Jersey and Guernsey have submitted their cases to the European Union (EU) for not being considered "harmful tax regimes''.

Jersey's arguments have been reported in the financial Press. Guernsey is understood to have made very similar representations.

The case put forward by Jersey's financial authorities is not entirely different from that presented by Bermuda to the Organisation for Economic Co-Operation and Development last year. The EU's response to Jersey may presage the OECD's reaction to Bermuda's case.

The OECD is currently evaluating submissions made to it by Guernsey and the Isle of Man. Bermuda's approach, which will see OECD regulators visiting Bermuda in the spring to assess its "tax harmfulness'', has not been adopted universally by the offshore jurisdictions.

Jersey's reputation has been besmirched of late by damaging revelations of abuse in its financial system. High-ranking civil servants and top international banks have been accused of a range of illegal activities.

In its submission to the OECD, Jersey argues that its international sector is of equal importance to those in Switzerland and Luxembourg, neither of whom are on the provisional list of "tax havens'' issued by the OECD.

Jersey's submission to the EU stated: Jersey does not generally impose zero or only nominal taxation. The standard rate of tax since 1949, 20 percent, produces nine-tenths of Government revenues.

Bermuda does not apply income or corporate taxes, but argues that its customs duty and payroll and other taxes cannot be ignored when computing the Island's total tax burden.

Jersey does not have a bank secrecy law and is about to introduce banking legislation tougher than that in force in many of the EU's members States.

Bermuda also has tough anti-money laundering legislation, and its vetting procedures for new clients and the relatively high cost of doing business in Bermuda are understood to act as a deterrent to those attempting to launder money.

Jersey has no lack of transparency in the operations of its legislative, legal and administrative activities.

Bermuda can, and probably will, mount exactly the same argument.

Jersey's international business sector is a major part of its overall business which speaks to the seriousness of its activities.

Bermuda earns more than three-fifths of its foreign exchange earnings from international business, one of its two main industries.

Finally, Jersey argued, other European countries offer a range of tax breaks and `special treatments' to encourage particular avenues of trade. Jersey has no such exemptions.

This is, essentially, the crux of the argument Bermuda will take to the OECD: that it treats its international and local companies in exactly the same fashion. The same taxes, in principle if not in dollar amount, are levied on, say, ACE and Holmes, Williams & Purvey. Bermuda cannot therefore be considered a "harmful'' tax regime, merely a "low'' tax regime.

The European Union Tax Code of Conduct committee, to whom Jersey and Guernsey made their representations, will rule later this year on whether the two islands are to be officially considered tax pariahs.

BUSINESS BUC