Yesterday yet another offshore investment location sought to cast itself in the role of the friend rather than the foe of international tax authorities.
In a speech entitled “Re-invention of Offshore Centres,” the Isle of Man’s Treasury Minister Anne Craine explained why she thought that the public perception of her country needed to be changed to that of a clean arena for honest business dealings rather than a tax haven.
The Minister was making her speech at Dublin’s 2010 Global Financial Services Centres Conference but the message was for a much wider audience.
Just because her country was a small island, claimed Craine, it does not mean that it is a haven for international tax evaders. In fact, Craine highlighted the positive contributions that the Isle of Man makes to the global economy. Citing the International Monetary Fund’s report of 2009 and Michael Foot’s report on Crown Dependencies and Overseas Territories, Craine held that her views were well supported by internationally acclaimed organisations.
Ms Craine said that despite recent measures the Isle of Man government has taken to improve tax exchange with other countries, its financial community has not experienced a downturn in the amount of business it has been doing.
This is no surprise – after all Tax Information Exchange Agreements have swept across the developed world and are becoming the norm rather than the exception. So an increase in the number that the Isle of Man is signing is not likely to affect business there.
However, what remains to be seen are the effects that the Isle of Man’s February Budget will have on the business it receives from offshore investment.
In particular, non-resident private individuals were dismayed to discover that their personal allowance for income tax from Manx investments will be withdrawn. Further, whilst the basic rate of tax stayed the same, the higher rate was increased from 18% to 20%. This is clearly a far cry from the crippling 50% that the highest earners have to pay in the United Kingdom, but investors in the Isle of Man must be watching with interest to see what comes next.
Jersey has long been seen as a low tax jurisdiction. However, it seems that no country is exempt from the belt tightening that is becoming necessary in financial centres all over the world. The question is; what effect (if any) will that have on offshore investors in Jersey?
The Crown Dependency benefits from the military protection of the United Kingdom but the freedom to do its own thing politically and economically. It is famously difficult to move there, creating an exclusive, wealthy financial centre that is based around the wealth creation industry.
Jersey’s Council of Ministers want to save 10% of their budget over the next 3 years, and are looking at ways of achieving this ambitious target. The island’s Treasury Minister stressed that efficiency savings and reductions in public spending would be their first port of call. Senator Philip Ozouf stressed that he was keen to ensure that taxpayers were getting value for money. However, if these efficiency savings do not yield enough of a reduction in the deficit, it seems that tax rises may be on the horizon.
Jersey Ministers are going to launch a review that will consider whether to raise Jersey taxes. It is not clear whether the measures would affect non-residents.
On the other side of the world, there is good news for individuals in Australia as more tax cuts are introduced. The latest round of measures is set to benefit low and middle income families, and is part of a programme of tax reforms that is now in its fourth year. Australian Treasurer Wayne Swan has announced an increase in personal allowances, resulting in a virtual tax exemption for many low earners. This is coupled with a simplification of the way in which tax returns are filled in and computed.
However, there is real controversy around the proposed mining tax, which opposition leaders claim would threaten an industry on which thousands of Australians rely for their livelihoods. With an Australian election looming in the next few months, no doubt the issue will be hotly debated.
Do expats enjoy a better quality of life than those who stay in their country of origin? 89% of respondents to NatWest’s International Personal Banking Department’s Quality of Life survey think so.
The image of an expat may typically conjure up the idea of a retired person relaxing on a golf course, but the Quality of Life survey revealed that British expats want to work hard. They just want a decent work/life balance too. 87% of those asked said that their work/life balance was good, and a further 89% said that the environment in which they worked in was good or excellent.
Commenting on the survey a NatWest spokesman said that the figures showed that British expats really were living it up abroad. The statistic that he felt told the most about expat lifestyles was that this year only 19% of expats said they would return to the United Kingdom at some point in the future – compared to the 26% who said that they were planning to go back eventually in 2008. Given the global economic downturn that has taken place in the last two years, expats appear to be weathering the storm wherever they are, and the majority do not feel the need to return home.
But moving abroad does not mean living in the slow lane at work. The expats who took part in the survey seem to have the best of both worlds – a developing career that is financially rewarding as well as not too time consuming. The survey found that on average, a professional expat earns £20,000 per annum more than their counterpart back home. 92% of those surveyed said that they had received a pay rise in the last three years (on average a media rise of 13% over that time period). If you consider also that taxes in their new home may be significantly lower, and offshore investment opportunities may be available, the expat life seems very attractive indeed.
We’ve heard about green investments. We’ve heard about tax havens turning over a new leaf and embrace the tax information exchange culture. But now Guernsey is aligning itself to be ahead of the game on both of those issues, with a growing number of green funds opening up.
The growth in green funds is often put down to investors’ disillusionment with the more traditional and less ethical opportunities that went so wrong and led to the global economic crisis. So called Socially Responsible Investment (SRI) can be an environmentally friendly opportunity linked to green technologies or green products. But the expression can also extend to investments in business opportunities that place corporate social responsibility high up their list of priorities.
If an investment is too complicated to explain in a single sentence and whiffs of questionable ethics, it stands little chance for today’s environmentally conscious saver, a Guernsey firm of financial advisers recently advised.
Guernsey is keen to seek out new kinds of investment product to continue its position as a first class destination for offshore investment. Its long standing mature financial services community may attract “green” investors who are looking for the level of comfort that only a well established financial centre can offer.
As a Crown Dependency, Guernsey has the protection of the United Kingdom from a military perspective, but nevertheless enjoys the political freedom to pursue its own agenda. Most importantly from the point of view of offshore investors, Guernsey has a free hand to ensure that non-residents are taxed (or rather, not taxed) in a favourable way.
The island is a popular location for Qualifying Recognised Overseas Pension Schemes, which are schemes the UK HMRC has approved for the tax free transfer of UK pensions. Aside from the obvious tax advantages, Guernsey offers such investors the freedom to choose and manage their assets that may not be available elsewhere. Perhaps if Guernsey is getting greener, British expats may find that their pensions are too.
Recent figures released from the Channel Islands show that the Crown Dependencies are enjoying a period of growth.
In particular, Jersey has released figures for the first quarter of 2010 which show that not only are bank deposits up (7.5% to £177.6 billion), but that the net asset value of funds being managed there grew to £180.5 billion over the first three months of this year.
Not only did the value or funds and bank accounts managed there increase, but the number of companies that were set up and funds that were opened grew too.
Commentators from the island said these figures were too early to define a trend, but they did show that Jersey had a promising start to the year. One trend however that could be identified was the growing popularity of Jersey as a financial centre for money that comes from the Far East.
Jersey’s neighbour Guernsey also had some positive news to share. Having released figures for the same period last month, the Guernsey finance industry claimed that the value of investment funds there rose by 7.2% to £197.4 billion.
Both islands (or strictly speaking both collections of islands) offer similar environments for low tax financial activity. Well established and well regulated, the two jurisdictions punch far above their weight in the world of international finance.
Guernsey spokesmen were also anxious not to infer too much from the figures, as since the end of March much has happened on the international stage that may affect the results for this quarter – stock market crises and oil spills may have taken their toll on June’s figures when they are announced.
Nevertheless, spokesmen for both countries have been positive overall about the gradual return of confidence, with Guernsey in particular having enjoyed three consecutive quarters of growth.
Can they make it four in a row? We won’t be able to tell until June’s figures are released in a couple of months’ time.
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