Jersey not affected by Cayman Islands difficulties

News - Tax

Tuesday, 08 September 2009 08:35

The financial problems currently being encountered by the Cayman Islands have led to media speculation that Jersey must be experiencing similar difficulties. However, the two jurisdictions are very different and Jersey has built up significant financial strength and resilience.

Terry Le Sueur, Chief Minister of Jersey, says, “Before the current economic crisis, Jersey had already modernised and broadened its taxation system. Public consultation on tax reform began in 2001; a 3% Goods and Services Tax and a 10% tax for financial institutions were introduced in 2008.”

Jersey runs a strong, prudent fiscal policy. Since the 1980s, the island has paid budget surpluses into a long-term savings account. This Strategic Reserve currently holds £500m – that’s 12% of the island’s total annual economic activity (GVA*). The government has no public debt.

This prudent approach to fiscal policy was strengthened in 2006 with an improved fiscal framework which introduced a Stabilisation Fund (effectively a second savings account). The government has used this to put money aside in periods of growth, which is now being used to support the economy through the current downturn.

Jersey also introduced an independent Fiscal Policy Panel of leading economists to publicly advise the Treasury Minister. This use of independent advice in setting fiscal policy has few parallels in other small jurisdictions, or even in larger economies.
Jersey’s finance industry has been relatively unaffected by the global downturn, with only modest job losses to date. Profits for 2009 are likely to be down after a strong run lasting several years, but the diversity of Jersey’s finance industry is expected to limit the overall impact from a downturn in any particular financial sector.

Jersey’s long standing commitment to international standards of regulation, co-operation and transparency should ensure its continued success as an international finance centre in the years ahead. Jersey firmly supports the OECD drive to achieve a level playing field in tax cooperation, including an end to the bank secrecy laws that exist in other jurisdictions.