Over 130 representatives of 55 governments, the Commonwealth Secretariat and the European Commission met on 15-16 November 2005 in Melbourne, Australia to review progress towards the OECD's stated objective of transparency and effective exchange of information for tax purposes (the so called "level playing field based on high standards"). And what an extraordinary gathering it was, with tiny islands like Vanuatu and Niue sitting down at the same table as the US, the EU member states, and Canada!
The two day discussions, which were based upon the review of the legal and administrative frameworks on transparency and exchange of information in tax matters currently in place in over 80 countries, showed that a global level playing field in the areas of transparency and effective exchange of information in tax matters is gradually developing. However, the Forum's discussions identified a number of areas where further progress needs to be made. The Forum's review will be published as a formal report in 2006.
BVI Guide on EU Savings Tax Directive
With the European Union Savings Tax Directive ("EUSD") due to come into force across much of Europe on 1st July 2005, the government of the BVI has published a Guide outlining how the EUSD is to be implemented in that OFC.
BVI is not a member of the European Union but along with other overseas territories and dependencies of EU member states (such as the Cayman Islands and the Netherlands Antilles) and certain other third countries (in particular, Switzerland) the BVI has agreed to implement measures to comply with the substance of the EUSD.
The US and Bermuda, alone among the UK's Overseas Territories, have not so far agreed to implement the directive.
What is an "Offshore" Jurisdiction?
Technically the expression "offshore" means "moving or directed away from the shore" as in the term "an offshore wind". In finance the expression is used to describe an arrangement that is located or based in a foreign country and therefore not subject to the laws of the jurisdiction in which you or your business is domiciled. (E.g., offshore bank account; offshore investment).
The concept of an "offshore jurisdiction" is commonly used in connection with financial transactions to describe the use of jurisdictions which are predominantly financial centres and which have enacted special legislation and/or tax regimes in order to attract financial services from other, mainly larger, countries. Generally these offshore financial centres are characterized by low or zero taxes on international business, liberal laws for the incorporation of international business corporations or other legal structures, and a lighter burden of regulation and supervision.
Many offshore jurisdictions are small islands in the Atlantic, Indian or Pacific oceans. Given the extent of the British Empire in its hay day it is not surprising to find that many of these islands where once owned by the U.K. Perhaps more surprising is the fact that most of the U.K.'s last remaining colonies - or "Overseas Territories" as we should now call them - are leading offshore financial centres, namely: Bermuda, BVI, Cayman Islands and Gibraltar. Throw in the Crown Dependencies of Jersey, Guernsey and the Isle of Man, which are also all offshore financial centres, and we could claim that the City of London's finest export to the world is "Offshore Financial Centres". LOL
Another MSM article full of distortions about Tax Havens!
The Chrisitian Science Monitor has an posted an article entitled "Secretly, tiny nations hold much wealth" by David R. Francis from the April 25, 2005 edition.
Here's the BIG distortion:
"Corrupt officials in poor nations, illegally, and multinational corporations, mostly legally, siphon huge amounts of money into bank accounts and shell companies in 70 tax havens, such as the Cayman Islands, Bermuda, and Jersey."
What a load of rubbish. OFCs like Bermuda, the Caymans and Jersey, now have "Know Your Customer" rules that far exceed those of London and New York and which specifically prevent "politically sensitive" persons (like corrupt thrid world dictators) from opening accounts in those centres. Corrupt officials in poor nations do NOT and cannot salt away illegal monies in the OFCs that the article names. The only exception to this rule is possibly Switzerland, but Bermuda, the Caymans and Jersey are definitely NOT in that business anymore......but that does not stop the MSM from trotting out this old canard! Why doesn't David Francis name even one such corrupt official who has been shown to have siphoned illegal monies to one of the three OFCs that he names? Because he cannot, that's why!
Other ridiculous assertions from the article:
"Although they have only 1 percent of the world's inhabitants, they hold a quarter of United States stocks and nearly a third of all the globe's assets.
They're tax havens: 70 mostly tiny nations that offer no-tax or low-tax status to the wealthy so they can stash their money. Usually, the process is so secret that it draws little attention. But the sums - and lost tax revenues - are growing so large that the havens are getting new and unaccustomed scrutiny.
For example: When London's Tax Justice Network (TJN) reported a month ago that rich individuals worldwide had stashed $11.5 trillion of their assets in tax havens, it caused a fuss in Europe. "Super-rich hide trillions offshore," blazed a British newspaper headline.
Although that report received little notice outside Europe, there are rumblings of concern in the United States. That's not surprising. Nations lose an estimated $255 billion in tax revenues a year because of the havens, according to TJN. The US alone probably loses $60 billion a year, a tax expert estimates."
and
"There are about 3 million shell companies (set up largely to duck taxes) in offshore tax havens, Komisar reckons. These tiny tax havens hold 31 percent of total world assets and 26 percent of the stock of US multinationals."
3 million, hey? Now lets see. The BVI has about 300,000 companies registered, Bermuda has less than 30,000, about the same as Cayman and Jersey. So where exactly are these 3 million companies incorporated that Komisar "reckons" exist for no other reason than "to duck taxes"???
The TJN, by the way is a very left wing, socialist organisation - which is curiuosly not mentioned in the article. Of course their real agenda is to introduce global taxation and remove any tax competition between nation states. This hidden agenda is alluded to by TJN:
"As our economies have globalized, our tax systems remain nationally based and measures that should have been put in place decades ago to improve international tax cooperation have not been put in place," says John Christensen, international coordinator in London of TJN."
According to the article, we are in for another big fight to defend OFCs!
""It's going to be the next major issue," forecasts Lucy Komisar, a New York journalist writing a book on offshore banking. She compares the drive against tax havens with the civil rights movement of the 1960s, in which she participated, and the feminist and environmental movements of more recent decades.
Ms. Komisar helped organize a meeting on Capitol Hill April 7 to get an American branch of the TJN going. Representatives of several members of Congress, the AFL-CIO and a few other unions, several prominent tax research groups, and the United Church of Christ attended. About a dozen well-known activist groups were also present, including Public Citizen, Greenpeace, and the National Council of La Raza."
And of course we know that all those great organizations are really looking out for us, right!
I am saddened, but no longer shocked, that the Christian Science Monitor would publish such a poor piece of journalism, in which bold assertions are made which have no basis in fact and which clearly have not been fact checked by any editor.
Update: To read more of Komisar's mis-guided criticisms of OFCs see her article entitled "Profit Laundering and Tax Evasion -The Dirty Little Secret of Financial Globalization" posted here.
Update 2: John Christensen, one of the co-founders of the TJN has denied reports that the organisation is linked to the Fabians (a socialist society) and espouses communist ideals - see story here. One source of the reports is this article in the Washington Times by Richard Rahn. Mr Christensen was a former assistant adviser to the States of Jersey but resigned from his post in 1998. He now lives in the UK and actively campaigns against OFCs.
The OECD versus the OFCs: A Score Card
Offshore jurisdictions have come under attack in the last few years from various quarters, but particularly from a group of multi-national organizations, such as the Organization for Economic Co-operation and Development (OECD) and the Financial Action Task Force on Money Laundering (FATF).
I recently penned an article for a publication called "The Square Mile", which steps back and tries to evaluate what has happened over the last 5 years. In this slightly revised version entitled "The OECD versus the OFCs: A Score Card" I attempt to provide an overview on the current state of the leading offshore financial centres, discuss some of the changes that have occurred in these jurisdictions over the last 5 years, and consider how they have weathered the storm.
I conclude that the changes implemented by the leading offshore jurisdictions as a result of the attacks have actually made them stronger and more relevant, not weaker. In particular, the leading offshore financial centres have:
1. established new or entrenched their existing zero/low tax regimes;
2. substantially enhanced their reputations with better regulations and strengthened regulators;
3. extracted benefits in return for imposing greater regulation (e.g. international recognition for their stock exchanges, acceptance of banking secrecy laws, and treaty exemptions); and
4. been given a seat at the table on global tax forums going forward - with equal negotiating status under the "level-playing field" concept.
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