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Offshore Tax Havens PDF Print E-mail
Friday, 05 December 2008 15:27

Offshore Tax Havens

Offshore centres around the world face a three-pronged assault as heavyweight international organisations step up their efforts to stamp out tax evasion, money-laundering and “harmful tax competition”, writes Angus Foote.

Three reports issued in quick succession by the Financial Stability Forum, the Financial Action Task Force and now the OECD have whipped up a storm in the offshore world. Well-established financial centres such as Jersey, the Cayman Islands, Gibraltar and the Isle of Man have fallen foul of one or another of the reports which have provoked strong reactions in the jurisdictions affected.

A number of major centres now face a stark choice: co-operate with the international anti-tax evasion drive and introduce fiscal reform, or reject the validity of the latest criticism and risk the imposition of punitive measures by OECD member countries.

Offshore Tax Havens & The Latest Development

The latest development in an unfolding drama came with the publication of an OECD report targeting “harmful tax practices”. Lists have been drawn up identifying those jurisdictions meeting the OECD’s criteria for being classed as tax havens, as well as identifying “potentially harmful preferential regimes” in member countries.

Some 47 preferential tax regimes of member countries are deemed potentially harmful, while 35 jurisdictions have been categorised as tax havens. “The OECD will develop guidance to help countries determine whether their potentially harmful regimes were harmful in practice,” the organisation said.

Offshore Tax Havens & Jurisdictions

Jurisdictions designated tax havens will be given 12 months to determine whether or not they wish to work with the OECD to reform their regimes by the end of 2005. Dialogue held over the last six months leads the OECD to believe that a significant number will do so.

The organisation said it was developing a framework within which member countries can implement a common approach to tackling harmful tax competition. “This will include defensive measures that countries will consider applying to unco-operative tax havens that choose not to commit to eliminate harmful tax practices,” warned the OECD report. These measures would be applied on the basis of a fresh list of Unco-operative Tax Havens to be drawn up by 31 July 2001.

Jersey, Guernsey, the Isle of Man, Gibraltar and BVI all found themselves on the tax havens list, and now risk OECD sanctions unless they commit to fiscal reform within the specified period. Jersey launched a vigorous defence of its position, pointing out the island had a sound domestic taxation system whereas many territories listed have no direct tax structure at all. “This clearly demonstrates the absurdity of the OECD list,” asserted Senator Frank Walker, president of Jersey’s Finance and Economics Committee.

Offshore Tax Havens - The Isle Of Man

The Isle of Man found itself ranked in the top drawer by the FATF and the G7 Forum but threatened with sanctions by the OECD.
John Cashen, chief finance officer of the Isle of Man, said: “We support the OECD aim of creating fair tax competition - even though its work is still clearly at a preliminary stage.”

But Cashen believes the Isle of Man is now well ahead of the game. “After two years of preparation, we embarked last week upon a tax reform programme to adapt our legislative and regulatory environment to meet the rapidly changing needs of the global economy. So, as far as we are concerned, the OECD report is already outdated.”

The Cayman Islands and Bermuda, meanwhile, were among six jurisdictions which moved to pre-empt the threat of appearing on the wrong list by promising to co-operate with the OECD in future.

 

For more relevant news items and magazine articles please click the links below:

News: Jersey & Guernsey Remain Off Tax Haven Blacklist

Article: Weapons of Tax Destruction

News: The Pressure is Mounting On Offshore Jurisdictions

 

   

 

 

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