Offshore centre debate leaves MPs up creek without paddle

Cayman Islands

No one watching the Treasury select committee’s inquiry into the offshore centres, friend or foe of tax havens, can think that MPs are about to come up with a solution.

The havens have come under scrutiny following suggestions they have been critically involved in many of the failings of the global economy.

That was a suggestion witnesses before the committee last week, the first meeting the MPs have had, were keen to play down.

‘Most centres are determined to be legitimate. They want to regulate properly,’ said John Whiting of PricewaterhouseCoopers.

They have also upped their standards and changed their pitch to global business in recent years.
‘There’s an increasing awareness among the regulated community that if they are doing business in a place which is seen to be badly regulated, that is a poor reflection on them,’ Kari Hale, Deloitte partner and former FSA chief, told the MPs.

Whiting said he did not believe there were any accurate figures showing how much tax is evaded through offshore centres.

John Chown of Chown Dewhurst (who stressed he was speaking in a personal capacity), said that fears of a race to the bottom because of tax competition were exaggerated. The benefits of reducing tax rates for taxpayers get worse the lower the tax rate becomes, he argued.

The committee has received 27 written submissions. To add to the complexity, the Society of Trust and Estate Practitioners pointed out that some US states acted as regulatory havens, an issue MPs might well be very reluctant to try and resolve.

Oxford academic Professor Edmund Fitzgerald said there should be more research into criminal and terrorist activity through offshore havens. ‘International security in general, and that of the EU in particular, is threatened by the routing of criminal/terrorist “black” funds through offshore financial centres,’ he explained.

The committee now hopes to produce recommendations for government by S eptember.

The issue everyone seems to agree on is increasing the transparency of the centres, and of sharing banking information across borders. But if that sounds a good idea, there is one last sobering question: isn’t that what the Organisation for Economic Co-operation and Development, among others, has been trying to do for years?