New tax haven lists published by the Organisation for Economic Cooperation and Development (OECD) last night in the wake of the G20 London summit will drive more family office business towards the Channel Islands and the Isle of Man.
Jersey, Guernsey and the Isle of Man have been seeking to set themselves apart from other jurisdictions considered by international regulatory bodies as less well regulated offshore centres. Jersey, for example, has made a pitch for the foundations market which has traditionally been dominated by Liechtenstein and Panama. A new law has been approved by the States of Jersey and is awaiting Privy Council approval.
Trust sector leaders in St Helier say their first target is family offices which want to transfer their existing foundations from less highly regarded offshore centres. Guernsey has said that it also wants a share of the same market and is planning its own foundations law by the end of 2009.
Company service providers in the Crown Dependencies are also lobbying family offices heavily on the demise of the tax benefits -- in 2010 -- of the Luxembourg 1929 holding companies regime. The same arguments are being deployed -- that Luxembourg is less well regarded than the UK's offshore centres.
The new lists which the OECD issued late last night are divided into four categories. The first has already been branded the white list. These are the centres which are regarded as largely compliant with the OECD's standard for tax information exchange agreements (TIEAs).
In March, the Paris-based organisation said it saw the benchmark for states to be regarded as compliant as 12 TIEAs signed. On Friday last week, the Isle of Man had 14 under its belt and Jersey and Guernsey 13 each. TIEAs with Australia and New Zealand are imminent.
The white list now includes Jersey, Guernsey and the Isle of Man so that means that they are technically not tax havens in OECD thinking. Also on the white list are Ireland (the lowest corporate rate in Europe), Barbados, Cyprus, Malta, Mauritius, the Seychelles and Dubai. Commentators have already said that the white list is a combination of genuinely compliant states and some that benefit from the political largesse of the major economies.
The second list is branded tax havens. These are states which have agreed to be committed to the OECD standard but have not yet achieved the benchmark. The Caribbean and the Atlantic jurisdictions dominate this list. Notably, Bermuda, Cayman and the British Virgin Islands -- arguably the three most important centres in the American time zone -- are each cited as non-compliant tax havens. This could have an adverse effect on their attempt to market themselves to family offices wanting safer harbours.
Cayman, in particular, with eight unilateral tax information exchange agreements signed and 11 waiting to be confirmed is expected to react strongly against its designation. In terms of family office business, Bermuda, Cayman, BVI and the Bahamas dominate this market in the American sector.
Andorra, Gibraltar, Liechtenstein and Monaco are also in this category. Gibraltar, which has been fighting trench warfare with the European Commission in the courts over tax policy, is anticipated to be profoundly aggrieved.
The third list is composed of other financial centres which are regarded as committed but non-compliant. This features Luxembourg, Singapore and Switzerland. The Swiss and Luxembourg have been losing ground on banking secrecy for several years and in the last few weeks agreed to commit to transparency.
A final list of four countries "not committed and non-compliant" includes Labuan, which is Malaysia's offshore financial centre. Labuan's marketing arm IBFC has invested heavily in the last two years in raising its profile in family office and wealth management sectors in Asia. Also, Hong Kong escapes by the skin of its teeth. China is in the white list but a footnote says that the special administrative regions -- Hong Kong and Macao -- are excluded.