The tax haven strikes back

Monday, November 02, 2009 | Posted by: Dave Jennings
Categories: Protecting your wealth | Tags: offshore, Dave Jennings, tax havens, Protect Your Wealth, tax policy, Liechtenstein Disclosure Facility, NDO, New Disclosure Opportunity, G20, Cayman Islands, Bermuda, Lloyds Bank, backlash

Back in June, we asked, Is this the end of ‘tax havens’? But it’s not all been one-way traffic from G20 governments aiming to crack down on so-called ‘tax havens’. Some overseas territories are defending their position, claiming to be the scapegoats and an easy target of the authorities. One haven has said that the ‘finger-pointing’ by some Governments is hypocritical and seeking to shift blame from their own failed tax policies.

Do tax havens deserve to take the blame?
In September 2009, a BBC Panorama investigation revealed what happened when they secretly filmed a man sent in to a Jersey branch of Lloyds Bank with £4m to invest. ‘It’s of no interest to us whether you tell the Taxman or not,’ said the banker.

Of course, HMRC was a little concerned and said it would investigate. But was the banker right?

To a limited extent, yes he is. The bank is not responsible for the tax declarations a customer makes, but of course, if HMRC knew that an adviser had indicated to the customer that they didn’t have to make an income tax return, then HMRC would be very concerned that this could be encouraging tax evasion. However, the banker would also have to ensure compliance with the relevant anti-money laundering rules, a subject I will come back to soon.

Tax havens fight back verbally…
Since the G20 summit in April 2009, tax authorities around the globe have been putting pressure on so-called ‘tax havens’ to disclose details of offshore investors. But being cast as tax avoidance ‘bad guys’ is not going down well in some offshore jurisdictions.

‘It’s not fair,’ said McKeeva Bush, the Cayman Islands’ Minister of Financial Services recently. ‘There is a lot of finger-pointing at the offshore world,’ added Cheryl Packwood, the CEO of the Bermuda International Business Association.

Meanwhile, Bermuda’s finance minister Paula Cox is quoted as saying that the world’s richest economies may be seeking ‘extra-territorial solutions to their economic, fiscal and financial challenges… There is a strong suspicion that the G20 has an undisclosed agenda item to drive forward a global corporate tax policy, which may fly in the face of a nation’s sovereign right to set down its own tax policy’.

…and through mutual tax information exchange agreements
But is the Minister right? Clearly Governments are co-ordinating a crack-down on tax havens and it hasn’t stopped yet. The recent G20 summit in Pittsburgh confirmed that there will be country-to-country peer reviews to improve tax transparency and the exchange of information. In fact, more Tax Information Exchange Agreements have been signed since November 2008 than in the previous ten years.

Again some tax havens are taking defensive action. One requirement to move from the ‘grey list’ (committed to implement internationally agreed tax standards but haven’t done so yet) on to the ‘white list’ (implementing internationally agreed tax standards) of complying nations, is to sign a minimum of 12 agreements to exchange information. It may have taken some advisers by surprise that many tax havens have met this target by signing agreements with each other!

Seismic shift towards transparency – and disclosure
However, what can’t be denied is that there has been a seismic shift across the globe to obtain account information from the tax havens and the clock is ticking to take advantage of the UK’s offshore Disclosure Opportunity (NDO).

You can read more posts on the current NDO and the Liechtenstein Disclosure Facility. For some people, though, the NDO may not be the best way to properly disclose any unpaid tax to HMRC and they should seek specialist advice.

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