Jersey Acknowledges the Rich Are “Highly Mobile” as it Considers Whether to Charge More for HVR Program

Since 2005, Jersey (the self-governing Channel Island) has raised GBP 1.03 billion in property investment, some GBP 200 million in income taxes, and nearly GBP 100 million in stamp duty from participants in its High-Value Resident program, as well as untold amounts in the form of charitable donations and unrelated business investments.

This week, the 49 deputies and Connétables of the States Assembly (Jersey’s parliament) are debating whether asking wealthy residents to pay more will increase overall tax revenue or encourage them to move elsewhere.

About the Jersey High-Value Resident programThe program provides renewable residence permits with one-year validity, a five-year path to PR, and a six-year path to citizenship to individuals who

• pay a minimum annual tax of GBP 170,000;
• buy or lease a property worth at least GBP 1.25 million;
• have a global income of at least GBP 850,000, and
• have a net worth of at least GBP 10 million (informal requirement)
• are generally deemed to be a positive addition to Jersey society

Learn more details about the program here.

Jersey has approved 259 High-Value Residents since 2005, some 85% of whom the island has been able to retain.

Two proposals regarding the program were debated last week.

First, St. Helier deputy Lyndsey Feldham of the left-leaning Reform Jersey party (10 of 49 seats) has lodged a proposal that would see the scheme suspended altogether, or at least until HVRs' "unfair" preferential tax rates are abolished.

Currently, HVRs must pay a flat rate of 20% on worldwide income up to GBP 850,000 (hence the minimum GBP 170,000 tax) and 1% on worldwide incomes above that threshold. Deputy Feldham proposes to make HVRs pay the flat 20% on all global income rather than on only the first GBP 850,000.

In her response to Feldham's proposal, Chief Minister Kristina Moore pointed out that it ran counter to Jersey's aim of "increasing economic growth and community benefit in a sustainable manner" and that it would "send a clear negative signal" to the financial services sector on which Jersey, "as a stable jurisdiction that makes prudent economic and fiscal decisions," relies.

The Chief Minister pointed out that the Council of Ministers has already committed to updating the HVR scheme and had "carefully developed" proposals for changes over the last six months by considering the evidence of tax receipts from HVRs, as well as by consulting with the private sector. This period of evaluation and consultation had, said the Chief Minister, resulted in thegovernment's more well-considered proposal to update, rather than end, the program.

The government's proposal, tabled by Treasury Minister Ian Gorst, seeks to retain the HVR program but to raise the minimums in the following manner:

• Raise the minimum income tax distribution from GBP 170,000 to GBP 250,000
• Raise the minimum annual worldwide income requirement from GBP 850,000 to GBP 1.25 million
• Raise the minimum property value for HVR residents to GBP 3.5 million (GBP 1.75m for leases)

Tax on incomes exceeding GBP 1.25 million would still be taxed at 1%.

A jurisdiction with a realistic evaluation of its market value

Underpinning the rationale for this more incremental approach to program updates was a recognition that competing jurisdictions like Guernsey and Isle of Man offered more favorable terms than Jersey. While high-value residents may be willing to pay slightly more in Jersey because it compares favorably to those islands in terms of life (Jersey is bigger, better connected, and has more developed infrastructure and amenities), Jersey could not afford to become much more costly than its competitors.

"Weighing this, Ministers acknowledge that wealthy individuals are highly mobile and may choose to live elsewhere if Jersey ceases to be attractive," the Ministerial proposal noted. "They also have legitimate means of effectively managing their wealth and income, including choosing to live elsewhere if Jersey ceases to be attractive."

Raising the minimum value of real estate purchased or leased by HVRs, said the Chief Minister, serves to reduce the price impact for lower-priced segments of the market, in which most locals operate.

Since 2004, HVR residents in Jersey have invested more than a billion pounds in personal residences alone. Average investment invariably exceeds the mandated minimum.

Most HVRs are English, while Swiss and Hongkongers are also well-represented.