The Observer reports:
Britain could be forced to bail out one or more of its offshore tax havens at huge cost, according to early drafts of a Treasury report, because the economic crisis has wrecked their finances.
Offshore expert Michael Foot will next month set out a number of options to government ministers in the report as anxiety grows within Whitehall over the health of Britain's overseas territories and crown dependencies.
Senior insiders say early drafts of Foot's report suggest that the government may need to make provisions for the financial failure of British tax havens. Experts suggest the failure of a major tax haven could potentially cost the UK tens, if not hundreds, of millions of pounds.
This does, of course, follow the news that I broke that Cayman is bust.
The Observer continues:
Government officials say they are aware that some British overseas territories are facing serious problems which could get worse. In the event of further economic deterioration, they could become failed states and be dragged into the illegal drugs trade, Whitehall insiders warn.
Any suggestion that Britain will have to rescue offshore financial centres would be extremely controversial as tax havens drain the UK economy of an estimated £25bn annually through their role in aggressive tax avoidance and evasion.
Apparently:
The Foot report is likely to suggest that tax havens should boost their balance sheets with new taxes, though this would have to be carefully handled as it could drive away businesses that are valuable to them.
Foot will say that tax havens will require additional cash to abide by new international protocols, and that some do not have the expertise or staff to weather the economic crisis.
He is thought to be concerned at the accuracy of some islands' economic analysis and modelling.
Sources close to Foot suggest he is particularly concerned that tourism on Caribbean islands is also suffering which is compounding the downturn.
I’ve long forecast this. It gives me no pleasure to know I was right to do so.
It also gives me no pleasure to suspect that the control by the secrecy providers (bankers, lawyers and accountants) who use and abuse these places for their own purposes — and who drive their local populations into poverty in the process — will not be relaxed as a result. Their callous indifference to those local people, sovereignty (unless they can abuse it), poverty in the wider world, tax evasion and more besides will continue unabated, I am sure.
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Let’s hope that the Foot report isn’t just words but a call for active intervention. The Isle of Man arrogantly boasts of its financial strength, budget surplus & AAA rating but it can’t manage a bank failure as it has no bank of last resort & its Depositors Compensation Scheme is both a sham & a shambles. The best thing that could happen would be for the banking sector and financial regulation to come under the control of the Bank of England. The first thing the BoE should then do is restore the life savings of thousands of British expats lost in the collapse of Kaupthing IoM and take over the recovery of 88% of the assets before PWC & Co., sit like vultures to stripping them to the bone over 6 years, leaving depositors with something like 50%. This sanctioned daylight robbery of people who put their trust in banks has got to stop.
So there is a leak of the Foot report, mmm
UK COULD be forced, could? Bolton COULD win the premiership this year, no
UK could be bust themselves and ask aid from Cayman as well.
Is Cayman Bust? I don’t beleive they have met all there obligations at present, so wrong again. ANd yu didn’t break the news the Guardian made it up.
As for “and who drive their local populations into poverty in the process” where do you get this in Cayman from, you seem to be making it up as you go along. Show some evidence, Caymanians live a very good life as the economy is geared towards them, ie Employment oportunites, having to own 50% of businesses.
Caymanians are going to be the ones left in poverty if the UK (and you)has it’s way, don’t balem the financial sector.
to quote an older Caymanian about life before Caymanians brought in the Financial services:
” I would always hear my Grandmother who lived to 106 years old say that she respected the Mother Country because of the position, but that England never ever gave Cayman anything. In fact she told me that after the Hurricane 32 storm that the residents of Cayman was starving for food. My dad and uncles and their friends agreed that this was true. They told me that they had to boil wild parsley and make little soup, and if any person from the Island had a little money and had killed a cow, none of the ordinary citizens could afford to buy a piece of meat unless it was once a year.
My Grandmother said that she would walk 12 miles to wash clothes, starch and iron them, scrubb the floors rake the yards for one slice of bread and some times was too happy to get the cowfoot bone with no meat on it to boil with the parsley for soup. That bone was then passed around to all the neighbours and family members to boil also only to obtain a little susbstance. Caymanians who had a few dollars did trade and business with Jamaica, Honduras and Cuba. That is why you will find so many caymanian families living in honduras and Cuba.”
And it is you who want to return these people to that poverty, I do feel pity for your ignorant hatred of the Cayman people
Creg
Sorry – but I really think you get me very, very wrong
I have not a thing against the people of Cayman at all
I do against those who have captured the place and used it to pursue their own goals and to undermine the state of Cayman and other states
This is something quite different
Richard
Yet it was Caymanians who helped set up Cayman to attract the Financials Services. So those who “captured the place” are the Caymanians themselves.
The expat financial “experts” who work there are by and large here at Caymanians invitation, hence why there is a 7 year limit on working there, and why if they are made redundant they have 2 weeks to pack up and go.
So it is not something quite different, Cayman has been “taken over”, after all only Caymanians are allowed to vote, so trust me they are in charge.
Creg
Not true. Your civil servant credited with bringing finance in was not Caymanian
Richard
Jim,
You gambled chasing the highest returns you could in offshore accounts and you ended up losing.
Get over it.
Actually Sir Vassel Johnson, KT, CBE was thought by many here as Caymanian, after all he did move to Cayman in 1934 when he was 12 and so had lived there for 31 years before “bring finance in”
And he was born in Jamaica, which back then was under the same controlled are as Cayman.
Seems pretty Caymanian to me
http://www.gov.ky/portal/page?_pageid=1142,3429100&_dad=portal&_schema=PORTAL
for more information on the great man
Richard
To whom are you referring ? Vassel Johnson ? Thomas Jefferson ? But of course offshore finance in Cayman was actually introduced by the UK Government back in the early 1960s, recognising that it was by far the best way for the British Dependent Territories to become self-sufficient and no longer a drain on the UK purse. How ironic !
Sure I’m referring to Vassel Johnson
He did a great disservice to the islands
And was arrogant about it in the extreme
I’ve read his autobiography
I don’t recommend it
Mmm, he turned the island from a place exporting silver thatch rope, with no rivers and limited fresh water wells, a place with very little arable land and where the mosquito swarms were so thick that cows were known to suffocate as they would block their airways
An island where the only work the majority of men could find was in the merchant navy seeing their wives and children as little as twice a year.
And thanks to him and other greatCaymanians, Cayman now enjoys the best standard of living in the Caribbean with the only real aid from Britain being their legal system
Does that really sound a disservice to the island?
“He did a great disservice to the islands”
Yes, fancy allowing people to move out of substinence poverty.
Fancy allowing a small Island to become self-supporting.
What a bad man.
Anyway, why the silence over the IMF report:
“The IMF has assessed Jersey as complying, or largely complying, with 44 of the 49 recommendations of the Financial Action Task Force (FATF). When last assessed, only three other jurisdictions scored 40 or more — the US and Singapore scored 43 and Belgium 42. We are not aware of any other jurisdictions that reached 40 or more. This places Jersey among the top jurisdictions for compliance with the FATF recommendations, out of a total of more than 120 jurisdictions that have been assessed. The UK has been assessed as complying, or largely complying, with 36 of the recommendations. ”
Time to ask for every other jurisdiction in the world t match the example of Jersey: http://www.gov.je/ChiefMinister/International+Finance/JsyTopstheList.htm
He’d have done fine to get rid of mosquitoes and open up tourism
But he knowingly created the opprtunity for abuse
In the late 60s he cancelled all information sharing agreements Cayman had to achieve secrecy for finance
This man was no innocent
We all know – and Cayman admits – it was a centre for abuse in the 80s and 90s – and maybe less now
He created that on the proceeds of crime
Don’t tell me that’s good
Richard
Richard
Yes, Johnson created something for which there was huge global demand, in an era when the world was a very different place and when such a regime was far more acceptable than it was today. I doubt if anyone, even Creg, would disagree that Cayman possibly went too far in satisfying that global demand, particularly in the 1980s and 1990s.
However, let’s also not forget that every single piece of Cayman legislation required UK Privy Council approval before it was able to be enacted, including the decision to cancel any information sharing arrangements (I wasn’t aware that there were any in those days). Everything that the Cayman Islands became, as an offshore finance centre, was done with the express and tacit approval of several successive UK Governments, including, yes, the Confidential Relationships laws. Vassel Johnson, Thomas Jefferson and Bill Walker, all widely “acclaimed” as the people who created the Cayman offshore finance centre, could have achieved absolutely nothing without the UK’s full support in the 1960s, and neither could Cayman have maintained its industry over the past 45 years or so without the UK’s full support. Its fair to say that Washington didn’t exactly want to close it down either.
Yes, Vassel Johnson was a prime instigator in designing the legal and tax framework, but you can’t possibly blame him for how it was able to be exploited. Successive UK governments are to blame for that.
And don’t forget also that a combination of the historic lack of anti-avoidance tax legislation, Sterling Area Exchange Controls and the US’s infamous decision to levy withholding tax on bonds, all fuelled Cayman’s dramatic growth. Sterling Exchange Controls didn’t happen I recall until 1972, and the US bond decision didn’t happen until the early 1980s, so I don’t think Vassel Johnson can be blamed for those either !
The bottom line is that if it hadn’t been Johnson, it would have been somebody else in office at the time that the UK came up with the idea to turn Cayman into an offshore financial centre.
SO similar to the British selling opium to their Empire and expploting the colonies