LONDON: This week the British government holds meetings with its Overseas Territory (OT) leaders. After a series of radically left attacks in Britain in recent days aimed at these long-established U.K. tax havens, this meeting should see some hot debates, notwithstanding traditional British civility. 
Some Labour Party leaders and their socialist and trade union allies are using the British government's multi-billion dollars bailout of selected banks as an excuse to demand that aided banks be ordered to end all of their offshore activity in tax havens. These radicals insist that now that the British Labour government owns a stake in the banks, the government should force policy decisions on the banks' managements.
In Britain, the government holds as much as 6% of Royal Bank of Scotland and up to 43.5% of a combined HBOS and Lloyds TSB. U.K. banks that benefit from the publicly-funded bailout have hundreds of subsidiary firms in tax havens such as the Cayman Islands, Jersey and The Bahamas, and radical leftist are demanding that all such offshore entities be abolished.
Leftist Radicals in Full Cry
The U.K. Treasury should tell banks receiving investment from the government to close their operations in offshore tax havens, said Vince Cable, a Liberal Democrat lawmaker. "It seems totally inappropriate for banks funded by the taxpayer to be systematically avoiding British tax or helping customers to do so,'' Cable said in an interview. "The anomaly of the nationalized banks will bring this issue to a head.''
The research director of the radical socialist Tax Justice Network, said: "I think these banks should close down their offshore subsidiaries. This is because the government cannot have a stake in companies that undermine the government. Closing them down could be done as it is a commercial choice to operate in tax havens."
At stake could be the very survival of existing U.K. tax havens and billions in assets in places such as Bermuda, the British Virgin Islands, the Cayman Islands, the Turks & Caicos Islands, as well as the Crown Dependencies of the Channel Islands (Guernsey, Jersey and Sark) and the Isle of Man.
Labourite Anti-Havens Record
Ever since the Labour government came to power in 1997 under Prime Minister Tony Blair, the U.K. offshore tax havens have been forced to tow the leftist line laid down by the Foreign Office in London. Following U.K. orders, they lifted strict bank and financial privacy laws, enacted laws making tax evasion by foreigners a crime, strengthened anti-money laundering laws and mandated exchange of individual's tax information with other governments -- the free booting offshore "good old days" came to an end.
Underlying these forced "reforms" has been Left Labour suspicions that Her Majesty's offshore havens are really exotic fronts for massive tax evasion. That sour view has been balanced by the very substantial income, taxes and the havens' valuable accommodation of the flow of British worldwide finance.
Unintended Consequences
One unintended result has been a substantial movement of assets and cash away from the U.K. OTs to non-U.K. jurisdictions such as Switzerland, Singapore, Hong Kong and Panama, much as high British taxes have driven U.K. corporations to move to low tax countries.
Another perhaps unexpected result has been a major clean up of offshore jurisdictions, now with stricter rules in many areas than even those honored in the breach in the City of London or New York, the world's two major money laundering venues. But this reform is ignored by the anti-tax haven haters of the Left.
American Cousins
But here in the United States similar anti-capitalist noises are being heard from the American Left and the likes of AFL-CIO head Tom Sweeny, based on the U.S. bank bailout.
More importantly, as I have noted before, this sort of fascist/socialist state control of banks and banking policies is the heart of proposed anti-tax haven legislation sponsored by Senator Barack Obama.
It looks as if the massive Bush/Paulsen bank bailouts may give a leftist new U.S. government, should there be one, and opening to do all it could to destroy offshore tax havens -- and the rights of millions of until now free Americans to invest and bank offshore.
** There are many legal ways to bank and save taxes offshore; I tell you Where To Stash Your Cash: Click Here. And if you're interested in Switzerland, Click here for Swiss Money Secrets.
Comments