Ecuadorian officials have one year to get their assets out of Jersey

Tuesday 28 February 2017

Ecuador’s civil servants and elected officials have one year to pull their assets out of Jersey or will face the sack.

It comes after a national referendum last week saw over half of the country’s population vote ‘Sí’ when asked if they agreed that both politicians and government workers should be prohibited from holding, “…assets or capital, of any nature, in tax havens.”

The politicians behind the referendum argue the move could help Ecuador get back some of the $30 billion dollars – equivalent to one third of the country’s GDP – which they claim they lose to global tax havens every year. 

Ecuador voted YES! in a referendum to bar politicians and public servants from using tax havens #GlobalTaxJustice pic.twitter.com/suDCqL7Tad

— Foreign Affairs Ec (@MFAEcuador) February 24, 2017

While the UK's former Prime Minister David Cameron said in 2013 that it was not, “…fair any longer to refer to any of the overseas territories or Crown Dependencies as tax havens”, citing their tax cooperation commitments, Ecuador’s thinking is different.

Jersey – included within the Channel Islands – was named on the Ecuadorian IRS’ black list, which defines tax havens as either preferential tax regimes, or low-tax jurisdictions. It classifies these as anywhere you would pay up to 60% of the tax which would be due on the same basis in Ecuador. 

VIDEO: Crown Dependencies should not be viewed as tax havens, former Prime Minister David Cameron tells the House of Commons. (Source: Jersey Finance)

Other listed areas included the Cayman Islands, Gibraltar, the Isle of Man, Luxembourg and the United Arab Emirates.

But a spokesperson for the Government of Jersey said they found it difficult to comprehend why the Island had been included on the list.

“It is difficult to know what criteria the Ecuadorian authorities used when compiling this list of jurisdictions. It does not, for example, include Switzerland, where it might be expected that some Ecuadoreans could hold offshore accounts.

“We have no reason to assume that Ecuadoreans hold accounts in Jersey; however, if they did, the Ecuadorean authorities have not taken any steps to comply with the international standards that would allow Jersey to exchange information with them. This is particularly surprising, given their desire to adopt an anti-tax avoidance position.”

Geoff Cook, CEO of Jersey Finance welcomed the country’s new measure:

“Since the financial crisis of 2008 we have seen a growing trend of initiatives across the world to combat “tax havens”, and it is commendable that action is being taken against non-compliant jurisdictions.

“From our experience the key to the success of such initiatives is that all jurisdictions are measured against international standards. Jersey achieves just this, as most recently highlighted in the MONEYVAL report on Jersey, which marked the jurisdiction as compliant or largely compliant against 48 of the 49 FATF [Financial Action Task Force] Recommendations, putting us in a leading position globally.”

Pictured: Geoff Cook, CEO of Jersey Finance, said that Ecuador's efforts were "commendable."

According to Ecuador’s Foreign Minister Guillaume Long, the vote, “…shows that the people continue to rely on government management for fighting corruption of both national and international bureaucracies."

The new measure will support Ecuador’s previous efforts to inspire debate and eventually eliminate what it deems to be an “immoral practice.” Officials had already proposed an Ethics Pact last year, and had called for greater work to combatting tax havens at the United Nations General Assembly and the G77.

Now UK political officials and campaigners are joining these calls, with a number signing an open letter, expressing hope that, “…Ecuador’s leadership on this issue will inspire other governments to make bold moves too.”

Mr Cook added: “We will watch with interest to see how the Ecuadorian proposals develop against the various global initiatives currently in place.”