Finance companies flee offshore tax shelters
Financial companies are fleeing offshore havens following a crack down on tax evasion by the world’s richest countries that are losing billions in revenues.
French banking conglomerate BNP Paribas will leave Nassau, Bahamas by the end of the year and will uproot branches in other countries that do meet OECD regulations on tax transparency, according to CEO Baudouin Prot.
Recently the world’s third largest insurance broker, Willis Group Holdings, announced that it was transferring its headquarters from Bermuda to Ireland, citing economic factors.
About 10 non-insurance related companies are also planning to leave Bermuda due to tax-related reasons.
Many Caribbean countries are facing economic hardships now the cash from banks and financial companies is drying up.
Another territory with big financial problems is The Cayman Islands - 10,000 financial institutions set up shop on the islands by 2008. At the top of the hedge fund boom, more than CI$3.4 trillion was flowing through the islands en route to London, New York and other financial centres.
Today, the story is much different, as the island’s government has had to borrow £38 million to payroll the civil service and spending after revenues from finance collapsed by 40% in a year and look to still be spiralling downwards.
In 2008, the islands had the 12th largest GDP per head in the world.
“I am baffled, bemused and bothered that people call the Cayman Islands a secretive tax haven,” said Tony Travers, director of the Cayman Islands Financial Services Association. “We are simply tax neutral. It is unfair that when you see an article about tax havens it’s always illustrated by a palm tree, never a Swiss Alp.”
Critics in richer countries find the suggestion that the Cayman Islands already has an open and transparent financial process astonishing.
Travers feels that the no one should breach financial secrecy by accessing company records and accounts held on the islands.
“It is a legitimate right to commercial privacy,” he said. “We give companies protection but are always ready to pass on information to the authorities if they suspect criminal activity.”
