Jersey and Guernsey may be straightforward - if expensive - places for family holidays, but in the popular imagination they hold a special place as tax shelters.
Accordingly, when the Government last week apparently surprised everybody by announcing a review of the offshore financial shelters operated by the two Channel Islands, as well as the Isle of Man, it was initially assumed that this was some kind of Inland Revenue crackdown - even though it was stressed that there was no link with the reported financial arrangements of Geoffrey Robinson, Paymaster-General. As soon as it was realised that the move had been made by Jack Straw, the Home Secretary, the mood became more relaxed.
According to one financial adviser, this meant in effect that an audit of arrangements for preventing money laundering and other aspects of fraud was under way. And representatives of all three centres have stressed that they are - in the words of one - "not regarded as a soft touch by money launderers".
Indeed, no doubt keen to draw a line under such embarrassments as the collapse of the Isle of Man-based Savings and Investment Bank in 1982 and the failure four years before of Guernsey's Barnett Christie, they have recently sought to emphasise that they are reputable as well as profitable places in which to do business.
The States of Jersey, in effect the island's parliament, was so angered by not being consulted over the move that it yesterday called a sitting to discuss how it was going to protest.
Pointing out that the island government had "no problem with a review in principle", representatives said it intended to co-operate with the Home Office; it was merely puzzled as to why constitutional procedures had not been followed.
In fact, the island has invited the Financial Action Taskforce, an international watchdog, to review its procedures, because it is confident that it meets the highest standards and is therefore an attractive place for law-abiding organisations to do business.
Such is the level of probity that certain leading accounting firms have been working with the Jersey authorities in order to draft legislation that would enable them to base themselves on the island in an effort to reduce their exposure to potentially ruinous negligence claims. The two proposed mega-mergers announced late last year have put a halt to discussions, but the possibility remains that Jersey could play host to substantial proportions of what would be huge organisations.
Not surprisingly perhaps, tax accountants, too, have lately been seeking to play down the significance of places such as Jersey. They point out that extensive arrangements between the Revenue and other tax authorities mean that it is difficult for taxpayers to keep funds completely out of sight - unless, as a tax partner at a leading firm of accountants has pointed out, they go over the line separating tax avoidance (which is legitimate) from tax evasion (which is not) through, say, smuggling cash back to mainland UK.
Accountants emphasise that the key use of offshore financial arrangements is to defer tax payments - unless an individual or company has resorted to tax evasion, the tax becomes payable when the funds enter the UK.
However, there are certain offshore products - particularly insurance bonds - that are much used by financial advisers in providing tax-planning services. These have the double benefit of not being subject to tax as they grow, while the individual does not generally have to declare income from them for self-assessment purposes. The real advantage of such schemes is in assisting individuals who plan to retire abroad.
John Allison of Scottish Life International, which uses the Isle of Man to provide its services, said that such arrangements were covered by European law and any attempt to change them would fly in the face of harmonisation.
There are, however, other further-reaching ramifications of any heavy clampdown. While Jersey, for one, has sought to demonstrate its respectability by stating that it will register only top companies and banks, observers point out that attempts to introduce too much regulation might threaten the Isle of Man and the Channel Islands and boost other international centres, particularly those in the Caribbean.
John Wosner, a tax specialist who is nearing the end of his term as national managing partner of the accountants Pannell Kerr Forster, said that too much tightening of the rules of discovery, for instance, could put the British centres at a disadvantage against places such as the Cayman Islands and the Bahamas.
Suggesting that it was possible to get too carried away by the status of the islands and the benefits they offered individuals and companies, he pointed out that they were "a good source of invisible earnings and increasingly well regulated".Reuse content