Brexit Impact Eyed

By Global Tax Weekly

Naturally, a great deal of the debate about the United Kingdom’s future in the European is focusing on how a Brexit would affect the UK economy, and, to a lesser extent, the economy of the European Union. However, it is not just the UK and the EU that are facing highly uncertain futures. There are various other territories dotted around northern and western Europe that anxiously await the result of Britain’s EU referendum on June 23, 2016, including the UK’s Crown Dependencies, Guernsey, Jersey, and the Isle of Man, and Gibraltar, which is classified for the purposes of international law as a British Overseas Territory.

Largely self-governing, none of these jurisdictions is fully “in” the EU, but they are inextricably tied to Europe through their strong constitutional links with the UK, which looks after their foreign affairs. Guernsey and Jersey, for instance, are part of the EU under the UK’s accession treaty, but are not a part of the EU fiscal area. Similarly, the Isle of Man forms part of the EU single market and VAT area but is otherwise not part of the EU fiscal area. By contrast, Gibraltar is not a part of the EU VAT or common external tariff regimes, but has implemented a great deal of EU financial legislation to allow it to market investment funds and other financial products across the EU.

So what happens to these territories if the UK sees through the Brexit? Guernsey, for its part, is confident that it would be business as usual. But, as the island’s investment promotion agency recently acknowledged, investors, especially those in the lucrative new markets in the Far East, are beginning to ask questions, and perhaps its recent statement on the matter was designed to soothe these concerns as much as anything, because a Brexit would surely have some kind of impact on the Crown Dependencies.

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