And so to St Helier, the capital city of the Channel Island of Jersey, a pretty piece of greenery and rock sited between France and the south-east coast of England.

St Helier is a charming place. A gilded statue of the 18th century English king George II presides over the Royal Square, and the well-heeled inhabitants go about their business in a serious and determined way.

Apart from the occasional street nameplate in French (and sometimes the local Jersey patois) as well as English, you feel as though you could be in any prosperous, well-ordered town in the south of England.

I felt that way until the financial services seminar I was chairing got under way. The financial services professionals of Jersey and Guernsey (the two major centres of finance in the Channel Islands) are worried – really very worried indeed.

Readers may remember that I wrote some months ago of the uneasiness felt in onshore European locations claiming offshore benefits – principally opaque or highly discreet investment ownership rules, and liberal or tax-free fiscal structures. Andorra, sandwiched as it is between Spain and France, is in deep trouble.

The Channel Islands have a better chance of retaining their privileged tax status. But the consensus seemed to be among the custodian bankers and investment managers I spoke with in St Helier that troubles lie ahead. That trouble takes the form of European Union legislation. It seems certain that both the major islands will have to change their business tax structures if they want to get approval from the EU. I won't bore you with technical detail, but both Jersey and Guernsey have a tax system which makes paying corporation tax very easily avoidable. Given that it's essentially a voluntary tax, you may not be surprised to learn that very few structures incorporated on these islands choose to pay it.

There is an EU code of conduct – essentially an unambiguous set of principles of tax law – and the Jersey and Guernsey "zero-10" system of corporate taxation is at variance with the spirit of the code. The islands have just had a visit from the financial equivalent of the deputy headmaster (Stephen Timms, Financial Secretary of the UK Treasury) and have promised to try to better. Senior politicians from Guernsey and Jersey met with Timms and released an anodyne statement saying that they were going to work together to review their tax structures. Well, they would say that, wouldn't they?

The Channel Islands, being islands and semi-sovereign states, might be able to obfuscate, divert and fight off change for a little while yet. I have been reporting on finance for far, far too long – long enough to know that there has been pressure for offshore tax reform for at least a quarter of a century. So you might think that there's nothing new here, that the old arguments and practices will prevail. As a libertarian in these matters, I rather hope so. Yet I fear that the end is well and truly night for the European offshore centres. The "big" governments of the United States and the European Union are attacking their geographic neighbours. It's a pincer movement with the aim of flushing out offshore assets.

The custodian bankers of the Channel Islands, the ones who keep the books of the offshore trusts, funds and other structures, were extremely gloomy.

Volume of business is down, and few could see it picking up.

The statue of George II was erected as a gesture of thanks because he donated money to improve the St Helier harbour, thus encouraging trade on the island. You have to wonder whether that the bureaucrats of Westminster or Brussels have any of that vision.


- The writer is a journalist, author and commentator on international business issues

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