20 FEBRUARY 2002

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Jersey sanctions threat may catalyse rush to repatriate funds

By a staff reporter
The government’s investment repatriation scheme could see a large influx of funds by the end of the month, with Jersey being threatened to adopt better financial transparency practices by 28 February.

Jersey, one of the infamous Channel Islands tax havens, has long been a favourite fund sanctuary for many Maltese who in the past had sought to conceal their funds far from the eyes of the authorities.

However, if the island – which falls under the protection of the UK but is independent of its parliament - fails to conform with international stipulations aimed at improving global financial transparency it may face sanctions.

It is thought that UK government officials are privately urging Jersey to meet the 28 February deadline for transparency set out by the world’s leading industrialised countries.

However, whether Maltese nationals holding funds on the island will pre-emptively respond to the possibility of Jersey adopting financial transparency and take advantage of the government’s no strings attached repatriation scheme still remains to be determined.

The threat of sanctions against Jersey can trace its roots back to a blacklist of 35 tax havens published in the summer of 2000 by the Organisation for Economic Co-operation and Development, which is comprised of the world’s 30 most industrialised nations.

While Malta had narrowly avoided being listed by committing itself to reformatory measures prior to the publication of the damning list, 28 offshore centres were ‘named and shamed’. These, including Jersey, face the daunting possibility of OECD action and bi-lateral countermeasures by OECD members, unless they consent to become more transparent with overseas tax authorities.

While Jersey undoubtedly treasures its financial secrecy, a key to the island’s wealth, its authorities have not yet announced how they are to respond to the 28 February deadline. However, over the last few week three infamous tax havens – the Bahamas, the Cayman Islands and Antigua and Barbuda – have singed bi-lateral information agreements with international tax authorities. Many experts speculate that Jersey may very well follow suit.

The investment registration scheme, Finance Minister John Dalli’s brainchild, was introduced in November’s budget and is aimed at individuals holding ‘undeclared’ foreign accounts and allowing them to repatriate such funds without facing penalties.

The investment registration scheme has provided tax defaulters with the opportunity to regularise their position and see their overseas holdings repatriated and integrated under the Maltese withholding tax system - without being reported to the tax authorities.

31 March will see the first change to the scheme’s registration fee, when it rises from three to four per cent. Participants are required to pay the a one-off registration fee, which is equal to a percentage of the current market value of their investment – three per cent if registered before 31 March, four per cent if registered between 1 April and 30 June and five per cent if registered after June.

The Business Times, Network House, Vjal ir-Rihan San Gwann SGN 07
Tel: (356) 382741-3, 382745-6 | Fax: (356) 385075 | e-mail: editorial@networkpublications.com.mt