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Friday, October 30, 2009

Report recommends tax changes for British Overseas Territories

LONDON, England, October 30, 2009 - A report commissioned by the United Kingdom government is recommending that British Overseas Territories, including those in the Caribbean, introduce more taxes to put their economies on a firmer footing.

The report, prepared by former director of the Bank of England Michael Foot, reviewed the three Crown Dependencies - Guernsey, Isle of Man and Jersey - and six Overseas Territories - Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, and the Turks and Caicos Islands.

"The tax regimes in most of the Overseas Territories have not evolved beyond the imposition of specific transaction and consumption taxes; they operate a range of customs duties on imports, on which they are heavily reliant for revenue," Foot said, adding that there are no taxes levied on income, profits and capital gains, and no sales or value added taxes.

Foot said that consultancy firm Deloitte, which played a part in the review, found "a compelling case for those of the nine jurisdictions which do not already operate VAT or Goods and Services Tax (GST) to consider introducing such a system to increase the sustainability of their business models by broadening their revenue bases".

"Deloitte noted that this would be of particular importance for the Overseas Territories should the global trend for reducing reliance on customs duties continue," he said.

Foot himself said that none of the jurisdictions he had reviewed could afford to be complacent.

"Some now face difficult decisions and will need to look afresh at options for controlling public expenditure and increasing revenue," he said.

The UK Minister for the Overseas Territories, Chris Bryant, said he welcomed Foot's "balanced and intelligent report", which also stated that British offshore financial centres must ensure they meet international standards on tax information exchange, financial regulation, anti-money laundering and countering the financing of terrorism.

"I have argued for some time that the Overseas Territories need to have robust governance of financial institutions, transparency in financial systems, proper regulation of off-shore financial services and a broader tax base," Bryant said.

"The Overseas Territories have made substantial progress, especially in relation to financial transparency. I shall be working closely with the governments and governors to ensure that these recommendations are taken forward."

Lord Bach, Ministry of Justice Minister for the Crown Dependencies, added that the review was "helpful" and that it recognised that in a fast changing and increasingly complex financial environment, there is no room for complacency.