Investor interest in Jersey, the largest among the Channel Islands in the English Channel, seems to have been boosted by the Tax Information Exchange (TIE) agreement it signed with India.

In fact, Jersey (a self-governed British Crown Dependency) had already signed similar agreements with 25 countries, to position itself as a highly regulated and cooperative nation with transparent jurisdiction. The capital flow from Channel Islands into India went up to $500 million in 2010, from $50 million a year earlier, with Jersey accounting for a lion's share.

In conversation with Business Line , Mr Sean Costello, Chief Representative Officer, GCC (Gulf Cooperation Council) and India, Jersey Finance (which promotes inbound investments into Jersey), feels the real investment figure would be even higher as some funds flow from a Jersey-based entity through other entities in other jurisdictions – for the purpose of utilising Double Taxation Agreements (DTA).

Excerpts from the interview:

How will the TIE pact help Indian investors?

The world is getting more regulated. If you are a highly regulated brand, then, you align to customer needs. And in most cases, you will be successful. So, Jersey will be a pioneer of high regulation. Of late, there is a pent-up interest among Indian companies to list on the Alternative Investment Market (a sub-market of the London Stock Exchange) for raising capital abroad.

There are, at least, 20 Indian companies especially from the financial, energy, infrastructure and clean technology sectors that are inching towards that by setting up base in Jersey. We expect it to happen by the first half of next year. Besides, Bank of India has a presence in Jersey – we want to attract another Indian bank.

What are the investment opportunities?

London real estate is a very good asset class. Particularly, Central London has attracted lot of Indian interest. While investing in London property the best thing Indian investors can do is structure their holding in Jersey because they are not subject to UK taxes such as capital gains and stamp duty.

So they can put up a company or trust in Jersey to acquire the assets. It will be very attractive for Indian billionaires and millionaires.

How important is the TIE treaty for India?

I think it is beneficial at a number of levels. The most important is the regulatory interface between tax authorities in India, Ministry of Finance and the tax authorities in Jersey. They can now talk to each other directly. Technically, it comes into force from January, but is effective from now. The signing of TIE leads to talks on DTA. In a way, TIE is a stepping stone towards DTA. So it is an important component. We would be looking to work together towards the treaty. In fact, initial discussions are on.

Is Jersey a tax haven?

No. In fact, after signing the TIE, it is not a tax haven by default. It is a safe haven for investment, but it is a tax neutral environment, because there are no taxes charged. As the Indian investors seek to diversify, they will be more comfortable in Jersey. It will be more tangible if you have a physical presence. By having your investment held in Jersey you can diversify your portfolio and not just invest in India. It is used widely in private wealth management.

Can you pass on information of all Indian accounts?

While the agreement is designed to protect the privacy and confidentiality of clients who have set up their affairs legally, it will help Indian authorities when they are undertaking specific investigations to identify those who have committed a fiscal crime, through the formal exchange of tax information. If you are an investor in Jersey and suddenly somebody is looking into your accounts without good reason, you would not be very happy. So the grounds have to be very strong.

How can Jersey help India bring back black money?

I hope that is the driver for signing this agreement. It demonstrates that you should not brush all offshore centres with the same brush. From East to West, there are 30 to 40 offshore centres. We are located in the middle and have a close relationship with London. We have a high rating from the International Monetary Fund. It is important to differentiate and distinguish those which are most compliant and regulated, from others.

> suresh@thehindu.co.in

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