Knowledge Centre

The Crown Dependencies and Overseas Territories all have central registers of beneficial ownership of companies.  The contents of these registers must be verified by regulated corporate service providers, making them the most reliable and accurate registers in the world.  This information is provided to the UK upon request.  Under the Criminal Finances Act 2017, the UK conducted a statutory review of these systems in 2019, and found that they have "proven highly valuable to UK law enforcement agencies" and "are adding significant value in informing time sensitive economic crime investigations".

There is a lot more behind the angry headlines surrounding tax havens, Juliet Samuels explains in this article in the Telegraph. 

Several of the United Kingdom’s Overseas Territories, such as the British Virgin Islands, Cayman Islands and Bermuda, have governments that impose no tax on the profits of businesses they incorporate. That is why they are commonly called tax havens. And it partly explains why they have become offshore financial centres (OFCs).

International and regional financial centres facilitate the flow of international investments in developing countries. This review provides a brief summary of evidence available on the role of selected regional financial centres in mobilising investment finance toward low- and middle-income countries. Overall, the financial centres contribute to enhancing public and private investment in developing countries.  This K4D report was commissioned by the UK Department for International Development.

Since 2008, there has been a focus on reforming the global financial system to enable it to deliver growth and prosperity while avoiding a repeat of the financial crisis. These reforms are particularly significant for developing countries, because their economic growth – and the poverty alleviation that depends on it – is being held back by a lack of finance.

So much of public policy on international tax is driven by sensational reports of (unrepresentative) individual cases and the misuse of statistics that the actual role of offshore jurisdictions remains unknown to most people.

Labour MP Chris Evans and Conservative MP Mark Harper write in support of the alternative investment fund sector, which relies on international financial centres, especially in the Cayman Islands, to reduce risks and increase returns.  Alternative investment funds earn the UK Exchequer £4bn a year directly, and earn UK investors billions of pounds a year more.  The flexible and specialist fund structures and tax neutrality of international financial centres are not available or replicable onshore, so IFCs are essential to creating that prosperity.

The truth about offshore alternative investment funds

The Queen has been criticised for having investments in Cayman Islands funds.  But almost every pension fund has investments in offshore fund vehicles, too.  Instead of being used for nefarious purpose, international financial centres are overwhelmingly used to pool savings and invest collectively: allowing smaller investors to achieve the same return as large investors do, and reducing risk for everyone by spreading investments more evenly.

While the Paradise Papers and similar hacks and leaks imply that simply operating in an international financial centre is wrong per se, they are essential to cross-border international investment, by big and small investors alike.  Almost everybody uses or benefits from international financial centres for day-to-day purposes, as Matthew Lynn explains.

Development Finance Institutions (DFIs) invest public money in private enterprises, with the aim of accelerating the economic development of low- and middle-income countries. One of the greatest threats to development is popularly perceived to be the network of tax havens that drain billions from developing countries, in part by allowing cross-border investors to avoid taxes. And yet these public institutions that exist to promote development regularly route their investments through tax havens. Why?

Economics consultancy Capital Economics conducted an assessment of the benefits of Jersey to the United Kingdom.  They found that the island - overwhelmingly its international financial centre - created 250,000 jobs in the UK and generated £5bn for the UK Exchequer: ten times more than the highest possible estimate of losses due to Jersey.

Economics consultancy Capital Economics conducted an assessment of the benefits of Jersey to the European Union.  They found that the island - overwhelmingly its international financial centre - creates 88,000 jobs in the EU (excluding the UK) and generates €1bn for EU Governments.

Offshore investors are not just the uber rich highlighted by the Panama Papers. Many are hardworking people looking for better returns and more flexibility

At last! We can now see why David Cameron tried to keep this quiet. He sold his shares in January 2010 – just as the recovery was starting. What a dunce! His £31,500 would be worth a lot more by now if he’d held, and diversified his portfolio. So can you trust him with the nation’s finances? And this, as far as I can make out, is the limit of the scandal. All else is spin and smear.

Where does the most British tax go missing these days? Perhaps in Panama, you think. Or Dubai. Or some tropical island where heartless rich people are drinking piña coladas served by starving local children.

Revelations in the Panama Papers have caused concern that so-called tax havens lie at the centre of a web of criminal conduct. Jeremy Corbyn, the leader of the Labour party, has demanded that British finance centres be “shut down”. The uproar invites examination of the role these centres perform in the global economy.

Money "moves" internationally through electrons and physically among financial institutions and non-financial institutions as part of global trade in legitimate goods and services and as part of legitimate transnational capital investment, and, regrettably, as part of criminal enterprise. Some analysts argue that the movement of a large amount of these funds' through offshore financial centers (OFCs) suggests a problem with the financial system that puts "global financial capital. .. beyond the control of any one national government, able effectively to cast judgment on the fiscal and monetary policies of nation states themselves through the disciplinary fear of capital flight."

The conventional wisdom on tax havens - reinforced in recent months in the discussion on tax and the corporate sector (for example, Starbucks, Google, Amazon, and so on) - is that they are the scourge of responsible countries with ‘proper’ tax regimes. As with much conventional wisdom, the reality is different.

For criminals moving large sums of dirty money internationally, there is no better device than an untraceable shell company. This paper reports the results of an experiment soliciting offers for these prohibited anonymous shell corporations.

Corruption is estimated to be at least a $40 billion dollar a year business. Every day, funds destined for schools, healthcare, and infrastructure in the world’s most fragile economies are siphoned off and stashed away in the world’s financial centers and tax havens. Corruption, like a disease, is eating away at the foundation of people’s faith in government. It undermines the stability and security of nations. So it is a development challenge in more ways than one: it directly affects development assistance, but it also undermines the preconditions for growth and equity. We need mobilization at the highest level so that corruption is tackled effectively.