The clampdown on offshore tax havens by the European Union and UK government could provide the Treasury with an estimated £50bn a year, according to the Association of Accountancy and Business Affairs.

It is money Gordon Brown cannot afford to ignore considering the black hole in his balance sheet, but he will meet staunch resistance from both the havens themselves and UK plc.

Jersey is the latest jurisdiction to come under the spotlight after demands from both the EU and the Organisation for Economic Co-operation and Development to end practices such as discrimination in favour of foreign businesses.

But instead of backing down, the island plans to cut domestic corporation tax rates to zero in order to preserve the same rates for international companies. 'I see this current proposal (by Jersey) as an act of desperation,' said John Christensen, a development economist, member of AABA and former adviser to the government of Jersey. 'I see it as no more than a short-termist measure. Before long there will be a reaction to it.'

Richard Murphy, a chartered accountant and the AABA member who calculated the figures, believes it goes deeper than desperation: 'Jersey is going to self-implode within three years,' he said. 'It is staggeringly dependent on corporation tax.'

Chas Roy-Chowdhury, head of tax at ACCA, feels the government would be 'shooting itself in the foot' if it were to outlaw tax havens. 'It gives the impression that the UK is turning into a very business unfriendly environment,' he said. Whether this is true or not is debatable. Feelings are split between those who believe companies want to operate in the UK come what may, and those who believe they only do so because of an attractive corporate tax regime, which is being increasingly eaten away.

Havens such as Jersey and Gibraltar have been given until 2005 to meet EU demands, including the phasing out of tax avoidance schemes such as the exempt company regime.