Tax shelters battered by recession backlash
Tax havens are feeling the financial squeeze as government round the world are exacting revenge after blaming them for the banking crisis that led to the recession.
Led by the UK and USA, the world’s richest countries are forcing these former tranquil financial backwaters to reveal offshore bank and investment client information so they can chase down unpaid tax.
The big economies feel the tax havens bear blame for the recession because they allowed multinational companies and rich individuals to set up tax avoidance - and in some cases tax evasion - strategies that had so many layers of secrecy that the whole system collapsed like a house of cards.
For years, financial institutions in these tax havens raked in the cash with virtually no questions asked.
Now, HM Revenue and Customs is chasing down expat investors with money stashed in these former havens for billions in unpaid tax and penalties. Tax authorities in other countries are also joining the posse and the tax havens are feeling the pinch:
Tax havens
The Cayman Islands have asked the UK government for a bailout. The islands shelter 80% of the world’s hedge funds and are the fifth largest global banking centre, but their government cannot afford to pay civil servants pensions and salaries.
Britain was asked to give permission for a £278 million loan, but the government replied that there were doubts the Caymans could repay the cash and suggested they considered raising payroll and property taxes.
The UK Foreign Office has suspended the Turks and Caicos government over corruption claims and rescheduled debts.
Jersey has a financial black hole of £80m out of a total income of £590m. A newly introduced sales tax is in place to make up the difference, but the tax may need to be increased soon because the island expects a further £50m shortfall in revenue from the recession.
Antigua and Barbuda is suffering from the collapse of Texas billionaire Sir Allen Stanford’s business empire. He is facing charges in the US relating to a US$7 billion fraud based on financial instruments issued by his bank on the islands. The country is accused of aiding and abetting the fraud and investors are suing the government for $24 billion in damages.
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