OECD gets hit list go-ahead on havens
Multibillion pound offshore financial services business stands to be wiped out, reports Phillip Inman.
The Organisation for Economic Co-operation and Development was given the go-ahead this week to draw up a hit list of global tax havens offering ‘harmful tax competition’ that could wipe out the multibillion pound financial services business in the Channel Islands and Caribbean.
The G7 finance ministers meeting in Birmingham approved an 18-point plan put forward by the OECD in April that aims to identify countries offering low or zero-tax rates and then combat them with a series of sanctions.
Chancellor Gordon Brown also emphasised efforts to crack down on tax-related money laundering by organised crime groups.
He said a Special Compliance officer from the Inland Revenue would be attached to the National Criminal Intelligence Service, allowing domestic and international money-laundering intelligence to flow to the Revenue for the first time.
Ministers approved the plans despite strong objections from two member countries, Luxembourg and Switzerland. The two countries described the report as ‘selective and repressive’.
Among the many propo-sals they rejected was the demand that banks should open corporate and private accounts to scrutiny by tax authorities. The OECD said it was necessary to obtain information about funds hidden to evade tax debts.
The move follows reviews of UK tax havens by the Home Office and Foreign Office and the appointment this week of Treasury minister Dawn Primarolo to head an EU committee that will examine the effect of tax competition among member states and offshore havens.
Officials in the Channel Islands said they would respond to the reviews in due course, but privately expressed alarm at the attack on their tax status. Jersey, for instance, has a 20% top rate of tax and has so far refrained from levying inheritance tax or capital gains tax.
One US-based investment adviser, who channels private funds through the Jersey and Guernsey into the main UK market, said the move could have far-reaching consequences. ‘If the OECD carries this policy through, it will wipe out the Channel Islands’ business,’ he said.