Wednesday 13 December 2017
Regarding the EU Council of Finance Ministers, ECOFIN, formally reaffirming Guernsey's status as a cooperative jurisdiction.
Last week in Brussels, the EU Council of Finance Ministers, ECOFIN, formally reaffirmed Guernsey's status as a cooperative jurisdiction. This clear reaffirmation from the EU that Guernsey is a cooperative jurisdiction is very welcome, fully justified and should be of no surprise to anyone who knows us.
The EU Tax Commissioner Pierre Moscovici described us as such last year, and the ECOFIN decision was based on a recommendation by the EU's Code of Conduct Group on Business Taxation, the Code Group, with whom the government of Guernsey has been actively engaged in an evaluation process throughout 2017.
The Policy & Resources Plan approved by the States' Assembly recognises that Guernsey's economic sustainability as an international finance centre has adherence to international standards as one of its foundations.
As part of our commitment to meeting international standards, Guernsey has for many years engaged willingly with the EU and the Organisation for Economic Cooperation and Development (the OECD) on tax transparency and economic substance. We have taken a number of significant steps to demonstrate its active commitment to both. This latest EU process has rightly recognised this.
Guernsey has long called for a fair, consistent and objective EU approach in its treatment of both EU and non-EU jurisdictions. I am heartened that EU Tax Commissioner Moscovici, who I met in Brussels just three weeks ago, has publicly called for the new EU list to replace the outdated and inconsistent national 'blacklists' maintained by some EU Member States. We remain on one or two, for example, Portugal and Lithuania, and I hope that we will now be removed from these.
We should also welcome the agreement at the recent Global Forum Plenary in Cameroon to establish an informal voluntary group. This will comprise the interested members of the Global Forum, the BEPS Inclusive Framework and the EU Code of Conduct Group. It will work together to ensure an objective and consistent understanding and application of the criteria used by the EU. In other words, working on the basis of the principle of a 'level playing field,' and to draw on the work of the Global Forum and of the OECD Forum on Harmful Tax Practices. This level playing field must of course include consideration of application to the EU Member States themselves.
The evaluation process that the Code Group has undertaken involved 92 countries and jurisdictions, including Guernsey.
The process led to the Code Group setting out a number of broad areas where it would like cooperative non-EU jurisdictions, such as ours, to take further steps to support economic substance. Guernsey is already committed to the OECD's Base Erosion and Profit Shifting (BEPS) action plan on economic substance, has put in place country-by-country reporting, and in June of this year was a signatory to the BEPS multilateral instrument.
The Policy & Resources Committee is publishing the most recent exchange of correspondence between Guernsey and the Code Group later today, and Deputies will have received copies of those letters this morning.
As that correspondence sets out, we look forward to engaging directly with the Code Group early in 2018 in order to identify steps to further strengthen our approach to economic substance. We are committed to ensuring that we implement those steps in the next 12 months.
Those steps could include amending legislation, changes to our regulatory requirements, additional accounting or tax reporting obligations or amended notification regimes.
As we consider those potential steps, we will ensure the States' Assembly is fully engaged at the appropriate times, and also that our business community is consulted including through the Guernsey International Business Association.
Guernsey is choosing to continue to meet EU tax good governance standards. This means that there should be no reason for the EU to have concerns over Guernsey as a location into which the European Investment Fund can continue to comfortably invest. Nor should it have any tax related concerns when considering our access to the EU market in the future on the basis of equivalence, when provided for in EU legislation. We therefore also hope too that the Commission will soon grant the AIFMD, the Alternative Investment Fund Managers Directive, third country passport which ESMA, the European Securities and Markets Authority, has recommended.
Guernsey is a good neighbour and trading partner to the EU, providing a vital role in ensuring the efficiency of global capital markets, including as a funnel for foreign direct investment into the EU and UK. We have nothing to hide, and we should be loud and proud of our contribution to the UK's economy directly and its exchequer indirectly.
Our funds sector funnels £25bn of foreign direct investment into the UK strengthening its capital account; the UK financial services industry receives significant revenues on the back of our finance sector - £1.1bn from investment management fees alone, strengthening the UK's current account. Tens of thousands of UK jobs - contributing to the UK exchequer - depend on what we do and our doing it well. We are working closely with CityUK, and it is understood that we are a vital part of the UK's post-Brexit prosperity.
As I said last week when ECOFIN made its formal decision, Guernsey has demonstrated that it is possible to balance transparency with privacy, and economic substance with competitiveness. We will maintain that approach.
Guernsey also makes a strong contribution to the EU capital market, and investment in infrastructure across Europe, and I am pleased that the work we have been doing in Brussels since establishing in 2011 CIBO, the Channel Islands Brussels Office, emphatically is helping to ensure that our positive role is understood by EU Member States.
Whilst ECOFIN's decision is to be welcomed as being the right one, no-one should be under any illusion - given the political nature of these types of decisions - it was not inevitable and required a considerable amount of time and commitment to ensure that Guernsey's position was properly understood. It is very clear from the feedback that both Deputy Trott and I have had from our respective recent joint visits with Jersey's Chief Minister, Senator Ian Gorst, in October and November, that Guernsey's active engagement and presence in Brussels is appreciated, welcomed and is absolutely essential to represent our interests.
We will need to continue this commitment and investment for the foreseeable future, particularly with Brexit looming. For those who are in any doubt as the value of our investment in supporting CIBO and in the visits we make to Brussels, I would cite this issue as being exactly the reason why we have to make those investments.
I should add that much of the work undertaken with the Code Group process, and indeed on our external relations, is undertaken in close partnership with Jersey. That will continue on this matter, and on matters such as Brexit.
Sir, to finish with an aside, I would observe that the effectiveness of our joint working in external relations with Jersey is unfortunately not always replicated in other areas of joint working. That is to be expected from time-to-time, but it has to be the exception and not the rule. Guernsey and Jersey face many similar challenges, and my recent conversations with Jersey's Chief Minister, Senator Ian Gorst, has led us to agreement that this may in part be due to the differences in political governance with different projects - and that a more formalised and strategic approach to joint working would be in both of our interests.
I am pleased that the Chief Executive Officer of the States of Guernsey and his counterpart in Jersey will be taking that forward in 2018 as a priority, and I hope that in early 2018 the Policy & Resources Committee will look to bring a short Policy Letter on joint working with Jersey to the States' Assembly.