When Arthur Miller wrote of the Salem witch trials in The Crucible he was applying a dramatic metaphor to the communist witch hunt that was taking place in America during the 1950s.
I have always admired Miller for tackling the uncomfortable through his work. Make no mistake: I do not profess to be of his literary standing by any stretch. However, I want to draw from his courage to confront a populist topic head-on.
My subject matter is slightly different to Miller’s. I am writing to clarify what takes place in Guernsey’s investment funds industry to counter some of the current misperceptions. Experience tells me that Guernsey is a well-established financial services jurisdiction and I want to share this to help shed some clarity on this topic.
So, where to begin? Guernsey plays an important part on the world stage by facilitating the investment of funds drawn from around the world into European financial markets. The return to the investors is subject to tax in their home country and the business activity generated by the investment in Europe is taxed in the jurisdiction where that activity takes place.
Globalisation for the investment funds sector sees funds that run through Guernsey invest in a wide range of projects that include delivering sustainability, innovation and important infrastructure to developed and developing countries. Advances in healthcare, renewable energy, technology and infrastructure are made possible because of the international flow of investment. Guernsey’s financial services professionals offer appealing expertise in these areas and beyond.
No financial services jurisdiction, whether on-shore or offshore, has shown itself to be immune from scandal. Take Global Laundromat and Amazon as just two operations to have hit the headlines for alleged money laundering and tax avoidance onshore. Indeed, these are global issues which need to be tackled unilaterally, collectively and collaboratively.
So, what are the drivers for investors and fund managers in the investment funds space to choose Guernsey?
Let’s start with what’s not on the list:
1. Tax is not on the list of incentives. As I’ve explained the businesses that the fund invests in and the investors themselves are taxed where they are based. Any workflow through Guernsey will not add an additional tax requirement however neither does it remove those that exist.
2. Neither does fund business come here to hide. Regulation shapes every aspect of how we work. All investment vehicles are subject to regulatory oversight in Guernsey through the Guernsey Finance Services Commission. This uniform approach is not the case for many onshore countries. Guernsey has embraced global regulation like FATCA and the OECD’s Common Reporting Standard and is fully compliant.
At PEA our experience indicates the following three drivers for choosing Guernsey as a good place to structure funds:
1. The scope of investment. Offshore funds are made distinct from onshore funds through the eclectic range of investors and investments from a variety of different countries. This scope is something that is complicated for an onshore fund to achieve. It’s easier to facilitate a multi-jurisdiction investor base via one independent location.
2. Investors in funds favour the opportunity that exists here to spread their financial risk across the multiplicity of investment options that are available to them.
3. Investors take comfort that they are dealing with a reputable centre that is well run. With a 50-year track record, industry-leading regulation and a multiplicity of advisors on hand to administer and provide advisory support, Guernsey offers a close-knit and experienced infrastructure.
New funds continue to launch in Guernsey and there continues to be an increase in the migration of structures to Guernsey that seek a better-regulated environment which their investors expect. Guernsey has a continued commitment to meeting EU standards on matters of tax transparency and economic substance and, in the past, has voluntarily submitted its tax regime for evaluation by the EU and was found to be fully compliant with EU rules.
Transparency, openness and global compliance are among the key features of our industry. Long may this be the case. After all, these are the features that our clients have come to expect.
James Orrick holds a Masters in Corporate Governance from Bournemouth University, a BSc (Hons) in Accounting and Finance from the University of Essex, is a Fellow of the Association of Chartered Certified Accountants and the Institute of Chartered Secretaries and Administrators.