Economy of Jersey

The economy of Jersey is a highly developed social market economy. It is largely driven by international financial services and legal services, which accounted for 39.5% of total GVA in 2019, a 4% increase on 2018. Jersey is considered to be an offshore financial centre. Jersey has the preconditions to be a microstate, but it is a self-governing Crown dependency of the UK. It is considered to be a corporate tax haven by many organisations.

Other sectors include construction, retail, agriculture, tourism and telecommunications. Before the Second World War, Jersey's economy was dominated by agriculture, however after liberation, tourism to the island became popular. More recently, the finance industry recognised worth in operating in Jersey, which has now become the island's dominant industry.

In 2017, Jersey's GDP per capita was one of the highest in the world at $55,324. In 2019, the island's economy, as measured by GVA, grew by 2.1% in real terms to £4.97 billion. In December 2020, there were 1,350 people actively seeking work.

History

Agriculture

Until the 16th century, the economy of Jersey was based on feudalism and open-field self-sustinance agriculture. The main crop, wheat, was exported and sold to Spanish merchants in St Malo.

Enclosure happened in Jersey around the end of the 16th century. Unlike in England, enclosure was done by the peasantry in order to make profit from producing cider, the production of which moved Jersey's economy from self-sufficiency to cash-crop agriculture. From then until the 19th century, cider was the largest agricultural export; in 1795, 20 percent of the island was orchard. In 1839 for example, of cider were exported from Jersey to England alone,''Balleine's History of Jersey'', but by 1870 exports from Jersey had slumped to . Beer had replaced cider as a fashionable drink in the main export markets, and even the home market had switched to beer as the population became more urban.

Enclosure and the subsequent transition to cash-crop agriculture can be blamed for shortages in essential crops, particularly corn, which caused political instability in the island, such as the 1769 Corn Riots.

Potatoes overtook cider as the most important crop in Jersey in the 1840s. Small-scale cider production on farms for domestic consumption, particularly by seasonal workers from Brittany and mainland Normandy, was maintained, but by the mid-20th century production dwindled until only eight farms were producing cider for their own consumption in 1983. The number of orchards had been reduced to such a level that the destruction of trees in the Great Storm of 1987 demonstrated how close the Islands had come to losing many of its traditional cider apple varieties. A concerted effort was made to identify and preserve surviving varieties and new orchards were planted. As part of diversification, farmers have moved into commercial cider production, and the cider tradition is celebrated and marketed as a heritage experience.

Since the 1800s a significant portion of the Jersey economy has been greenhouse agriculture raising fruits, vegetables and flowers under glass. In the twenty first century this has been a declining activity with many greenhouses now unused and some in derelict condition. There was a motion in the Jersey legislature in early 2022 to repurpose unused greenhouses as construction sites for housing. A compromise proposal was that half the unused greenhouses be used for other purposes. The measures failed to pass

Textiles

The textile industry became a popular export industry for islanders, particularly women. In fact, the trade became so popular that in 1608 the States had to ban knitting during harvest and vraicing season. This industry connected rural Jerseymen to the wider global economy. The knitting of woollen garments was a thriving industry for Jersey during the 17th and 18th centuries. The knitting industry died sometime after 1750.

Ship building

Jersey was the 4th largest ship building area in the 19th century British Isles. See History of Jersey.

Historical exchange rates

Jersey pounds per US dollar - 0.55 (2005), 0.6981 (January 2002), 0.6944 (2001), 0.6596 (2000), 0.6180 (1999), 0.6037 (1998), 0.6106 (1997); the Jersey pound is at par with the British pound.

Government spending and economic management

Jersey is fiscally independent from the UK. UK public money is not ordinarily spent in the island, and Jersey residents do not pay tax or national insurance contributions to HMRC. As the UK is responsible for Jersey's defence and international representation, the cost of Jersey to the British taxpayer could be seen at around £55 million, though this is a notional cost; it's unlikely that, if Jersey were independent, that money would be saved on costs to the armed forces. The States make, upon agreement with Westminster, a contribution to the costs of its relationship in the form of a territorial army on the island.Dreisin, A; Evans, A; Phelan, J; Pragnell M
Jersey's Value to Britain: Evaluating the economic, financial and fiscal linkages between Jersey and the United Kingdom (Summary Report)
October 2016 ccessed 10 February 2022 Capital Economics Ltd. for Jersey Finance.

Taxation

Jersey does not have inheritance, wealth, corporate or capital gains tax.

Personal Tax

Until the 20th century, the States relied on indirect taxation to finance the administration of Jersey. The levying of ''impôts'' (duties) different from those of the United Kingdom was granted by Charles II and remained in the hands of the Assembly of Governor, Bailiff and Jurats until 1921 when that body's tax raising powers were transferred to the Assembly of the States, leaving the Assembly of Governor, Bailiff and Jurats to serve simply as licensing bench for the sale of alcohol (this fiscal reform also stripped the Lieutenant-Governor of most of his effective remaining administrative functions).

The first income tax in Jersey was introduced in 1928. Income tax has been levied at a flat rate of 20% set by the occupying Germans during the Second World War. Jersey's tax is not entirely regressive, however. Exemption thresholds apply to those on lower incomes and tax reliefs exist for married couples, single parents, child day care and children. Residents living in Jersey under the high value residency scheme are charged 20% on the first £725,000 and 1% on anything over that amount.

Until February 2020, married women in Jersey did not have control over their own tax affairs. Since 1928, married couples were required to file tax receipts under their spouse's name, married women's earning were considered part of their spouses' earnings and male permission was required for women to be treated separately or to discuss her financial affairs with the tax office. For couples in same-sex marriages, the older partner was required to give permission for the younger. In 2020, a vote in the States Assembly (40 ''pour'', 2 abstentions) to reform the law to give both marriage partners equal rights over the couple's tax affairs passed to come into force from 2021.

Goods and services tax

Historically, no value added tax (VAT) was levied in Jersey, with the result that luxury goods have often been cheaper than in the UK or in France. This provided an incentive for tourism from neighbouring countries.

The States of Jersey introduced a goods and services tax (GST) in 2008. It was originally set at 3%, but rose to 5% on 1 June 2011 as part of the 2011 States budget. To try to prevent islanders living below the poverty line, the States of Jersey introduced an Income Support service in January 2008.

Although this is a form of VAT, there are a number of significant differences between the European VAT and Jersey's GST. It is charged at a much lower rate than UK or French VAT, so Jersey can still act as a low-tax shopping jurisdiction on certain items. However there are far fewer exemptions to GST policy. For example, no VAT is charged on female sanitary products (the so-called ' tampon tax') in the UK while GST still applies in Jersey.

Some items are GST zero-rated, e.g. exports, housing, prescriptions, while others are exempt from the tax, e.g. financial services, insurance, postal services and supplies by charities. Imported goods below £135 are also exempt from the charge.

Corporation Tax

Jersey has a corporate income tax. The standard rate for all corporations is 0%, however Jersey is not a corporate-tax free jurisdiction. A 10% tax applies for regulated financial services companies and a 20% maximum tax rate applies for larger corporate retailers and utility and property income companies.

On 5 June 2021, global finance ministers, including the UK Chancellor Rishi Sunak, at the G7 agreed to set a new global minimum tax rate of 15% (although all G7 countries have higher tax rates) and to ensure that major corporations, such as Amazon and Microsoft, pay taxes in the countries where they operate, not those where they have headquarters. It will affect the island and take a number of years to implement, meaning Jersey's "zero-ten" tax policy will no longer be possible. On 16 May, Chief Minister John Le Fondré had criticised the move led by Joe Biden. He said in an interview with the i newspaper that the US should look "closer to home before involving themselves in the tax policies of others", citing Delaware's tax regime. Former Senator Ben Shenton said the zero-ten system was nearing its "sell-by" date and the zero percent rate was reinforcing Jersey's image as a tax haven.

Welfare state

During the COVID-19 pandemic, the government introduced Co-Funded Payroll to support businesses.

Tax haven

Many have criticised Jersey's tax policies and labelled the island as a tax haven, although some, including the Government of Jersey, do not recognise that label.

Despite the island's small size, it is recognised as a large offshore finance centre. Jersey Finance estimates that Jersey trusts control £1 trillion in assets. According to the Tax Justice Network, Jersey suffers from the "finance curse", a term used to describe a low-tax jurisdiction's overreliance on the finance sector (which accounts for over 50% of the island's GVA and directly accounts for 25% of the island's jobs) and a lack of a viable alternative development strategy. Even in the modern day, Jersey continues to encourage high-wealth individuals to settle in the island to take advantage of lower tax rates.

Jersey has a long history of tax avoidance, being one of the first offshore financial services markets. Jersey has a long history of low-tax and duty-free economic activity. Jersey's situation between France and England meant that Jerseymen took up smuggling of goods into French and English ports. For example, Jean Martel of St Brelade organised brandy and textile smuggling into both sides of the Channel. In the 1920s, high net worth individuals from Britain would emigrate to the island (or simply shift their wealth there) for tax purposes.

In 2020, the Tax Justice Network, a UK tax advocacy group, placed Jersey seventh in its list of "The top 10 countries that have done the most to proliferate corporate tax avoidance and break down the global corporate tax system" and 16th in its Financial Secrecy Index. below larger countries such as the UK, however still placing at the lower end of the 'extreme danger zone' for offshore secrecy'. The island accounts of 0.46 per cent of the global offshore finance market, making a small player in the total market. A large proportion of the financial services conducted in Jersey are tax-driven, meaning they are booked there without the requirement of adding value.

Tax Research UK classes Jersey as a tax haven. It too claims Jersey is a tax haven, citing its "half-hearted commitment to transparency". Jersey's finance industry featured in a BBC
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