Guernsey says it is well positioned to deal with tax
issues coming its way.
There are numerous issues related to tax that international fund
jurisdictions are required to deal with at present, as ADI has
documented. The beneficial ownership exchange and BEPS are two of
the most prominent of them. On both these items Guernsey believes
that it is well positioned, and probably better so than any of its
rivals. ADI hosted a roundtable in Guernsey in March, where the tax
challenge to all international fund jurisdictions was dealt with in
Unlike some other offshore domiciles Guernsey has been
collecting beneficial ownership information on a corporate registry
since 1999. If you want to have a company in Guernsey, you have to
have a regulated financial services provider run that company for
you. Trust companies and fund administrators, for example, are
required to find out who owns the company - and not just the legal
owner of the shares in that company, but also the ultimate
So, at least for Guernsey, the issue is not so much whether
there should be a registry but whether the information should be
made available to the public. There are many good reasons why this
information should remain outside the public domain, it was argued
at the roundtable. But the point is that it is available to tax
authorities and others if required. The Financial Action Task Force
approach, followed by Guernsey, is to ensure that the true owners
are known, that this information is readily available and that it
can be exchanged when necessary.
But what happens if Miliband gets into Downing Street in May and
carries out his threat to blacklist jurisdictions that do not make
the information public? JTC's Steve Desmond said that if
Miliband comes to power and carries out his blacklist threat he
will have to do that to many OECD countries, in addition to
Guernsey and the other offshore centres.
BEPS is another challenge for the offshore centres. Much of the
roundtable discussion focused on this particular topic, and what it
means for Guernsey and other similar domiciles. Whilst many details
surrounding BEPS have to be finalised one thing is sure: having
substance in a jurisdiction is going to be critically
Gavin Farrell of Mourant Ozannes made the point that BEPS is an
extension of central management and control; it focuses on where
that is. BEPS will make it more difficult for us to prove that a
presence in Guernsey is justified. But it will be easier for
Guernsey to demonstrate that there is real substance than it will
be for the Caribbean domiciles to do this.
Guernsey Finance's Dominic Wheatley said that substance
means different things to different people but Guernsey has a long
history of meeting challenges such as BEPS and having survived
them. If the OECD produces a set of rules that everyone has to
adhere to that willn be helpful to Guernsey as it will create a
level playing field.
Fiona Le Poidevin, who is the new CEO of the Channel Islands
Securities Exchange, made the point that BEPS was set up with the
Googles and Starbucks in mind; there is a danger about how rules
designed for companies like these will affect the fund industry.
But when it comes to transparency Guernsey leads over its
competitors so shouldn't be any concern on this score. And
Carey's Joe Truelove said that with respect to investment funds
and BEPS Guernsey offers a tax neutral product similar to those
that onshore jurisdictions offer. This shouldn't be affected by
People use Guernsey as a fund domicile because it has flexible
regulation and good company law, not because of tax.
Investment funds domiciled in Guernsey are big investors in the
UK. KPMG has done research on this topic which suggests that there
is £25 billion of net investment (investment coming from
outside the UK into the UK) from Guernsey based funds. The
universal view at the roundtable was that no government in London,
Labour or Conservative led, would want to jeopardise that. A point
made by many contributors is that politicians often say silly
things in the heat of an election campaign. Once the campaign is
over much of this is then quietly dropped.
Many people are baffled by trusts, the purpose of which they don't fully comprehend. Some even regard them with suspicion, as tools of of opaque tax evasion strategies of a type favoured by wealthy individuals.
We were recently instructed by a Bank in relation to a regulatory matter. The Bank had made a suspicious activity report to the Financial Investigation Unit ("FIU") due to their concerns about the potential source of funds in an account.
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