Guernsey seeks to strike difficult balancing act
Within a rapidly changing global finance industry, offshore centres are reassessing their identities and their place within it. Guernsey is one of them, but it has a difficult balancing act to strike between reaching out to new business and preserving its identity.
Offshore centres have been engaged in a hard fought battle since the first wave of the financial crisis hit in 2008. Despite often being preferred by managers over larger jurisdictions for their efficiency and favourable tax structures, and by wealthy investors seeking privacy and protection, politicians have made them scapegoats for the wider industry’s failings.
They have an inherent mistrust of offshore centres, labelling them “tax havens” and saying they are accountable for the funding gap dragging down Western markets. But according to William Simpson at Ogier, “the OECD and EU were on the warpath before the crisis-they must have known there was a budgetary problem.” He says Guernsey’s books were balanced until the EU and OECD saw the tax system as pernicious, now there is a “black hole” as the Channel Island is running a budget deficit for the first time.
Representatives from Guernsey’s finance industry think the level of suspicion emanating from larger powers is a disservice to what the island does.
While Jersey is undertaking quite an aggressive lobbying campaign, Guernsey’s finance industry representatives are instead making a push to capture new business, says deputy chief executive and technical director at Guernsey Finance Fiona Le Poidevin. With the balance of growth transferring to the east, Guernsey has set its sights on Asia. In May, the Hong Kong Stock Exchange’s executive committee gave their approval for Guernsey incorporated companies to list on the exchange. A number of Guernsey companies have opened offices in Asia: Law firms Mourant Ozannes will open in Hong Kong in August, Collas Crill is already in Singapore, Ogier in Shanghai. Fund administrators have also broken into the region: Nerine Group was the first Channel Islands trust company to open in India in April.
Moves have been boosted by efforts from Guernsey’s political authorities. Last year, the island’s chief minister Lyndon Trott signed a Memorandum of Understanding (MoU) with the Shanghai Financial Services Office, and a Tax Information Exchange Agreement (TIEA) was made with Chinese authorities on the same trip. A further trip to Hong Kong is planned this year to improve relationships with the Chinese government and regulatory officials.
Russia is in Guernsey’s sights, but the jurisdiction has to be careful not to entangle itself with the wrong kind of business. Le Poidevin recently returned from a fact finding mission in the country, and concludes there are opportunities for Guernsey both to offer structuring for Russian investment funds and for Russian corporates to set up through Guernsey. Certainly, Russia has spending power and is ready to use it. “The mentality is spend now, because it might be gone tomorrow,” she says.