The Institute of Economic Affairs this week published a paper which aims to add a bit of balance to the conversation around international finance centres and the positive role of international finance in facilitating global investment.
It's a paper Jersey Finance is pleased to have supported. Its publication brought to mind a quote, which forms the title of this blog, from Aldous Huxley about truth and how facts in all walks of life can so often get buried or lost as a result of misunderstandings and misrepresentations.
We've seen numerous examples of this in recent years in relation to the allegations levelled at IFCs. The Panama and Paradise Papers are cases in point, where vast amounts of often misconstrued and historic data were used to form a narrative that suited a particular populist agenda and pointed the finger at IFCs – despite the fact that very few prosecutions have been brought about as a result of the data thefts.
And we've seen it more recently too, with UK politicians and lobby groups wrongly conflating the poisoning of Yulia and Sergei Skripal on UK soil with the promotion of open registers and the activity of IFCS. What was a matter of national security was turned into a debate about combatting financial crime through IFCs and British IFCs introducing public registers of beneficial ownership.
During the debate in the House of Commons, for instance, when politicians agreed to legislate for the introduction of public registers in the Overseas Territories, there were sweeping generalisations about combatting secrecy and stopping the formation of shell companies as if such practices apply in every IFC.
They don't. In Jersey, for example, no one can buy or form a 'shell' company and our commitment to transparency has the highest independent endorsement from the world's leading organisations such as the OECD and the World Bank. It's even been tested by rigorous academic research. Equally disappointing was the follow-up Public Affairs Committee's 'Moscow's Gold' report, which claimed that there is lots of Russian money coming into the UK, that some of it comes through IFCs, and therefore it must all be illegitimate. But there were no concrete figures or evidence to back up that claim.
The factual arguments over the soundness or otherwise of fully public registers were largely ignored too. There are real question marks over the effectiveness of public registers, which are as yet unproven, and which I have blogged about previously, including their violation of a right to privacy and their ultimate effectiveness in securing good quality data that can actually tackle financial crime.
In contrast, Jersey has had a central register of beneficial ownership in place for nearly three decades. It is proactively vetted and verified by service providers that are legally required to know exactly the source of funds they are administering. That information is then available to the UK tax and regulatory authorities and to the authorities in all countries signed up to the OECD's Common Reporting Standard. It's a system that surpasses most other countries' anywhere in the world, and leads me to believe that public registers are really a solution to a problem that has already been addressed through central registers and automatic information exchange.
Jersey Finance has always been of the opinion that it is much better to form opinions and make decisions based on fact, which is why we've made a concerted effort over the past five years to build up a library of evidence-based research. It's a library now totalling more than thirteen papers and reports, that can provide a platform for a more focused conversation around IFCs.
The IEA paper is the latest part of these efforts. Amongst its key points are that:
- IFCs provide stability, security and help mitigate multiple layers of taxation when investing across borders, making investment more efficient
- IFCs are benchmarks for transparency and good governance
- clamping down on IFCs will not raise tax revenues or preserve existing levels of investment but would lead to investment decisions becoming politicised
I would welcome the opportunity to work with anyone seeking clarity on our position, so that our role in the global economy – which I believe is fundamentally positive and can play a part in offering a better future to people all over the world - can be more readily understood. To quote the IEA report:
"It is difficult to imagine the process of globalisation that has taken place over the last fifty years, bringing hundreds of millions of people out of poverty, happening without the robust financial and legal framework which offshore jurisdictions provide for investment. It would be counterproductive, for both the developing and the rich world, to undermine their essential functions."
Politicians, campaigners and others are right to demand high levels of transparency and a concerted, global effort to fight financial crime. Jersey is absolutely aligned with that. But let's not get carried away and ride on the crest of a populist wave – let's realise that there are differences between truth and opinion and let's have proper, sensible, progressive conversations. The best place to start is with the facts.
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