Offshore financial centres could take advantage of new opportunities, such as managing the banking sector’s toxic assets, to offset the financial downturn, according to an interim review published by the Treasury.
The progress report by Michael Foot, a former managing director of the Financial Services Authority, lays out the issues facing the British Crown Dependencies and Overseas Territories, although it does not reach firm conclusions. It was commissioned last December amid controversy over the role of tax havens in the world economy and the fall-out from the collapse of Icelandic banks
In a forward to the review, Mr Foot says: “The most immediate issue facing the financial centres is how they can best deal with the current downturn in financial services business, particularly if it becomes prolonged.”
But he highlighted potential new opportunities, such as managing toxic assets, saying “the financial centres are well used to operating in a competitive market place and to adjusting to changes in the economic and regulatory landscape.”
In a forward to the review, Mr Foot says: “The most immediate issue facing the financial centres is how they can best deal with the current downturn in financial services business, particularly if it becomes prolonged.”
But he highlighted potential new opportunities, such as managing toxic assets, saying “the financial centres are well used to operating in a competitive market place and to adjusting to changes in the economic and regulatory landscape.”
The tone of the review was immediately slammed by the TUC, which has campaigned against tax havens, as “deeply disappointing”. Brendan Barber, general secretary said: “The Treasury needs to get a grip of this Review and decide whether it is flowing with or against the grain of world opinion which has turned so decisively against tax havens since the G20.”
Terry Le Sueur, chief minister of Jersey, a Crown Dependency, described the progress report as “a very constructive explanation” of how the review would be conducted.
Mr Foot said a key theme of the final report, to be published in the fourth quarter this year, would be understanding the mutual dependencies, and resulting contingent liabilities between the UK and the offshore centres.
He said the financial centres’ regulatory regimes had received “broadly favourable” reviews from the International Monetary Fund, although concerted action to implement new standards would put pressure on regulatory resources. Mr Foot said his review would explore whether more could be done to share technical expertise with the financial centres.
Mr Foot said a number of financial centres had more to do to implement the international standard on transparency, while the growing focus on tax avoidance would continue to shape international opinion. “Each centre will need to take this into account in balancing the real or perceived competitive advantages of current tax regimes with the need to generate sufficient revenue to support its domestic economy.”
The report invited comments on how the centres could “ensure that their tax models remain sustainable in the light of changing international standards and attitudes on tax evasion and avoidance”.