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Safe Tax Haven PDF Print E-mail

Safe Tax Haven

With only two months to go until the Organisation for Economic Cooperation and Development plans to demand sanctions against jurisdictions with harmful tax practices, Guernsey has yet to respond. It’s time to start talking, says Will Foggon

In choosing where to invest or deposit your money offshore, your decision should be based on the centre’s reputation and services.
Services refers to the range of products available on the island and the ease with which a bank account can be set up, a trust created, or a fund bought into.

Reputation is dependent on regulation. That is the degree to which financial regulations restrict illegal practices without affecting the quality of the services available.

Safe Tax Haven - Guernsey's Reputation

Guernsey’s reputation places it firmly at the top of the hierarchy of finance centres. Along with Luxembourg, Switzerland, Hong Kong and Dublin, the G7 group of countries’ Financial Stability Forum rates Guernsey as a group 1
(highest) finance centre.

Guernsey was one of the first offshore centres to set up a financial services commission, which it did way back in 1988. The Guernsey Financial Services Commission regulates the island’s insurance, banking and investment business and is charged with protection of the public against financial loss due to dishonesty, incompetence or malpractice.

In terms of services, Guernsey has the lot. There are 79 banks, handling deposits totalling £65.68 billion, 348 offshore insurers and 395 licensed investment companies.

Most of the large banks already have a presence on the island. Highly regarded operations, such as HSBC, ING Bank, Lloyds and NatWest all have representatives here, as do the likes of the Rothschild Bank Switzerland, and Leopold Joseph and Sons.

Safe Tax Haven - Investment International

As one islander told Investment International: “Part of the reason Guernsey achieves such high standards is because the people are professional. The institutions we have are associated with large banks elsewhere, so they have expertise inherited from the parent companies.”

HSBC Guernsey area manager John Davies agrees: “Guernsey has historically enjoyed a high degree of support from the authorities and the financial centre has worked with the authority to promote the jurisdiction and provide a high level of service to clients.”

Safe Tax Haven - Gary Durkin

In terms of the service standards, Gary Durkin, head of investment services at the Royal Bank of Scotland International, says Guernsey has achieved a good balance. “Guernsey is firmly against any practices that may encourage less scrupulous individuals’ activities,” he says. “Strict rules apply to opening bank accounts, to ensure that attempts to use Guernsey as a conduit for money laundering are closely monitored.”

And while this doesn’t make things any easier for the honest investor, it is necessary in order to ensure the ‘quality’ of the centre’s customers. “Due to strategies in play to stop any misuse of Guernsey, this now means that setting up bank accounts is not a quick, simple, ‘one signature at the bottom please’ process,” Durkin says. “Various forms of identification are required, checks may be made and references requested. To some, this may seem like overkill for those with the simple need to open a bank account, but clients should take comfort in this

And new business continues to arrive. By June last year, investment funds under management totalled £26.5 billion, representing a 16 per cent increase on the December 1999 figure, which was itself up 46 per cent on the previous year.

Safe Tax Haven - Richard Harder

And IFAs see the standard of services as second to none.

Richard Harder, managing director of Warrington Financial Services, says the regulation on Guernsey ensures a standard of service that is better than just sufficient: “The advantage of dealing through Guernsey is that you are dealing with a well-regulated centre. It is not only sufficient, it is first rate.”
Investors who purchase products through Guernsey are protected by the Investor Protection Act. The act ensures that all companies that operate on the island are properly checked out by the GFSC. And for investors, it means maximum compensation of 90 per cent of the first £50,000 and
30 per cent of the next £50,000, or a total of £60,000.

But Durkin suggests this protection is not quite first rate. “There is no scheme in Guernsey comparable to the Deposit Protection Scheme under the UK Banking Act 1987,” he says. So the scheme is better than nothing and better than most offshore centres, if not quite the best. However, this should make little difference to someone determined to earn their interest tax-free. If the choice is only between tax havens’ standards of
protection, then Guernsey performs well.

For news stories and relevant magazine features on Safe Tax Havens click here




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