18.05.09 Tax haven crackdown to hit offshore financial centres

18.05.09 Tax haven crackdown to hit offshore financial centres

The number of offshore financial centres could shrink by half within the next five years as the worldwide crackdown on tax havens gathers pace, according to a prominent Jersey-based financial lobbyist.

Geoff Cook, chief executive of Jersey Finance, a promotional body representing the financial services industry on the Channel Island, said: “It is not inconceivable to think that the number of offshore finance centres could fall by half in the next few years.”

Cook was responding to a question on the future of offshore centres at a conference hosted by Jersey Finance in London last week. The Paris-based Organisation of for Economic Co-operation and Development lists 38 jurisdictions as tax havens.

These include Jersey, the Cayman Islands and Liechtenstein, and less well-known and small jurisdictions such as the Caribbean islands of Aruba and Montserrat and Nauru in the Pacific.

Cook and others reckon smaller offshore centres will feel pressure to meet increasingly tougher regulatory and disclosure rules from international organisations and governments demanding greater transparency.

Tax havens are being forced to sign anti-secrecy agreements, or face possible sanctions from G20 countries. An estimated $7 trillion (€5.2 trillion) of assets are held offshore and, according to pressure group Tax Justice Network, developed countries lose $180bn a year in evaded taxes.
Jay Krause, a partner at law firm Withers, said: “The next stage of development in international information sharing in tax matters will likely focus on establishing ‘automatic’ information exchange between jurisdictions.

Such procedures may in practice be challenging for some of the smaller offshore centres to implement.” Currently, Most offshore centres only disclose information on accounts when there is a specific request from another country that has signed a tax information exchange agreement with the tax haven.

Krause added that smaller offshore centres will also struggle to attract the required talent to defend themselves against regulatory pressures.

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