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U.K. under pressure to clean up tax havens

May 3, 2013 at 5:51 AM   |   Comments

GEORGE TOWN, Cayman Islands, May 3 (UPI) -- British Overseas Territories in the Western Hemisphere will abandon their "tax haven" status as London struggles to raise cash and counter European charges its Caribbean and other overseas territories encourage tax evasion.

Chancellor of the Exchequer George Osborne said London signed agreements with its overseas territories that will automate tax information exchange between Britain, its major international partners and Europe.

The sharing of tax information exposes bank account holders to tax collection authorities not only in Britain but also other countries and follows large-scale bank account disclosures secured as part of the European Union's financial rescue of Cyprus.

EU pried the information out of Cyprus by encouraging a media vilification campaign that focused on Russian account holders and suspected money laundering activities in Cyprus.

But the measure also targeted European tax evaders, Middle East financiers and anyone else interested in hiding assets from the taxman.

EU campaigns were aided by online leaks of alleged tax evaders' personal data.

Luxembourg and non-EU Switzerland have also given in -- though only to some degree in the case of Switzerland -- to EU demand for disclosures.

British Overseas Territories Anguilla, Bermuda, the British Virgin Islands, the Cayman Islands, Montserrat and the Turks and Caicos Islands have agreed to automatically share tax information with the United Kingdom and with the G5, the Caribbean Journal reported.

The British Overseas Territories -- a designation for former colonies of the British empire -- and other regions with liberal tax regimes have been convenient vehicles for financial deals sanctioned with tacit knowledge of the authorities.

The alleged but rarely proven money-laundering spinoffs, too, carry convenient deniability loopholes, are seldom unknown to officials, and provide welcome benefits for small economies of the islands.

The Cayman Islands government was the first territory to agree to automatic information sharing.

The Cayman Islands, located in the western Caribbean Sea south of Cuba and northwest of Jamaica, include the three islands of Grand Cayman, Cayman Brac and Little Cayman.

Osborne said the overseas territories deal "represents a significant step forward in tackling illicit finance and sets the global standard in the fight against tax evasion.

"I now hope others follow these governments' lead and enter into similar commitments to this new level of transparency, removing the hiding places for those who seek to evade tax and hide their assets."

Analysts said European measures to close tax havens within EU jurisdiction triggered a scramble among banks elsewhere to attract new offshore banking business worth billions of dollars.

Officials say information sharing will cover names, addresses, dates of birth, account numbers, account balances and details of payments made into the overseas accounts.

It will also include information on accounts held by entities such as trusts.

Analysts say European tax collection officials face an expensive, long-drawn battle for recovery as, for every tax collector targeting evaders, there's at least one clever accountant or lawyer paid by an affected client to stay ahead of the game.

British moves to unearth tax avoidance schemes within its jurisdiction are aimed at raising cash for the treasury but also rebutting increasingly sharp accusations in Europe that London through its international financial networks harbors tax evaders.

Austrian Finance Minister Maria Fekter said the country won't change its laws until Britain ends tax haven and banking secrecy laws in offshore financial centers, including the Channel Islands.

"Austria is sticking to bank secrecy. We fight tax evasion and money laundering," she said.

"Great Britain has many money laundering centers and tax havens in its immediate legal remit -- the Channel Islands Gibraltar, the Cayman Islands, Virgin Islands. These are all hot spots for tax evasion and money laundering," Fekter said in an article for Kurier newspaper.

Austria is opposed to German-led demands for the automatic exchange of information on banking depositors with other EU countries, proposals that will be discussed by Europe's finance ministers.

Fekter described Britain as "the island of the blessed for tax evasion and money laundering," comparing British offshore banking to Cyprus, bludgeoned into accepting EU terms on pain of bankruptcy.

"Just as we urged the abolition of sealed foundations in the Cyprus rescue to drain the money laundering swamp, we must demand the same of the U.K.," Fekter wrote.

"We want a trust registry for the Channel Islands, but also for countries where British law applies, such as the Cayman Islands, the Virgin Islands or Gibraltar. These are all areas that are havens for tax evaders," Fekter said.

Austria aims to agree within weeks to give other EU countries access to foreigners' bank account details, Chancellor Werner Faymann said in a radio interview.

Faymann said he hoped for a deal before a May 22 summit, when EU leaders will discuss ways to claw back about $1 trillion a year in unpaid tax.

"We want to achieve a result for an exchange of data in the interest of fighting fraud in Europe," Faymann said in the interview aired by Austrian broadcaster ORF.

Most European banks are worried the EU measures will trigger a massive flight of capital, including lucrative high-volume deposit business from the Middle East.

© 2013 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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