Staying on white list will test hoop-jumping skills
WHEN the chief minister made an early pitch to increase the external relations budget as the States discussed its accounts there were whispers of opportunism and not being a corporate player.
WHEN the chief minister made an early pitch to increase the external relations budget as the States discussed its accounts there were whispers of opportunism and not being a corporate player.
But it was a way of Deputy Lyndon Trott laying down a marker early in the day amid a climate where the domestic agenda increasingly follows the international one.
A world where nations' economies are struggling is a world where countries fight for every penny they can get – and one where plugging the leaks to stop money going offshore becomes very attractive politically.
It is one where you need to get your voice heard and make sure you are ahead of the game.
There is a feeling if it were not for the storm that has followed President Obama's healthcare plans in America we would be hearing a lot more about proposals there to crack down on tax havens.
Early in May, he vowed to curtail the tax benefits of US companies and individuals who stash cash in overseas accounts.
He has, not surprisingly, since come under attack from corporate America and the right, but work is ongoing.
We heard last week that the UK had signed a deal with the previously secretive Liechtenstein to share information about British residents with their money in accounts there. A five-year period of grace exists to come clean before the threat of losing it becomes all too real.
This would not have happened a year ago.
Some believe it has set a precedent that the tax information exchange agreements that have been the benchmark so far will become tougher.
Guernsey's reliance on global events was made no more plain than at the 'London summit', as the G20 leaders planned the initial crackdown on tax havens.
Where would we stand now if we had not been white-listed?
The OECD's subsequent publication of its white, grey and black lists has laid the groundwork for the ever-tougher standards that we are beginning to see.
Two events in September should reveal what hoops the island has to jump through next to protect its white-listing and, in effect, its economic future.
First up is a two-day OECD global forum on taxation in Mexico and then the next meeting of the G20 in Pittsburgh.
Experts are in agreement that the demands are about to get tougher.
KPMG tax partner Tony Mancini said Liechtenstein had come from a very different place to Guernsey because it had banking secrecy.
The island also has anti-money laundering legislation.
'If we want to continue to provide services as an international finance centre we have to be white-listed,' said Mr Mancini.
'But the bar will go up. I've heard suggestions that with the G20 in September that there should be 20 TIEAs signed.'
Guernsey is on 14, crucially including its major trading partners, and with a pretty open invitation for OECD countries to get around the table to sign more.
There are suggestions in some quarters that the standard could reach into the 30s – all EU member states and OECD members.
'The Liechtenstein deal demonstrates how the process is continuing and what happens to people that don't play ball,' said Mr Mancini.
While the numbers game makes it a simple thing to monitor, proposals on the table would make the system more robust – just signing with small like-minded jurisdictions would not be enough.
So being white-listed could take into account who you have tax agreements with, the quality of them and whether they are effective.
Tax critics like Richard Murphy want to go further with automatic exchange of information. Their voices are heard louder every day.
Ernst & Young tax partner Graham Parrott said: 'I think there will be more pressure with people to be more open and transparent, people have to go down that path. When you see Liechtenstein doing what it's doing it's a fair indication of where the world has gone in recent years.'
He added that being on a white list was great, but if everyone was on it, the list served no purpose.
But the positive competition it led to was a good thing, he added.
Where does this end though?
The concern now is not so much about TIEAs, but what could follow.
'At the heart of this is countries wanting to raise more reserves for themselves,' said Mr Parrott.
The UK's interest in Liechtenstein surely has a lot to do with some £3bn. it believes is stashed there.
Mr Parrott's attention is drawn now to a wish to extend the EU savings directive – a move easily avoided by going outside the union and so creating an unlevel playing field.
He is also focused on possible action by nation states, which takes us straight back to Obama's proposals.
If Guernsey does not want to be caught lagging it needs to move closer to the heart of the discussion – and that is just what the external relations team can do.
But could the island go further?
A few months back, in a casual conversation, one minister suggested we needed some form of representation in Brussels, although not going as far as making the break for independence and subsequent full-blown membership.
It all again comes down to how much faith you put in the UK representing the island's interests, or whether we would be better off shouting our own corner.
Would our voice and interests be heard louder under a Conservative government? Or, indeed, if the political arm responsible changed from being the Ministry of Justice to the Foreign Office?
Can Guernsey ever really establish its own international identity while still being the UK's play thing?
