G20 may blacklist Caribbean regulatory havens

ISTANBUL, Turkey (Reuters) -- The Group of 20 major nations may blacklist countries that have lax financial regulation and impose sanctions on them, mirroring its crackdown on tax havens, Chancellor Alistair Darling was quoted as saying.

"Just as we want to go after tax havens, we want to go after regulatory havens as well," Darling told Emerging Markets magazine in an interview published on Saturday.

"It is not good for financial stability that some companies can operate out of a Caribbean island, and shelter behind a veil of secrecy, and we don't know what they are up to."

Darling's remarks, some of the strongest yet on the issue by a senior G20 official, suggested the group was determined to impose financial reforms comprehensively around the globe to reduce the risk of another credit crisis.

The G20, which groups the United States and other rich countries along with developing nations such as China and India, is pushing for wide-ranging changes in financial regulation -- from bank capital standards and bankers' pay to corporate accounting rules and supervision of financial institutions.

Emerging Markets magazine said the Financial Stability Board, which coordinates the G20's regulatory initiatives, would prepare a "provisional blacklist" of regulatory havens by a meeting of G20 finance ministers in November, as well as a grey list of countries that also should tighten standards.

The FSB will suggest the use of positive sanctions, such as help with improving a country's regulatory capacity, as well as negative sanctions, such as raising the cost of doing business with banks in a blacklisted area, the magazine reported.

Darling, visiting Istanbul for a meeting of finance officials from the Group of Seven rich nations and the International Monetary Fund's semiannual meeting, was quoted as saying big institutions which triggered the credit crisis had traded in every corner of the globe.

"We have an interest in making sure that the regulatory regime is robust, so that you don't end up with banks falling between stools," he said.

"I am concerned about countries that don't have such robust regimes. As it becomes less and less clear what exactly their arrangements are, that could have quite a destabilising effect on other countries."

The G20's crackdown on tax havens has had considerable success. G20 leaders agreed in April to name and shame the world's tax havens with a public list, and threatened sanctions for countries not falling into line.

Since then, some European countries, such as Switzerland, have made concessions on bank secrecy laws in an effort to get off the list. On Thursday, the government of France said French banks had promised to close all their branches in jurisdictions considered to be tax havens from March 2010 onwards.

October 5, 2009

caribbeannetnews

Bahamas Caribbean Blog International

Saint Vincent speaks out at UN debate on efforts to clamp down on tax havens

29 September 2009 – The efforts of major and industrialized economies to crack down on so-called tax havens are just an excuse to spread the blame for the global financial crisis on small nations’ legitimate attempts at development, Saint Vincent and the Grenadines told the General Assembly today.

Camillo M. Gonsalves, the Caribbean archipelago’s Permanent Representative to the United Nations, told the sixth day of the Assembly’s high-level segment that is country faces “being stigmatized out of our transition into financial services” by the Group of Twenty (G20) major economies, the Organization for Economic Cooperation and Development (OECD) and what he called “other non-inclusive bodies.”

Speaking at UN Headquarters in New York, Mr. Gonsalves said the crackdown on tax havens were actually “a pathetic effort to cast a wide and indiscriminate net of blame across a swath of legitimate and well-regulated countries’ development efforts.

“We note the irony of these paternalistic prescriptions from the same countries that are unable to stem corruption and mismanagement within their own borders, where corporations recklessly squander trillions of dollars and a single buccaneer investor can make $50 billion disappear into thin air – an amount greater than the combined annual budget expenditures of the entire CARICOM [Caribbean Community] sub-region,” he said.

Mr. Gonsalves took aim at the G20 for describing itself last week, at a summit in the United States city of Pittsburgh, as the premier forum for international economic cooperation.

“Saint Vincent and the Grenadines is not a member of the G20, nor were we consulted on its ascension to the ranks of arbiters of our economic fate… The G20 faces a serious legitimacy problem: aside from being non-inclusive and unofficial, many of the countries at that table represent the champions of the financial and economic orthodoxies that led the world down the rabbit-hole to its current economic malaise.”

The Permanent Representative also cast doubt on recent reports from some observers that the economy is returning to normal.

“The invisible hand of the market is still clasped firmly around the throats of poor people and the developing countries of the world. We see none of the so-called ‘green shoots’ that populate the fantasies of discredited economic cheerleaders.

“Indeed, the seeds sown by this crisis may produce the strange and bitter fruit of increased poverty, suffering and social and political upheaval. The crisis itself, with its disproportionate impact on the poor, will only widen and deepen the yawning gap between developed and developing countries.”

UN News

Bahamas Caribbean Blog International

News Tracker: past stories on this issue:

Dominican Republic calls for tax on tax havens to fund UN humanitarian goals

Caribbean tax havens talk back against G20 'finger pointing'

By Alan Markoff:

GEORGE TOWN, Cayman Islands (Reuters) -- Caribbean and Atlantic offshore finance centers are hitting back against attempts to portray them as shady tax havens and say world leaders are making them scapegoats for the global downturn.

Leaders of the Group of 20 economic powers, meeting in Pittsburgh on Friday on global economic issues, launched a campaign in April to name and shame tax havens and penalize those who failed to tighten tax standards and transparency.

Spurred by public outrage over big bonus-earning bankers and high-profile frauds by wealthy financiers, G20 governments have pointed accusing fingers at tax havens across the globe, many of them on tiny, beach-rimmed islands in the Caribbean.

As US investigators probe Swiss bank accounts held by suspected US tax cheats, leading offshore jurisdictions say they resent being cast as hide-outs for tax evaders and crooks.


"It's not fair," said McKeeva Bush, political leader and Minister of Financial Services of the Cayman Islands, the tiny British overseas territory south of Cuba that is one of the world's largest domiciles of hedge funds.

He and other policymakers and business chiefs from prominent Caribbean and Atlantic offshore centers say the anti-tax haven "finger pointing" by the world's richest and most powerful governments is hypocritical and seeks to shift blame away from their own failed policies and lax regulation.

"It's the fault of the onshore centers who taxed their own people ... money is running away from them now," Bush said.

"Cayman had nothing to do with the investing in sub-prime derivatives, US housing bubble or gross over-leveraging of the main banks ... It's a nice diversion to blame the evil guys in the Caribbean instead of laying blame where it belongs," said Grand Cayman real estate developer Michael Ryan.

"There is a lot of finger pointing at the offshore world," said Cheryl Packwood, chief executive officer of the Bermuda International Business Association. Bermuda, a tiny Atlantic island that is also a British territory, is a center for the global insurance industry.

But in the United States alone, offshore tax havens are estimated to deprive the Treasury of $100 billion a year. Official efforts to track down tax dodgers have gained pace as the US government seeks to collect more revenues without raising tax rates to offset its vast and growing budget deficit.

After G20 leaders this year declared a crackdown against tax havens, the Organization for Economic Cooperation and Development (OECD) in April published a "gray list" of jurisdictions they said fell short of full compliance with internationally agreed tax standards. More than a dozen Caribbean jurisdictions, and Bermuda, were on the list.

But while Caribbean and Atlantic offshore financial centers reject what they see as a one-sided witch hunt against them, their governments have nevertheless scrambled to get themselves dropped from the damning OECD noncompliance list."

The Caymans and the British Virgin islands achieved this in July after signing at least 12 bilateral tax agreements in line with OECD standards. Bermuda has also moved up to the "white list", and other Caribbean states are signing tax treaties.

Anthony Travers, chairman of the Cayman Islands Financial Services Association, sees an attempt by the G20 nations to impose what he calls a "new world order predicated on a global one-size-fits-all higher rate of taxation".

Bermuda's finance minister, Paula Cox, also suspects the world's richest states may be seeking "extra-territorial solutions to their economic, fiscal and financial challenges."

"There is now a strong suspicion that the G20 has an undisclosed agenda item to drive forward a global corporate tax policy, which may fly in the face of a nation's sovereign right to set down its own tax policy," she said.

Timothy Ridley, former chairman of the Cayman Islands Monetary Authority, believes the crackdown on tax havens stems largely from fear of competition by "those ... who wish to retain control of the world's capital and to tax it".

Some experts in the Bahamas suggested the offshore sector should ensure its future by shifting away from clients in the United States, Europe and Canada to new wealthy customers in emerging powers like Brazil, China, Nigeria, Russia and India.

"If you can provide new services to these markets, you will swim, not sink," said Julian Malins, a London-based barrister who has acted as counsel for cases originating in the Bahamas.

While insisting they have put their finance sectors in order from the regulatory viewpoint, political and business leaders of these offshore jurisdictions admit their territories have not escaped the battering of the global financial crisis.

"Fewer tourists, lower tourist and consumer spending, the squeeze on business profits, redundancies and lay-offs are all the result of the global recession," said Bermuda's Cox.

This has led to some companies leaving the Atlantic island insurance center. This week, directors of global insurance broker Willis Group Holdings approved moving its domicile from Bermuda to Ireland, citing economic factors.

But both Bermudian and Caymans business leaders felt their finance centers could weather the economic storm and prosper.

"Money is going to find the right place to be," said Cayman's Leader of Government Business Bush, who is embroiled in a dispute with Britain over the islands' financial management.

"No matter what (the United States and EU) try to do, the more regulated places will survive and the Cayman Islands will survive," he said.


September 26, 2009

caribbeannetnews

Bahamas Caribbean Blog International

 

Bahamas Tax Havens Struggle

BY KENDENO N. KNOWLES:

While the Bahamas is considered one of the original tax havens, one senior official at Deloitte & Touche said recently that The Bahamas has not reaped the maximum benefits like many other tax havens in the region.

Deloitte Managing Partner Raymond Winder said recently that The Bahamas has more or less flat lined compared to other Caribbean countries.

"We like to talk about this new model of business, but let us look at the financial services sector. We have never ever been a real big player in the financial service sector like some of the other tax havens," Mr. Winder said.

"Yes, the Bahamas was the original tax haven when you make a comparison against Grand Cayman and Bermuda but, let us look at what happens in Cayman and Bermuda, and just why they have benefited so much more from the financial services sector than we have.

"We have allowed the financial services sector in the Bahamas to be hijacked by the lawyers," he said.

The only players in the financial services sector Mr. Winder claimed are lawyers; this he said has been detrimental to the success of the financial services sector and by extension, tax havens.
"We feel as if all we have to do is incorporate corporations and there’s no more to it." Mr. Winder said.

Minister of State for Finance Zhivargo Laing however tried to set the record straight last week about the governments stand point.

Mr. Laing however said that it is the legal fraternity that is partly to blame.

"What I find interesting is that when the government listens we are blamed and when we don’t listen we are blamed," Mr. Laing said.

"With the greatest respect, this notion that Mr. Winder is talking about in terms of lawyers is an absolute policy of the legal establishment.

"I can tell you that I go to Geneva and I go to New York and I talk to fund administrators all over the world. I ask them why they set up their funds in Cayman and in St. Vincent. They [the fund administrators] say that their lawyers have international practices in Geneva and St. Vincent etc., but not in the Bahamas, because they say they cannot get in the Bahamas as easily.

"This is something where the legal fraternity will have to move," Mr. Laing said.

jonesbahamas

Bahamas Caribbean Blog International