As the push to meet OECD and G20 'tax transparency' requirements intensifies, some offshore financial centres claim the goal posts are being moved.
A number of Caribbean countries claim that they are well on the way towards meeting stipulations to make their offshore financial centres more transparent.
Earlier this year Caribbean and other offshore financial centres were - to all intents and purposes - instructed by the G20 nations and the Organisation for Economic Cooperation and Development (OECD) to sign at least 12 Tax Information Exchange Agreements (TIEA).
These agreements are meant to open up their hitherto secret banking systems to scrutiny.
The G20 (world's richest) countries said this was to clampdown on tax evasion and reduce the risk of money laundering.
Companies and wealthy people have used offshore financial centres to avoid paying income, corporate and capital gains taxes in their home countries – generally the rich industrialised nations.
But many of these countries claim they are losing billions in tax revenues.
Obama weighs in
In fact, US President Barack Obama targeted the Cayman Islands in a presidential debate referring to one building which houses offshore financial operations as supposedly home to 12,000 corporations.
Mr Obama: “That's either the biggest building or the biggest tax scam on record."
He also called for more transparency in bank accounts held by Americans in tax centres such as the Cayman Islands and the Bahamas.
Similar sentiments have been expressed by the British government.
Prime Minister Gordon Brown and Chancellor of the Exchequer (Finance Minister) Alistair Darling) called for the G20 states to draw up a "blacklist" of countries whose regulatory systems pose what he described as "a risk to the world's financial system".
Ironically, many of the offshore financial centres (or tax havens as they are euphemistically called) which haven fallen foul of the G20, are British territories.
Sixteen countries were earlier this year listed by the G20 as jurisdictions of concerns due to the secrecy of their banking system.
Several of those are in the Caribbean – and are present or former UK territories.
Severe penalties and sanctions were threatened.
Signing up
The OECD has three lists which to grade compliance: a white list for full compliance; a grey list for partial compliance; and a black list which result in countries being struck off and otherwise censured.
Several Caribbean countries have had previously been placed on the OECD’s ‘black list’, resulting for some of them in the decimation of their offshore financial sectors, from which several have not recovered.
Others have been struggling to rebuild their individual reputation, while those like the Cayman Islands, Bermuda, the Bahamas and the British Virgin Islands which all have a global profile in the offshore financial industry, have been defending the systems and regulations they have in place.
However, since early 2009 when the G20 announced that it was further tightening the screws on ‘tax havens’, many of them have been rushing to sign TIEAs – and furthermore, widely publicising the fact that they’ve done so.
St Lucia which found itself on an OECD ‘name and shame’ blacklist in 2002, has joined the TIEA bandwagon.
It just recently concluded an agreement with the Netherlands which Prime Minister Stephenson King said was crucial to his country’s international reputation.
“We are committed to ensuring that the environment being created is fully transparent,” he said.
The Bahamas too has announced that it was just two agreements short of getting off the OECD’s grey list.
The British Virgin Islands claims that they have signed around 17 so far.
Shifting goalposts?
But there are questions over the interpretation of compliance.
A British campaigner against tax havens has raised questions about whether Caribbean and other offshore financial centres are complying fully with new global standards.
“They are complying with the demands by the G20 and the OECD, but only in theory. They aren’t complying with the spirit,” said UK chartered accountant Richard Murphy who runs Tax Research UK and is a regular commentator on offshore tax centres.
Mr Murphy argues that the TIEA system is being flagrantly flouted by some offshore centres.
“For example, the BVI has signed an agreement with Aruba. Now, frankly I doubt if there will ever be any information exchanged between them,” he stated.
Murphy’s argument is that many of the countries required to sign the TIEAs are doing so mainly with other offshore tax centres and not with G20 countries.
But Premier O’Neal of the BVI takes issue with that assessment.
Reeling off a list of G20 countries that they have signed agreements with, he accused the OECD and the G20 of “shifting the goal posts”.
“England, Australia, France, Denmark, Holland, China United States of America. Are these all not G20 countries?” he asks.
The BVI, however, had also signed with a number of non-G20 countries, several of which are its Caribbean neighbours.
Pascal Saint-Amans, the new Head of International Co-operation and Tax Competition Division at the OECD, does not agree that the goal posts are being shifted.
However, he told BBC Caribbean that steps are being taken “towards a more level playing field.”
First though, he said he was concerned about how the rules on the TIEAs are being interpreted by some offshore tax shelters.
“Let’s take as an example, Monaco,” he said.
According to Mr Saint-Amans, “Monaco has concluded 12 agreements, most of which have been with countries such as St Kitts and Nevis and the Bahamas.
The OECD official agrees with Tax Research’s Richard Murphy on the effect on these agreements meeting the G20 objectives.
“What’s the meaning of such agreements?” he questions. “Monaco has almost no financial relations with these countries.”
But the BVI’s Ralph O’Neal insists that they are playing by the rules.
“Let’s see what they will come with next,” he said.
Levelling the playing field?
According to the OECD’s Pascal Saint-Amans, something new is indeed coming.
He told BBC Caribbean about a “revolutionary” approach to the future of relations between the G20/OECD and the offshore financial centres.
“It was decided to establish a global forum … to include all OECD countries, all G20 countries and all the offshore financial centres on an equal footing.
“It is something revolutionary!” he declared, “This is not the OECD telling everybody what they should do. It’s levelling the playing field.”
It’s left to be seen what effect this will have on the rules of the offshore tax game as interpreted and played by the BVI’s Ralph O’Neal and other offshore tax centres.