The losses to the Treasury from UK residents using the Island of Jersey to evade or avoid tax are “dwarfed” by the revenue that the crown dependency creates for Britain, research has shown.
In fact, while Jersey may be responsible for some tax leakage, the island generates more than £2bn more in tax revenues than is lost through avoidance, according to a report by Capital Economics.
“Possible losses from tax evasion and avoidance are far outweighed by the taxes generated through the activity in the UK supported by Jersey,” states the report, said to be the most comprehensive analysis to date of the economic relationship between Jersey and the UK.
“Although some UK tax may leak through Jersey, the amounts are dwarfed by the estimated £2.3bn of taxes paid on British jobs and profits supported by Jersey.”
Evidencing their claims, the report authors calculated losses to the UK Treasury through legal tax avoidance to be no higher than an estimated £480m a year, but are “probably much less.”
In addition, while it accepts that up to £150m a year of British taxes could potentially be evaded using Jersey, Capital says that amount will ‘substantially reduce’ in light of recently approved information exchange agreements.
The report adds: “Even on the basis of the most aggressive assumptions, we calculate that no more than £0.4 billion of this [the £2.9bn UK tax gap] can be mediated through Jersey and, in all likelihood, it is much less.
“Overall, we judge that, based on 2011 data, a maximum of £0.6bn per annum of British taxes can leak through evasion or avoidance using Jersey vehicles – although, in all probability, the actual number is much lower.”