tax haven

The Palace of Westminster

Posted 09/05/2009 - 10:02 by Mugged by HMG

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A tax haven sitting next to the River Thames!

British Tax Haven’s Safety, Secrecy Face Brown, Obama Challenge

Posted 16/01/2009 - 14:10 by sami

2009-01-16 (All day)

British Tax Haven’s Safety, Secrecy Face Brown, Obama Challenge

By Simon Clark

Jan. 16 (Bloomberg) -- The three-legged emblem on the red Isle of Man flag in Allan Bell’s office has a motto that the British tax haven’s treasury minister hopes stays true.

“Whichever way you throw me, I stand,” Bell said.

That resilience is now being tested. The self-governing island is in a tug-of-war with U.K. Prime Minister Gordon Brown over deposits in collapsed Icelandic lender Kaupthing Bank Hf and will find out Jan. 29 whether it will have to activate a compensation plan for savers. As a senator, U.S. President-elect Barack Obama backed proposed legislation labeling the island as a possible center of tax fraud.

“It’s certainly going to be the most challenging period that the Isle of Man has had in recent times,” Bell, 61, who entered government in 1984, said in an interview. “I can’t tell you where the Isle of Man is going to be in five years.”

The isle between Britain and Ireland, whose parliament traces back more than 1,000 years to Viking settlers, is home to 80,000 people. The island in the Irish Sea also has more than 100 financial companies, which managed a combined $132 billion of deposits and funds as of Sept. 30, according to data compiled by the Isle of Man’s Financial Supervision Commission.

The Isle of Man offers low or no taxes, easy movement of capital, and higher interest rates on accounts. The credit crunch has undermined its status as a safe haven for some investors and Bell is battling to defend its reputation.

U.K. Safety Net

When Reykjavik-based Kaupthing Bank failed in October, it owed about 880 million pounds ($1.3 billion) to depositors in its Isle of Man unit, said John Spellman, a government official on the island.

U.K. Chancellor of the Exchequer Alistair Darling refused to guarantee Kaupthing’s depositors on the Isle of Man.

“If I ever get my money back, I’ll put it in a bank owned by the U.K. government,” said Ziggy Sieczko, 36, who lives in London and had more than 1 million pounds of savings with Kaupthing. “Why would I put my money in the Isle of Man again when only government-backed banks proved to be safe?”

The U.K. invested 20 billion pounds to save Edinburgh-based Royal Bank of Scotland Group Plc, which in turn owns Isle of Man Bank Ltd.

Bell wants Brown’s government to return about 550 million pounds of deposits that he said were frozen in London when Britain seized Kaupthing’s U.K. unit in October. He isn’t optimistic.

Damage Limitation

“That’s Isle of Man money,” Bell said at his office in Douglas, the island’s capital. “The reputational damage to the Isle of Man will be that much greater if we fail to get a satisfactory conclusion.”

The island has committed 150 million pounds, about half its cash reserves, to compensate depositors by as much as 50,000 pounds each. The payment plan will be activated if the island’s High Court rules Kaupthing is bankrupt on Jan. 29. Bell wants to find an alternative to allow time to sell Kaupthing’s assets.

The Kaupthing dispute has triggered a U.K government review of British offshore financial centers, including the Isle of Man, Jersey, Guernsey, Bermuda, the Cayman Islands and the British Virgin Islands. The islands’ sovereign is Queen Elizabeth II, though none elect representatives to the U.K. Parliament.

“These Crown Dependencies, such as the Isle of Man and the Channel Islands, attract banking customers with lower taxes without contributing to the U.K. Exchequer,” Darling told Parliament on Nov. 24. “The British taxpayer cannot be expected to be the guarantor of last resort.”

Brown’s Black Holes

Bell said the islands channel billions of pounds into London’s financial district that would otherwise go to New York, Singapore or Hong Kong. “We are vitally important feeders into the United Kingdom,” Bell said.

Yet the tax havens are a potential obstacle for Brown’s goal to reform the financial system, according to tax campaigners.

“Brown will have to perform a very difficult balancing act,” said John Christensen, director of U.K.-based non-profit Tax Justice Network and economic adviser to Jersey from 1987 to 1998. “He can’t reform the world financial system without reforming the fiscal black holes he is responsible for.”

The Isle of Man also faces a challenge from Washington. Obama supported the Stop Tax Haven Abuse Act introduced to the U.S. Senate in 2007, according to a Feb. 17 statement from Senator Carl Levin’s office in Michigan.

That act blacklisted the Isle of Man and more than 30 other places as “offshore secrecy jurisdictions” and “probable locations for U.S. tax evasion.”

“That’s a good guide to the way legislation is going to go, although the devil is in the detail,” said Reuven Avi- Yonah, a University of Michigan law professor in Ann Arbor. Jen Psaki, a spokeswoman for Obama’s transition office, declined to comment.

Worried Islanders

Isle of Man residents are wary of Obama’s administration.

“It may not be so good for us,” said Brett McLinden, who works in the island’s museum, where Viking trinkets lie next to Celtic stone crosses and stuffed tailless Manx cats.

To remain a finance center, Christensen said Bell will have to prove that what’s good for the Isle of Man is also good for the world. Bell said the island is up to the challenge.

“The only concern we have is the apparent lack of differentiation at the moment in terms of those small finance centers that are fully cooperative and transparent, and those which are opaque and uncooperative,” Bell said. “We are as determined as anyone that our financial system is not abused.”

To contact the reporter on this story: Simon Clark in London at sclark4(?)bloomberg [dot] net

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Offshore Banks engulfed in a wave of pessimism

2008-11-15 (All day)

Mark Atherton of the Times discusses the need for tax havens to restore damaged credibility.
The collapse of banks such as Landsbanki and Kaupthing, Singer and Friedlander Isle of Man (KSFIOM) has prompted a serious rethink about the offshore savings industry....

Siggy Sieczo, a self employed businessman from London, has money deposited with KSFIOM and says: "After this experience I would not touch offshore savings accounts with a disinfested barge pole."

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Comments on the BBC from Treasury Select Committee members after 3/11 meeting

2008-11-07 (All day)

Conservative Graham Brady, Liberal Democrat John Thurso and the committee's chair, Labour's John McFall, gave their reaction to the Chancellor's comments. Even Labour's McFall was surprised by Darling's tax haven comment and they all understand, thanks to our efforts, that we are ordinary hard working savers, not tax evaders. A further investigation by the TSC is promised. Short but encouraging.

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