Taxation in Jersey

The social protection system in Jersey is known as Social Security. In 2004, Jersey spent less than any EU country on social protection at 12.3 per cent of GDP, though the island's per capita GDP was higher than the European average.[19] Social security contributions are funded by both employees and employers on monthly earnings.[1]

As of 2023, the basic state pension is £253 per week for single persons and £421 for married couples.[1]

During the COVID-19 pandemic, the government introduced Co-Funded Payroll to support businesses.[20]

Many have criticised Jersey's tax policies and labelled the island as a tax haven, although some, including the Government of Jersey,[21] do not recognise that label.

Despite the island's small size, it is recognised as a large offshore finance centre. Jersey Finance estimates that Jersey trusts control £1 trillion in assets. According to the Tax Justice Network, Jersey suffers from the "finance curse", a term used to describe a low-tax jurisdiction's overreliance on the finance sector (which accounts for over 50% of the island's GVA and directly accounts for 25% of the island's jobs) and a lack of a viable alternative development strategy.[22] Even in the modern day, Jersey continues to encourage high-wealth individuals to settle in the island to take advantage of lower tax rates.[23]

Jersey has a long history of tax avoidance, being one of the first offshore financial services markets. Jersey has a long history of low-tax and duty-free economic activity. Jersey's situation between France and England meant that Jerseymen took up smuggling of goods into French and English ports. For example, Jean Martel of St Brelade organised brandy and textile smuggling into both sides of the Channel.[23] In the 1920s, high net worth individuals from Britain would emigrate to the island (or simply shift their wealth there) for tax purposes.[22]

In 2020, the Tax Justice Network, a UK tax advocacy group, placed Jersey seventh in its list of "The top 10 countries that have done the most to proliferate corporate tax avoidance and break down the global corporate tax system"[24] and 16th in its Financial Secrecy Index. below larger countries such as the UK, however still placing at the lower end of the 'extreme danger zone' for offshore secrecy'.[25] The island accounts of 0.46 per cent of the global offshore finance market, making a small player in the total market.[26] A large proportion of the financial services conducted in Jersey are tax-driven, meaning they are booked there without the requirement of adding value.[27]

Tax Research UK classes Jersey as a tax haven.[28] It too claims Jersey is a tax haven, citing its "half-hearted commitment to transparency".[29] Jersey's finance industry featured in a BBC Panorama documentary, titled "Tax me if you can",[30] first broadcast on 2 February 2009.[31]

It is arguable that the people who benefit from Jersey's new tax structure are the owners of the large businesses that are separate or support the financial service based businesses. This is because they do not have to pay any corporation tax but will still benefit from the island's business.[32]

In 2020, the Corporate Tax Heaven Index ranked Jersey 8th for 2021 with a haven score (a measure of the jurisdiction's systems to be used for corporate tax abuse) of 100 out of 100, however it only has 0.51% on the Global Scale Weight ranking.[33]

As of 2020, the European Union does not consider Jersey to be a tax haven ("non-cooperative jurisdictions for tax purposes"). Jersey cooperates with the EU and implements all its commitments.[34] When the list was established in 2017, Jersey was initially on its "grey list" (Annex II), however was removed from the list entirely in March 2019.[35] One of the mitigation measures Jersey put in place was the "Economic Substance Law" in 2019.[36] Under the law, companies within its scope must be directed and managed, conduct Core Income Generating Activities ("the key essential and valuable activities that generate the income of the company and these activities must be carried out in Jersey") and have adequate employees, expenditure and physical assets in Jersey.[37] The chair of the EU Tax Matters Subcommittee Paul Tang has however criticised the list for not including "renowned tax havens" such as Jersey.[38] In January 2021, the European Parliament voted overwhelmingly to include on the blacklist of countries those that use a 0% corporate tax regime, which includes Jersey. However, the final decision still rests with the EU's Economic and Financial Affairs Council. Robert Palmer, director of Tax Justice UK, said, "post-Brexit the UK tax havens have lost their protector within the corridors of Brussels".[39]

Furthermore, in 2017 the OECD ranked Jersey as a 'compliant' country in terms of tax transparency in its Global Transparency Barometer.[40]

The Netherlands however does consider Jersey to be a tax haven. Jersey was placed on their tax avoidance "blacklist" in 2019. The list includes any jurisdiction with a corporate tax rate below 9%. As a result, companies registered in Jersey must pay 20.5% tax on interest and royalties received from the Netherlands from 2021.[41]

However former Chief Minister Terry Le Sueur, has countered these criticisms, saying that "Jersey [is] among cooperative finance centres".[42] Jersey has tax information exchange agreements with 40 countries, double taxation agreements with a number of other countries (with more "ready for signing").[43] Jersey Finance, the body representing the finance industry in Jersey, does not consider Jersey a tax haven, but does recognise ongoing tax evasion and avoidance.[44]

In September 2013 the UK Prime Minister, David Cameron, said it was not fair any longer to refer to any of the overseas territories or Crown dependencies as tax havens, as they have taken action to make sure that they have fair and open tax systems.[45] Its information privacy law also provides exemptions that other European countries do not, for example in the way Trusts do not have to disclose as much information to Benficiaries about use of their personal data as is normally required under such laws.[46]

A report by Capital Economics Ltd., commissioned by Jersey Finance found that the island is a conduit for around £500 billion of foreign investment in the UK. That report found Jersey is a net economic benefit to the UK, supporting between 250,000 and 575,563 jobs in the UK. 50 per cent of the foreign investment into the UK originates outside the London time zone, so the report argues that, without Jersey, the investment may go to other international finance centres, rather than staying in the British Islands. A survey in the report found that 85 percent of Jersey's financial services business would leave the sterling zone entirely without Jersey.[44]