With the dust hardly settled on the OECD attack on tax havens, attention must now quickly turn to ho...
With the dust hardly settled on the OECD attack on tax havens, attention must now quickly turn to how investors should interpret these events into future investment plans. Since the listing (1) in June of 35 countries that the OECD considers as operating a harmful tax regime, much of the attention has been focused on the outrage, surprise and confusion liberally registered by those countries who find themselves on the list.
No doubt this will continue for a further 12 months, which is the deadline the listed countries have been given by the OECD. Those that do not commit to reform within this time frame will risk punitive action and face economic sanctions.
As if this was not enough, further pressure is being brought to bear on certain jurisdictions in the form of the EU Savings Directive and new US information requirements regarding income flowing out of the US due to come into force on 1 January 2001.
Yet while jurisdictions argue and remonstrate at the savageness of such attacks and the tag of 'tax haven' being foisted upon them, companies and individuals that use these centres are left to ponder what the future holds for them.
Unfortunately for most, it will be a case of second-guessing what will happen in 12 months' time. Investors know that six countries (not included in the list of 35) have already committed to work within the OECD's harmful tax competition guidelines, which basically hinges on exchange of information. These are Bermuda, Cayman Islands, Cyprus, Malta, Mauritius and San Marino. But it is unclear what the 35 countries listed will do.
According to PricewaterhouseCoopers it seems quite likely that in a year's time there will be two categories of tax haven - those that have agreed to co-operate and those that have not.
What should investors do? The choice boils down to whether they are happy with the prospect of information exchange. If yes, then investors and companies alike must question the use of listed jurisdictions in the future. PricewaterhouseCooper suggests companies already in a listed jurisdiction should consider a tenable exit strategy should they wish to leave or, if they are about to establish new operations in a listed jurisdiction, question whether they still wish to do so.
For larger companies, influencing the attitude of the jurisdiction to the OECD may be an option. For fund managers, whether certain types of product are to be favoured in some jurisdictions as against others needs careful consideration.
For the 32 listed jurisdictions, the choices are not so complex. If they do not wish to see an exodus to jurisdictions that have already committed to co-operating with the OECD, they should present investors with an informed choice and say now whether they are going to co-operate or not.
(1) Andorra, Anguilla, Antigua & Barbuda, Aruba, Bahamas, Bahrain, Barbados, Belize, British Virgin Islands, Cook Islands, Dominica, Gibraltar, Grenada, Guernsey (including Sark and Alderney), Isle of Man, Jersey, Liberia, Liechtenstein, Maldives, Marshall Islands, Monaco, Montserrat, Nauru, Netherlands Antilles, Niue, Panama, Samoa, Seychelles, St Lucia, St Kitts & Nevis, St Vincent and the Grenadines, Tonga, Turks & Caicos, US Virgin Islands and Vanuatu
An ambitious objective
'Something completely new'
'Illusion of control'
Reasons to be cheerful
Total investment reaches £9m