The decision by the US to temper its support for the OECD in its efforts to discourage predatory tax...
The decision by the US to temper its support for the OECD in its efforts to discourage predatory taxation is the latest twist in a campaign that many offshore centres have seen as a fight for their very existence.
The OECD attracted criticism for its hard-line stance when it was first compiling its 'grey' list. Regulators and officials complained of a lack of clarity in what was being asked for and an intransigence about acceptable standards for transparency and information exchange.
As agents of the OECD (and their colleagues at the FATF) started to examine the various financial centres, they began to understand firstly the local importance of those industries, and secondly that for many there is a real will to evolve into professionally-run, internationally respectable centres of finance. The OECD softened its position.
The pressure on offshore centres to raise taxation in line with their mainstream counterparts is a threat to offshore investors and product providers alike, but for investors there has been some benefit from these international efforts: it will become increasingly clear which centres are just low-tax and which are high-risk.
In this respect, US caution could damage investor interests. The Isle of Man, for example, has made it clear that despite being keen to adopt international standards for regulation and taxation, it will not sacrifice its competitiveness. No one wants to lead. The resistance of respectable Luxembourg and Switzerland to aspects of these changes is similarly problematic.
Irrespective of the irritation and anxiety that international interference engenders, the compromise between the increasing costs associated with more regulation, and the ability for an adviser or product provider to grow a business in a centre recognised for its excellence, will be worthwhile.
Offshore centres have not been successful at public relations. But when the desire to penalise 'tax havens' turns into a global urge to compete on regulation, service provision and tax, it is hard to see who will have lost out.
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