|UK Tax Haven|
|Friday, 05 December 2008 15:57|
UK Tax Haven
“In the steps they have taken to deter and detect money laundering, the authorities have demonstrated the political will to ensure that their offshore financial institutions and the associated professionals maximise their defences against criminal funds.” However, it also stated that there are a number of areas where Guernsey can further improve its record.
The report recommended that the Guernsey authorities impose a direct and unambiguous mandatory reporting obligation in all cases involving criminal activity.
In 1998, an audit of financial regulations in the Channel Islands and the Isle of Man carried out by Andrew Edwards, a civil servant, was largely complimentary about Guernsey.
UK Tax Haven - GuernseyThe Guernsey financial services community was horrified, therefore, when the island was named and shamed as a ‘tax haven’ in a report published by the OECD earlier this year.
The stock response on the island is to criticise the OECD’s methods and motives. “The OECD didn’t do this very scientifically. The report was really a political attack,” says Ken Gibbs, general manager of the Bank of Bermuda (Guernsey).
“The OECD report was the most unsatisfactory set of negotiations I have ever been involved in,” adds Crook, who formerly worked at the Bank of England.
UK Tax Haven - CrookCrook suspects that Guernsey was named because more offshore than onshore money is deposited in the island’s banks. “The OECD put forward four criteria to assess whether or not a country is a tax haven, and none of them applied to us. Then they came up with a fifth which was how much of the money on the island is offshore and how much is onshore. Their assumption is that if you have more offshore than onshore money, you must be a tax haven,” he says.
However, the OECD threat of sanctions against jurisdictions that fail to homogenise their tax regimes so they fall into line with the rest of the world has not driven Guernsey’s financiers to despair just yet.
Close International Private Banking has just signed a 21-year lease on 25,000 sq.ft. of office space in St Peter Port. “We would not have done this if we thought our business on the island was under threat,” says Chris Fish, managing director at the bank. Unlike his contemporaries, Fish believes that the OECD report will have a positive effect on Guernsey and other offshore jurisdictions. “This may shake some of the complacency out of the offshore world,” he says.
UK Tax Haven - OECDBut the OECD is not the only problem to face Guernsey’s regulators. Although the Edwards report gave the island a positive assessment, it highlighted a number of areas where reform was needed and recommended a restructuring of the regulator. The GFSC came into being in 1988 after the island’s government, the States, passed the Financial Services Commission Law the previous year.
However, unlike in Jersey, Guernsey’s neighbour and principal rival, financial regulation is not divorced from government, a feature criticised in the Edwards report. The commission is currently led by the president of the States Advisory and Finance Committee, Guernsey’s equivalent of the UK’s Treasury. Next in command at the GFSC is a panel of four ‘ordinary members’ who represent different sectors of the island’s financial services industry. These are political appointees, nominated by the Advisory and Finance Committee and elected by the States.
In deference to the Edwards recommendations, the committee ruled late last year that the chairman of the GFSC need not be the chairman of the committee. According to Crook, this necessitates a change in the law, and the proposed amendments will be debated in the States before the end of the year.
UK Tax Haven & EdwardsEdwards also raised the need for a financial services ombudsman in all three of the British Isles’ jurisdictions. In response, the GFSC has pledged to issue a consultation paper to financial services institutions on the island this month on how the new body should be structured. “The original suggestion was to have a single ombudsman for all three jurisdictions but we are now moving on the assumption that we will have a separate ombudsman,” says Crook.
Edwards also expressed concern about the promotional role played by the jurisdictions’ financial regulators. Last month Jersey’s regulator announced that it had earmarked £500,000 to set up a stand-alone promotional body as suggested by Edwards. The GFSC, however, is more reluctant to relinquish its role as the voice of the island’s financial services industry.
Crook considers himself to be the best-qualified person on the island to promote the interests of its financiers and believes it would be counterproductive to pass the mantle to another body or person.
For more relevant news items and magazine articles please click the links below:
Article: Tax Guide for Expats
Article: Weapons of Tax Destruction
Article: Stop the Tax Haven Abuse Bill
|Last Updated on Monday, 27 April 2009 12:25|
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