Behind every fortune lies a crime
Supporters of Jersey's finance industry point out that it brings substantial amounts of foreign money into the sterling zone by offering tax-free incentives to investors from abroad. Competition in the offshore banking sector is fierce and it is acknowledged that without these incentives money would otherwise be invested elsewhere. The inward flow of capital from abroad creates and maintains jobs in the local economy and also supports the UK economy through the island's links with the City of London.
Conversely, critics of the industry point out that the tax avoidance industry facilitates the net flow of capital out of the UK economy. According to the Tax Justice Network, tax avoidance deprives the UK government of between £25bn and £85bn a year, more than the entire NHS annual budget.
Tax avoidance is not only a problem for rich western economies, however. The world's poorest countries are estimated to lose US$500bn per year to tax havens. Up to US$200bn of this loss is due to tax avoidance by companies, mainly through transfer pricing abuses. Most involve so-called 'tax havens' like Jersey, through which 50 per cent of the world’s trade passes with little value added, but a lot of profit extracted.
The Tax Justice Network estimates the offshore holdings of the world’s highest net worth individuals to be US$11.5 trillion, or 10 times Britain's gross domestic product. The annual cost in lost tax revenue to governments around the world is conservatively estimated at US$255bn a year.