The news comes as a surprise blow to Jersey, which has publically prided itself on its strong compliance record on recent international initiatives spearheaded by the OECD and the G20. The Crown Dependency also recently signed up to the US’ FATCA initiative and its UK equivalent.
Companies operating out of countries on the blacklist have to pay higher tax rates in France. It has been reported that being on the list triggers the application of 75% withholding taxes on French source flows to those territories, as well as the strengthening of anti-abuse mechanisms, which may include extra paperwork.
While the entry gave no reason for the decision, Geoff Cook, chief executive of Jersey Finance said in a response statement that it was “a bilateral issue relating to some outstanding tax information requests made by the French authorities, through the agreement Jersey signed with France in 2009″.
France also signed exchange-of-information agreements with Jersey as well as Bermuda and BVI in 2010. According to data provided by the French Government through to August 2011, Jersey and Bermuda had responded to all French requests for information.
It has been reported that the blacklist would not be activated until January 1 2014, allowing the three jurisdictions time to be removed from the list if they fulfilled their obligations by the end of the year.
According to Jersey Finance, the total value of banking deposits held in Jersey increased by £3bn from £152.1bn to £155.1bn during the first quarter of 2013, while the value of total funds under investment management increased by £1.5bn from £21.2bn to £22.7bn over the same period.
While Jersey Finance, a body which promotes the island’s finance industry, could not provide a data breakdown by territory, there are two major French banks on the Island, BNP Paribas and SG Hambros.
Cook said the French administration’s decision was “surprising” and did not take into account “all the significant action Jersey has taken this year in support of international moves on transparency and international cooperation”.
He added that Jersey’s government was strongly engaged with France and was “confident it can resolve this issue.”
As vice chair of the Peer Review Group of the Global Forum on Transparency and Exchange of Information for Tax Purposes, Jersey has now completed, agreed or initialled over 50 tax information exchange agreements.
Michael Lodhi, vice chairman of the Federation of European IFAs – whose company Spectrum IFA has a significant presence in France – said that the blacklist would have little impact on French clients who are unable to use non EU jurisdictions.
He said: “We do, however, come across clients who have been sold non-French compliant products – usually by UK IFAs or Offshore Banks – and are able to help re-organise their affairs to fit with their residential status. The French authorities have also been keen to “look through” offshore trust arrangements and more and more clients are coming to us to help unravel these.”