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Offshore News Digest for Week of February 12, 2001
IMF BACKS UP SOUTH AFRICAN GOVERNMENT'S CAPITAL GAINS TAX PLANS
The International Monetary Fund (IMF) has confirmed its support of the South African government's controversial proposal to introduce a capital gains tax. According to the South African news service, Business Day, the IMF says it would “rectify a deep weakness of the South African tax system” and it is “particularly urgent” that South Africa implement the tax due to the inequality in the country and the sophistication of its financial markets.
It appears that the campaign organised by South Africa's Chamber of Business (SACOB) urging the government to scrap plans for the tax will fall on deaf ears. SACOB has argued that the tax will deter direct investment into the country, saying the tax “has a notorious reputation for its low yield and high opportunity costs arising from distortions it creates in the economy ... [it is] a notoriously inefficient generator of net revenue. Capital gains tax has become a discredited tax, both as a revenue-collection mechanism and as an economic instrument. Many countries would not introduce [it] if they had the luxury of tax redesign.”More on this story here.
ANTIGUA & BARBUDA IS CLEANING-UP ITS OFFSHORE SECTOR
Lester Bird, Prime Minister of Antigua and Barbuda, says his government has been making extensive efforts to clean up its offshore sector in the hope it will become one of the most reputable in the world.
Speaking in a CBS intereview last week, Mr Bird said he had discussed development, investment and the online gaming industry with Victor Chandler, the millionaire businessman and head of international bookmakers, the Victor Chandler Group. Mr Chandler, who is Gibraltar-based but whose company has a betting operation in Antigua, had spoken highly of Antigua and Barbuda and said he had observed a transformation taking place in the islands' offshore sector. Antigua and Barbuda recently hosted a four-day Online Gaming conference with around 400 delegates in attendance.
Antigua and Barbuda has worked closely with the US and the UK on matters relating to the offshore sector in the past year. "Operation Clean Slate" was implemented and has significantly reduced the number of offshore banks from 68 to 18. Through the introduction of amended rules and regulations, the number of IBCs has also undergone a major reduction from 10,000 to around 2,000.More on this story here.
ENLARGED EU “COULD FACE WIDER RICH-POOR GULF”
The European Commission warned on Wednesday that the gulf between rich and poor in the European Union would widen after enlargement unless member states radically restructured the system of regional aid.
“No previous enlargement is comparable,” Michel Barnier, the regional affairs commissioner, told the European Parliament. “This time the union's surface area and population will grow by a third, but its gross domestic product by just 5 per cent.”
In its first assessment of the impact of enlargement on policies for promoting economic and social cohesion, the Brussels executive said the income gaps between the union's poorest and richest regions would double from the present multiple of 2.6 times if the EU of 27 existed today.
“We want to open the debate - with the regions, the European parliament and national parliaments - to examine the function of regional policy after 2007,” Mr Barnier said. “Without change, there is a risk of the rich getting richer and the poor poorer.”More on this story here.
OECD BELIEVES THAT BUSH ADMINISTRATION SUPPORTS ITS ANTI-OFFSHORE INITIATIVE
Reporting on last weekend's London talks between the OECD and representatives of a group of offshore jurisdictions, Dan Mitchell, Chairman of the Centre for Freedom and Prosperity (CFP), said: "We went to London to offer support and advice to the low-tax nations. Our goal, as outlined in our strategy memo, was to make sure none of the low-tax countries acquiesced to the OECD's one-sided Memorandum of Understanding. We're happy to report that our mission was accomplished." The CFP is at www.freedomandprosperity.org.
Andrew Quinlan, the president of CFP, commended low-tax countries, stating: "Taxpayers around the world owe a debt of gratitude to Prime Minister Owen Arthur of Barbados and Sir Ronald Sanders, Antigua's High Commissioner in London. These gentlemen played an instrumental role in the negotiations and refused to be bullied by the OECD."
Messrs Mitchell and Quinlan (who were not official participants at the meeting) say that the OECD misrepresented the new Bush administration's position on the “harmful tax competition” issue by saying that the new administration actively supports their initiative - including the threat to use financial protectionism against low-tax nations. Mr. Mitchell strongly condemned this tactic, noting that “Neither President Bush nor Treasury Secretary O'Neill have expressed any support for the OECD's campaign against low taxes and financial privacy. Indeed, we are very optimistic that the new administration will take the opposite position once they have a chance to review the issue.”More on this story here.
OECD AND OFFSHORE TASK FORCE MEMBERS FAILED TO AGREE IN LONDON TALKS
A statement released on last weekend's London OECD talks by Antigua and Barbuda High Commissioner Sir Ronald Sanders reveals that the OECD spent most of the time trying to claw back ground it was seen to have lost in Barbados on January 8th/9th.
The meeting in London was hastily arranged after the idea of a Global Tax Forum emerged in Barbados, with a 13-member Task Force composed of OECD members and offshore jurisdictions charged with the task of creating a framework within which the OECD's 'harmful tax competition' agenda could be discussed in a less threatening way.
The London meeting was supposed to provide a basis for further multilateral talks to proceed as planned in Tokyo later in February, but seems not to have succeeded in reaching enough of a compromise for that - instead, yet another meeting is now planned prior to Tokyo at which the Task Force will try to agree on procedures for the multilateral talks which are acceptable to both sides.
Sir Ronald, senior ambassador with ministerial rank and Antigua and Barbuda's representative on the Working Group concerned with the OECD initiative on Harmful Tax Competition, issued the following statement:
“The non-OECD members of the Working Group, established in Barbados after a high-level consultation on 8-9 January 2001, between the OECD and non-OECD jurisdictions, remain committed to the creation of a consultative political process that includes the widest possible participation, and to the creation of a truly global forum. The non-OECD members believe such a forum should consider the legitimate interests of all jurisdictions, and establish standards that command the respect and support of the international community with respect to tax matters which have cross border implications.
“It is true to say that the non-OECD members were unanimous and firm in their positions under the chairmanship of the prime minister of Barbados, Owen Arthur.
“I believe that we came to London ready and willing to cooperate fully with the OECD members of the Working Group to achieve this objective that was clearly set at the Barbados meeting.
“We were dismayed that, at the outset of the meeting on Friday, 26th January, the OECD members of the Group made no reference to the considerable progress that had been made at the Barbados meeting; instead they repeated the unilateral and arbitrary process that the OECD Secretariat had been demanding in the months prior to the Barbados consultation.
“In a spirit of genuine good faith and with a strong commitment to finding an acceptable process, the non-OECD members of the Working Group made a formal proposal to the OECD members in which we:
- recalled the clear remit of the Barbados meeting;
- offered, by 31st July 2001, to publicly confirm our commitment to the three broad principles of transparency, non-discrimination and effective exchange of information to which we had agreed at Barbados;
- resolved to establish, by 31st July 2001, a truly global tax forum with membership open to all jurisdictions that publicly committed to the three principles;
- committed to implementing the decisions of the global forum by 31st December 2005, the very date that the OECD Secretariat had itself set for accomplishing the implementation of a plan to end harmful tax practices;
- committed to the establishment of a dispute resolution mechanism for matters of international taxation.
“I believe that it is true to say that the non-OECD members of the Working Group were deeply disappointed when the response of the OECD members continued to insist on the original unilateral process created by the OECD Secretariat and on the retention of a forum devised and controlled by the OECD, including insisting that there could be no negotiation of the definition and details of the three broad principles.
“I believe it is also true to say that we were also alarmed that, in their proposal, the OECD members persisted in their desire to name and shame jurisdictions as non cooperative even though it is evident both from the Barbados consultation and the high level of participation in the present London meeting that all the targeted jurisdictions are willing to cooperate with the OECD and other members of the international community in fully addressing all tax matters.
“Nonetheless, we persevered in our desire to find a mutually acceptable solution by repeating the firm commitments we had made in our first proposal and adding to it that the truly global forum should use, as one of its working documents, the OECD interpretation of the three principles as set out in the Memorandum of Understanding which the Secretariat sent to targeted jurisdictions. In this connection, the non-OECD members undertook to present its own understanding of the three principles by 31st July 2001.
“We further proposed that by 1st May 2001, the Working Group should produce detailed proposals and a timetable for the creation of a global tax forum.
“We took account of the position of the OECD members that they have no authority from their ministers to negotiate beyond the remit given to them at the last ministerial meeting of the OECD. Therefore, we suggested that they should transmit our proposal to their ministers and seek authority to negotiate in a context in which the threat of sanctions is removed to allow for good faith negotiations. In this connection, we proposed that the meeting of Working Group should be adjourned, but not closed, to allow it to resume at an early date with a view to continuing to seek an acceptable way forward.
“At the end of the day, I believe it is true to say that the meeting achieved a better understanding of each side's position, and, in this context, progress was made. It remains our hope that the OECD members of the Working Group will recommend to their governments that (a) they withdraw the threat of sanctions so that we could enter into good faith discussions, (b) they agree to the establishment of a truly global forum in which the OECD will play an important part, and (c) the OECD definition of the three broad principles transparency, effective exchange of information and non-discrimination) should be an important part of the agenda of the proposed Global tax Forum.”More on this story here
CHANNEL ISLANDS TAX SELL OUT?
Fresh from a Paris OECD meeting, Channel Islands officials are making appeasement noises that could mean tax hikes for offshore clients.More on this story here.
Instead of fighting for its rights, Gibraltar seems ready to cave in to OECD blacklist demands.More on this story here.
B.V.I. LEADER PROJECTS FUTURE
ROAD TOWN, BVI. The Chief Minister explains to an international meeting here his view of where offshore havens may be headed.More on this story here.
PACIFIC SOLIDARITY AGAINST O.E.C.D.
The Cook Islands Prime Minister criticized the OECD for blacklisting the small offshore financial centers of the Pacific, defending the tiny, impoverished island nation of NIUE and its fledgling offshore financial community.More on this story here and here.
Chase Manhattan and the Bank of N.Y. arbitrarily have banned all transactions with Niue, protesting but unable to defend itself.More on this story here.
WILD WEST SWITZERLAND?
DENVER, Colorado. This American state has approved a depository fund's application to operate what is said to be the US's first foreign capital trust fund for wealthy foreigners. But why would anyone voluntarily place assets under the potential control of the IRS, US courts and government?More on this story here.
RUSSIAN ANTI-M.L. LAW PROPOSED
MOSCOW. A new Russian anti-money laundering law could give government control over financial transactions of every kind.More on this story here.
U.S. TAX CUTS COMETH
Times do change; the fight over US taxes isn't whether to cut them. Now it's over which taxes to cut and how deeply to slash.More on this story here.
U.S. COURT CURBS CASH FORFEITURE
NEW YORK. Citing a 1998 US Supreme Court decision, US v. Bajakajian, a US district court rules forfeiture of all unreported currency derived from a legal source is an unconstitutional 'excessive fine' under the 8th Amendment.More on this story here and at US v. Bajakajian.
WALL STREET LEFT OUT
WASHINGTON. Inside G.W. Bush's Treasury Department.More on this story here.
LE CLUB PRIVE WEB SITE
Did you lose money investing in Le Club Prive? Check out this site set up by the US SEC to help defrauded investors recover losses.More on this story here.
OFFSHORE FIRM IN TROUBLE
Imperial Consolidated, a British based world-wide financial services group that includes a Grenada bank and a Bahamas investment company has had its annual account report rejected by the UK official company registrar.More on this story here.
BAHAMAS OECD-FATF SELL OUT ANALYZED
A leading Bahamian says: "The sovereignty of the Bahamas has been compromised, while the goal for which it was compromised remains unattained, an may be unattainable." A penetrating analysis of the death of a tax haven.More on this story here.
O.E.C.D. VIOLATES INTERNATIONAL LAW
A former OECD attorney says the OECD attack on haven nations violates World Trade Organization rules and international law.More on this story here.
Barbados columnist Tony Snow tells OECD: drop your threat of sanctions.More on this story here.
ISLE OF MAN OFF BLACKLIST
DOUGLAS, Isle of Man. Leaders here say their island will soon be the first removed from the OECD's "harmful tax competition" blacklist.More on this story here.
BLACKLISTED PANAMA PLANS DEFENSE
The Center for Freedom and Prosperity had a successful 5 day visit in Panama, helping to build defenses against OECD and FATF blacklisting.More on this story here.
CFP president Quinlan told a cheering audience in Panama that CFP would take on the cozy, Paris based OECD-FATF club. "To use a football term, we need to tackle them, knock them down, grind them into the ground and hurt them."More on this story here.
The CFP is scheduling a tax competition/financial privacy forum in Paris prior to the next OECD-havens task force meeting, March 1 & 2. Those who wish information or to attend, send E-Mail to: firstname.lastname@example.org.
O.E.C.D. MEETS IN JAPAN
Pacific Islands Forum and OECD members meet for talks on tax issues in Tokyo on today and tomorrow, Feb. 15-16. Our report next week.More on this story here.
COOK ISLANDS INVADED BY BRIT POLICE
RAROTONGA, Cook Islands. Two Scotland Yard detectives are back in the UK after investigating alleged money laundering in this Pacific tax haven.More on this story here.
EVERBANK IS BEST ONLINE
Headed by Sovereign Society Advisory Board member, Frank TROTTER, everbank gets Forbes magazine's "Best Of The Web"' 2001 award for Online banking.More on this story here.
PRIVATE BANKING ENGLISH STYLE
LONDON. Are the perks of a private bank account really worth the price? An examination of the boom in banking with a personal touch in the nation that invented it. For UK private banking Web links see here.
SWISS SECRECY ENDORSED
As another national vote nears next month on Swiss EU membership, the Finance Minister says his nation's historic bank secrecy is "not negotiable."More on this story here.
CORPORATE TAX RACE
A new study proves European nations with lower corporate tax rates profit most from new business and investment.More on this story here.
SECRETARY OF THE TREASURY
WASHINGTON. Want to know more about PAUL O'NEILL, the new Bush Sec. of the Treasury? Find out all here.
CARNIVORE BY ANY OTHER NAME
The FBI has dressed its Online wolf in sheep's clothing, changing the name of its intrusive e-mail surveillance system, Carnivore.More on this story here.
U.S. FORGED I.D. EPIDEMIC
Computer technology has created a flood of hardly detectable forged IDs and credit cards in America.More on this story here.