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Towards a Level Playing Field,
second edition.


Report undertaken by Stikeman Elliott on behalf of the ITIO and STEP.

 


Tax haven London: Small countries seek to gain the financial high ground
Financial Times (EDITORIAL),

1 May 2007

Jokes about offshore tax havens with more mailboxes than people are plentiful in the world’s onshore financial centres. But it looks as if the jesters have got it wrong: the real offshore tax havens may be the UK, the US and other supposedly “onshore” financial centres. These countries need to practise what they preach on reducing tax ­avoidance.

A report out today points to the widespread failure of large countries to adhere to the tax rules that they have previously laid down for the havens. It brings into question what is really offshore.

The US lies off the shores of most other nations in the world. It is also fond of pointing fingers at Caribbean islands, but is unable to reel in its own renegade states.
Delaware, for example, falls short of some of the demands of the Organisation for Economic Co-operation and Development – a club of large, rich economies – on small countries for tax reporting. Little wonder that it hosts mailboxes for more than half of US corporations and 60 per cent of Fortune 500 companies.

The vast majority of US states do not require – let alone verify – owner­ship information when a company is formed. Companies need to provide almost as much information to register a web address.

It is hypocritical of rich countries to rail against offshore tax havens, while failing to do the maximum to penalise foreign tax avoiders within their own borders. Countries with a large population and tax base will always have a stronger argument against small countries that attract tax avoiders, but it is best to lead by example.

It is reasonable for organisations such as the OECD to suggest inter­national tax standards. But they should not be timid in pointing out failings within their own member states. International tax and regulatory competition is inevitable; the important thing is to provide a level playing field for all countries.

At the very least, it is time to rethink what we mean by “offshore”: size and proximity to the coastline do not seem to make much sense. A new definition would include anywhere that makes it easy for foreigners to reduce their tax bill. Great Britain, however, seems to fulfil either definition: it offers generous perks to non­domiciled foreigners, and it is an island.


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IT’S OFFICIAL: OECD TAX PROJECT DEPENDS ON LEVEL PLAYING FIELD

In a groundbreaking decision, the OECD has committed itself to working with members of the ITIO and other countries that provide international financial services to achieve a level playing field for the exchange of tax information.





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