Substance rules 'will make us stronger'

Andy Sloan, deputy chief executive, strategy, at promotional agency Guernsey Finance, also said yesterday that new ‘economic substance’ rules for companies could give the island a competitive edge with businesses increasingly looking to locate in transparent jurisdictions.

The new rules will require firms that are tax resident in Guernsey to demonstrate that they have sufficient substance locally.

They are being introduced after the island promised the EU that it would address the issue to stay off a tax blacklist.

‘Guernsey’s historic and continuing global leadership in tax transparency and reporting gives reassurance to global clients seeking comfort and confidence with the reputational credentials of a jurisdiction,’ said Dr Sloan when he addressed a local Institute of Directors breakfast seminar.

This leadership combined with the new substance requirements, Guernsey’s reputation as a ‘global specialist’ and a new financial services strategy offered a competitive advantage. The substance requirements ‘strategically should finally give us that absolutely clean bill of health’ in the longer term, added Dr Sloan.

Referring to the EU, it would allow Guernsey to say: ‘Here we are guys, we are kosher in this relationship. When the European Union actually applies it internally, as it’s been mooted to be doing last week, then it’s a jolly good space for us.

‘But those substance rules are the “what doesn’t kill you, makes you stronger [type]” – and I do think that it will be a growing criteria in locational preference.’

When asked if the EU had accepted the economic substance rules, Dr Sloan stressed that he was not part of the government. But he said that there had been a lot of engagement with the EU and the Crown Dependencies, which had worked closely together, on the issue.

‘I take my hats off to the team in the States that have done that, working in close collaboration with Jersey. I genuinely believe that having been party to the information, seen what is on offer, they’ve created a very compelling competitive platform for 2019 going forward.’

Dr Sloan also provided insights into a new financial services strategy for the island ahead of the expected formal publication of the policy framework next month during his speech at the seminar at the Old Government House Hotel yesterday.

Key to the plan was the repositioning of Guernsey as a ‘sophisticated and specialist global finance centre’ based on an evolutionary growth strategy. This includes supporting the development of artificial intelligence and building on already world-leading work around green finance.

‘We have recently been accepted into the UN’s Finance Centres for Sustainability Network and are one of just eight founding members of its European hub, alongside London, Paris, Dublin, Milan, Frankfurt, Luxembourg and Switzerland. Not a bad peer group, if I may say.

‘The scale of the prize of success is enormous. Estimates of the scale of required investment in green and sustainable assets to meet the UN Social Development Goals runs into the tens of trillions of dollars,’ said Dr Sloan.