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News - 17 June 2013

'Tax havens' hit back at G8 pressure

G8 leaders will hold their latest summit in Northern Ireland on Monday, with methods of combating aggressive tax avoidance and mass tax evasion expected to be high on the agenda of leaders including UK Prime Minister David Cameron, US President Barrack Obama and Germany's Chancellor Angela Merkel.

There is no universally accepted definition of a tax haven, but international bodies cite low tax rates and secretive financial systems as the major characteristics.

But now the leaders of some of those offshore financial centres suggest that the world's largest economies should get their own tax house in order first.

"Politicians love scapegoats," said the Isle of Man's Chief Minister Allan Bell. "And the G8 agenda is being politically driven because there's always someone else to point a finger at." He also accused President Obama of double standards, given that the US federal government has no direct control over the tax policies of individual states.

He went on to add that it is especially relevant when it comes to the tiny US state of Delaware which has only 900,000 citizens but over a million registered companies - most of which are "brass plate" entities controlled by very private entities or individuals.

Jersey's Treasury Minister, Philip Ozouf, rejected the notion that his government is any softer on tax issues than countries like the UK. He cited the case in the UK where wealthy individuals with "non-dom" status can pay a one-off levy of £30,000 a year to avoid being taxed on their income.

Stuart Coleman, Manager of the Tax Department of ABDS comments:
“Foreign-owned companies pay no corporation tax in the Isle of Man, but the island has recently signed tax information sharing agreements with the UK, US and European countries.
The channel island of Jersey also charges zero corporation tax for foreign-owned companies.
Like the Isle of Man it also has a maximum income tax rate of 20%. At any one time it is home to £120bn of cash deposits.”

The foreign super-rich can move to Jersey thanks to a tax benefit that requires the payment of a flat rate of up to $185,000 (£118,000) a year.

However some millionaires pay only $5,000 a year thanks to deals signed in the 1970s and 1980s.

One of the key demands to be discussed at the G8 summit will be a call for a central global register of companies showing who owns and controls companies wherever they are based in the world.

Jersey and the Isle of Man say they are happy to share details of who banks with them with advanced democracies because they know that extremely private data will not get passed on to anyone - including criminals or political and business rivals of their customers.

But they argue there are no such guarantees with developing countries without sound tax-gathering authorities.

Offshore financial centres are therefore caught between protecting those who bank with them and helping to share tax details.

If you need any help and advice for your business on Partnership Tax, Corporation Tax or you need to keep abreast of changes in legislation and how it could impinge upon your business, contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar to discuss how ABDS can help

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail: abds@netaccountants.net

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