEA) with the Chinese central government tax authorities.
The TIEA is the 19th such agreement that the island has signed with another jurisdiction and reinforces the fact that we adopt international standards of tax transparency. This was highlighted when we were within the first wave of territories placed on the OECD "white list" that was published at the G20 summit in April 2009.
The Guernsey government has also announced plans to give financial institutions a window from 1 January 2011 to 1 July 2011 for moving to automatic exchange of information as part of equivalent measures the island adopts in relation to the EUSTD. In addition, Guernsey was assessed by the IMF in the first half of 2010 and there is every indication that the final report will extremely positive for the island.
Guernsey has during its 50 years as a finance centre and particularly during the last decade or so faced scrutiny from the UK Government (the 1997 Edwards Report and the more recent Foot Report), the EU, the IMF, FATF and the OECD/ G20. The island has always cooperated in these processes and on each occasion been placed within the premier division of international finance centres.
Guernsey never rests on its laurels but is always looking to the future. We are currently facing challenges in a variety of guises, for example corporate tax rates and a revised EUSTD. Having said that, we have also been challenged many times in the past and the island has always proved more than capable of negotiating and adapting to survive.
Now the island has stepped up its representation within the corridors of power in both the UK and also the EU, where we have joined forces with Jersey to establish a Channel Islands Brussels Office (CIBO). In short, Guernsey is doing everything it can to ensure that the island remains attractive to corporate and private clients as a leading international fiduciary centre for many years to come.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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