Secrecy jurisdictions: the end is foreseeable

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As Dow Jones reports via the Wall Street Journal:

Standard & Poor's Ratings Services lowered its ratings on Andorra, citing the high and rising level of gross general government debt and concerns about the principality's economic model.

The ratings agency said the European nation would face "significant challenges" if the government attempts to materially change its low-tax regime to further increase revenues. Nations seen as tax havens faced pressure following the worldwide economic slowdown to crack down on tax evasion.

In S&P's opinion, Andorra's economic model is already coming under considerable pressure due to the country's narrow economic base and, in particular, the weakness in the tourism-related commercial sector. S&P also sees the nation's sizable banking system posting a significant contingent liability for the government.

The nation's long-term rating was lowered by one notch to A, midway between junk and AAA. S&P has a negative outlook on Andorra, meaning further downgrade is possible, as it projects general government deficits of around 3% of GDP in the medium term.

As I’ve said time and again, the economic prospects for the poor tax havens are very poor. This just confirms it. The campaign against them is working. And economic pressure may well now be the catalyst for change.  It already is in the Isle of Man. And with Jersey and Guernsey’s tax systems in chaos they too will follow.

It would be rash to say the end is nigh for these places: it is not, yet.

But it is clearly foreseeable.