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Little to fear from FATCA deal
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However, the FATCA – Foreign Account Tax Compliance Act – arrangement, which has been agreed in principle, is of great importance not only to financial institutions, those holding money in the Island, and our critics, who see it as evidence that our ability to offer competitive services is being threatened, but also to the entire community. Even those who, reasonably enough, find fault with the unbalanced nature of our economy must acknowledge that, in one way or another, financial services pay most of the bills.
If, then, there were any prospect of the FATCA agreement fatally undermining our finance sector, we should all be very worried indeed. Fortunately, rumours that we are all doomed appear to be gross exaggerations.
It is no doubt the case that the Island – along with the other Crown Dependencies – was left with relatively little room to manoeuvre by the UK when it came to acceptance of the new reporting regime.
It is nevertheless significant that leading industry figures – as well as senior politicians and their advisers – are sanguine about what the future will hold. To begin with, as much as 80 per cent of the information of relevant to the UK is already available to its authorities. In addition, there is widespread acceptance that the sort of openness required amounts to a new global standard. By accepting the FATCA model, Jersey, as a jurisdiction with a track record of probity, is signalling that it is fully prepared to abide by generally accepted rules.
But it would be naïve to suggest that everything in the garden is rosy. Although the UK is saying that the G8 group of the world’s wealthiest nations will probably throw its weight behind FATCA principles, this is, at present, no more than a pious hope. Moreover, jurisdictions such as Singapore and Hong Kong, who might want to follow their own paths, may well want to hang on to what they regard as competitive edge.
Meanwhile, although the UK Chancellor of the Exchequer, George Osborne, whose wish to see that all the Crown Dependencies had made FATCA pledges before he delivered Wednesday’s Budget speech was fulfilled, has estimated that the new agreements will drop £1 billion is in lap, he might be in for big disappointment. Our experts are unanimous in suggesting that the windfall will be far less impressive.
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