Britain’s Chancellor of the Exchequer George Osborne is reportedly finalising measures to clamp down on two Caribbean tax havens.
Under tough anti-evasion measures being drawn up by the Treasury, banks in the British Virgin Islands and the Cayman Islands will be forced to reveal details about customers suspected of hiding money offshore.
The Caribbean islands are among the world’s main offshore financial centres. More than one million offshore companies are registered in the British Virgin Islands alone, even though the total population is just 30,000.
“The places you can hide are getting smaller and smaller,” Osborne said at the weekend at the European finance ministers’ summit in Dublin.
“We are in advanced stages of discussion [with the two territories]. They are in no doubt about what we expect,” he added.
Osborne’s remarks drew an immediate reaction from Cayman Islands Stock Exchange Chairman, Anthony Travers.
According to Travers, if the UK recovery is dependent on revenues from Osborne’s tax crackdown on Caribbean financial centres, then he is in for a rude awakening.
Travers said, “I am deeply troubled that the meritless attacks on the Overseas Territories by [Austrian Finance Minister Maria] Fekter appear to be gaining traction. Furthermore, there seems to be no contrary assertion from the UK government and the chancellor as to the true position .This is in neither of our interests, as in turn it seems to me to leave the City open to further Franco-German attack by association. But this is an attack based on mischaracterization.
“A cursory review of the publically available statistics under the European Saving Directive which established fully transparent proactive tax reporting shows bank deposits in Cayman of EU residents of a statistically irrelevant US$25 million,” he pointed out.
“The correct answer to Ms Fekter should have been that the Overseas Territories already demonstrate full tax transparency .Given that HMRC already has full treaty access to Cayman accounts for UK tax purposes, the provisions of FATCA are simply duplicative, wholly unnecessary and will raise no additional revenue,” Travers added.
He went on to say that it has not escaped his notice that Osborne has also attacked the British Virgin Islands, which has similar tax transparency with the UK and the USA.
“He should know that the BVI has an extensive network of some twenty one tax information exchange agreements providing for complete tax transparency notably to HMRC and the IRS; that they are concluding the FATCA negotiation with the UK, and the US and that they are considering moving to proactive reporting with the EU under the Directive,” he said.
He pointed out that the Cayman Islands, as well as the BVI and Bermuda, regard tax evasion as firmly off the table but yet they are continually labeled tax havens, a term that has become synonymous with illegality and wrongdoing.
“Our measures in Cayman far exceed the tax transparency available in Austria (and many other places, including the US) and yet we find no rebuttal from Chancellor Osborne, rather the contrary. One can only gaze in awe at the misinformation being promoted by a UK chancellor and wonder why he appears willing to assist the French and Germans in their avowed quest to irretrievably damage The City of London’s global dominance,” Travers concluded.
Meanwhile, in a letter on Sunday to the editor of Britain’s Daily Mirror newspaper, BVI Premier Dr Orlando Smith responded to an article published on Saturday, headlined “Margaret Thatcher the tax snatcher?”
The article claimed that Thatcher’s £6 million (US$9 million) London townhouse is owned by a BVI company, which could have been a scheme that would help her estate avoid millions in inheritance tax.
John Christensen, of the Tax Justice Network, said: “How can a former prime minister spend more than two decades living in a house in London that has been owned for many years by a company based in the British Virgin Islands? We all have a duty to pay our taxes, and that includes former politicians.”
However, Smith said that the article makes the classic error of assuming that the use of an offshore structure is in some way improper for UK tax purposes or that some unauthorised benefit is obtained.
“That is simply an unsound assumption. The fact that HMRC has clear avenues to obtain all tax information from the BVI should in fact lead your correspondent to the contrary conclusion; that offshore structuring in the Overseas Territories is correct and within the law,” Smith said.
“The legitimate use of transparent offshore financial centres needs to be better understood by your journalists,” he concluded.