The small island of Jersey draws thousands of tourists to its wide, sandy beaches, sun-drenched landscapes and curious mixture of "very British" and French savoir vivre just 20 kilometres off the French coast. The island with luxury cars prowling its streets and large banks lining St Helier's pedestrian zone is a draw for the rich from all over the world and their money.
The self-governing British crown dependency is one of Europe's largest offshore financial centres and as a result has found itself the target of virulent criticism. On Wednesday, residents were voting in a referendum on whether they would like more democracy. "There's just one party on Jersey, and that's called finance," said Nick Le Cornu, 54, an unemployed financial lawyer who is a member of the opposition, which is pushing for a change to the political status quo.
He said voters should vote for a radical change in how Jersey's electoral constituencies are divided up. In the rich north, where the well-heeled financial managers have their homes, there is one member of the assembly, known as the States, to around 1,500 voters. In St Helier's more modest areas, the proportion is one to up to 19,000 voters.
While their hopes for a victory in the poll are muted, Le Cornu and his allies see this democratic deficit as a blemish on the island because it keeps political power in the hands of the few whose central aim is to retain the island's status as a tax haven. Wednesday's referendum gives voters three options: two for change and one that maintains the current system. Most voters were expected to favour change, but not the more drastic option advocated by Le Cornu.
Results were expected late Wednesday or Thursday morning. Advocates of the status quo have asked voters not to vote for change for change's sake while advocates for the third option, which would reduce the number of elected members in the States, argued that the financial health of Jersey is at stake in the referendum.
"In most of our industries, the peak days are behind us," Ben Shenton, an investment manger, said. "We need to wake up to change. Otherwise, we will see the first big bank leaving one day." The politics of the four Channel Islands - Jersey, Guernsey, Alderney and Sark - are a throwback to the feudal era. A bailiff stands at the head of Jersey's political system.
The islands are not part of the United Kingdom and also not of the European Union, but like the Isle of Man, they fall under the crown. The Privy Council, sitting in London, has to give its approval to Jersey's laws. Jersey was taken off the Organisation for Economic Co-operation and Development grey list of countries accused of assisting tax evasion after the government concluded a number of double taxation agreements with EU member states and other countries.
Critics regard this improved status as a joke. "Of course Jersey is a tax haven," said Richard Murphy, a British economist and author who runs the website Tax Research UK. He pointed to its guarantee of secrecy, the fact that little in the way of wealth creation takes place and its low taxes.
Official statistics show that 49 per cent of economic output derives from banking, trust funds, hedge funds, private foundations and financial legal services. The tax system is favourable to foreigners while the island's citizens bear 80 per cent of the tax burden. The foreigners that funnel enormous sums through the island's trusts pay little.
The system has had bizarre results. A few years ago, international traders found a loophole in Britain's law on value-added tax, which led to books and CDs being packed by Polish and Portuguese migrant workers on Jersey for onward shipment to Britain - VAT-free.
London closed the loophole, and since then, Jersey has begun to experience the previously unheard-of problem of unemployment. About 2,000 of the 100,000 residents on the island are without a job. A new EU directive on the taxation of interest, which is aimed at foiling tax cheats, is set to cause headaches for the island's financial whizzes. It requires trusts to provide details on the assets of EU citizens. Analysts were beginning to say that Jersey's business model is now in doubt after the island was rated in 2011 in the top 10 of the most secretive financial centres. Murphy said he believes change would come rapidly.
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