UK's havens need diverse tax bases: report

Britain’s offshore financial centres must develop broader tax bases to help implement a prudent approach to managing government finances, says an independent report published today.

The document is the final offering from the Treasury-commissioned review of the long-term financial opportunities and challenges facing three crown dependencies (Jersey, Guernsey and Isle of Man) and six overseas territories (Bermuda, Cayman Islands, Gibraltar, Turks and Caicos Islands, British Virgin Islands and Anguilla).

The author, Michael Foot CBE, covers a number of important areas that affect the future sustainability of the jurisdictions, and he sets out a series of standards that the tax havens will be expected to meet.

Mr Foot, a former MD of the Financial Services Authority, states that the offshore financial centres must ensure they meet international standards on tax information exchange, financial regulation, anti-money laundering and countering the financing of terrorism, as well as ensuring that they put their public finances on a firmer footing by diversifying their taxes.

‘Meeting international standards on tax transparency, financial sector regulation and financial crime is an absolute must if the jurisdictions wish to continue to hold themselves out as internationally active financial centres,’ writes Mr Foot, adding that ‘international pressure must also be maintained on competitor jurisdictions to raise their standards’.

He recommends that, as well as establishing broader tax bases, the crown dependencies and overseas territories develop mechanisms to measure and control public spending and build financial reserves during periods of economic growth.

He also suggests that jurisdictions that offer protection to retail depositors should ensure compensation schemes can be understood by those depositors, and any jurisdiction that has not already done so should undertake a thorough examination of the range of powers to resolve a crisis in its financial services sector.

Financial secretary to the Treasury Stephen Timms welcomed Mr Foot’s report, saying it comes ‘amidst [sic] a real step change in the international determination to tackle tax and regulatory havens’ and that the document ‘sends a strong signal to overseas financial centres that they must ensure that they have the correct regulation and supervision in place, while also ensuring their tax bases are more diverse and sustainable to withstand economic shocks’.

Issue: 4232 / Categories: News , tax havens , Admin