The mounting effects of the global financial crisis have sparked some wild accusations as governments, experts and investors alike have tried to identify scapegoats. Predictably, hostility towards offshore financial centres in particular
is growing.
Pressure has come from politicians on both sides of the Atlantic – the ‘Stop Tax Haven Abuse Bill’ in the US; a review of the Crown Dependencies and Overseas Territories in the UK; the EU’s ‘White List’; and President Sarkozy’s call for a ‘crackdown’ on tax havens.
Australian prosecutors have added their weight by targeting a Jersey-based accountant, alleged to have been engaged in a multi-million dollar fraud, for what may become a regular request for offshore directors – extradition to face prosecution for ‘onshore’ tax offences.
A well-regulated financial market is vital to the global economy. The difficulty for those who argue that offshore equals poor regulation is that numerous supranational organisations find time and again that offshore jurisdictions outperform their onshore counterparts in complying with international standards of regulation and anti-money laundering.
Each jurisdiction should be judged on its own merits. In fact, the terms ‘offshore’ and ‘onshore’ are becoming increasingly redundant and the focus should simply be on ‘compliant’ and ‘non compliant’ centres.
This new offensive is not without its contradictions. Vice-president Joe Biden’s home state of Delaware houses more than 600,000 firms and many thousands more opaque limited liability companies, none of which require disclosure of beneficial ownership to the authorities.
Attacking legitimate centres undermines the international standards of compliance and regulation themselves. If the real argument is about unwelcome competition in difficult times then not only is it an unattractive one, it is intellectually dishonest to pretend it is about poor regulation or money laundering – especially in light of the available evidence. The real agenda is tax competition.
