A number of investment organisations and business groups have written to the Treasury Select Committee on the issue of offshore financial centres, ahead of yesterday's deadline for comment.
Among those responding to the Committee’s request for written evidence, as part of a Treasury inquiry into offshore financial centres, was the Association of Investment Companies (AIC) which has given its backing to the Channel Islands.
It argues the British Exchequer does not lose out “where investment companies locate offshore, as they would not, and do not, exist at all in the UK under the current tax regime”.
The AIC, which represents some 354 closed-ended investment companies, argues offshore financial centres can be legitimately utilised by investment companies without raising any public policy concerns back home in the UK.
“Unfortunately, the UK’s tax system has not kept up with the needs of collective investment vehicles as investment practice has developed,” the AIC said in a statement summarising its position on offshore financial centres.
“For example, it does not currently allow UK-based investment companies to invest in income-producing assets such as bonds, property and infrastructure without the end investor experiencing double taxation on the income.
“The tax system also makes it difficult for investment companies to use strategies such as short-selling and derivatives without potentially adverse tax consequences.
“Where investment companies have sought to meet demand for these assets/strategies, they have increasingly looked offshore.”
Other organisations known to have written to the Committee ahead of yesterday's deadline include the Association of Private Client Investment Managers & Stockbrokers, the British Bankers Association, the Investment Management Association and Jersey Finance, a pro-business group located on the island.
The Treasury Committee’s interest in offshore financial centres comes as offshore tax havens come under increasing scrutiny from governments keen to boost their tax revenues.
In February, many tax haven bankers and their clients were stunned to learn that Germany had paid an insider for data on hundreds of German citizens who had accounts in a major Liechtenstein bank.
In its request for comment, which can be seen here, the Treasury said it was particularly interested in hearing to what extent, and why, offshore financial centres are important to financial markets. It also wants to know to what extent their use threatens financial stability.
* In an interview published in today’s Financial Times, Lloyd’s of London chairman Lord Levene said it was important for the UK Treasury to recognise that “the UK has to be more competitive” with respect to tax issues.IFAonline
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