Tax haven crackdown leaves wealthy at loss

Published on Saturday 11 July 2009 15:01

WEALTHY investors and businesses will be forced to seek out new tax havens if a number of traditional centres fail to meet the stipulations of the G20 leaders by the time it meets again at the end of September.

At their last summit in April a crackdown on tax havens was unveiled which will pave the way for the naming and shaming of countries that fail to comply with internationally agreed standards.

This move is in line with the UK Government's stricter approach to tax evasion and avoidance, said John Brolly, director of tax investigation in Scotland for accountancy firm BDO Stoy Hayward. He said the increased scrutiny from the government was partly due to the fall-out from the banking crisis. Another motive is concern over less capital being available to help support poorer countries because the Exchequer is losing out on income due from taxation.

He said: "New regimes such as the Seychelles and Panama are being introduced to replace traditional ones (tax havens]. But these are a little more esoteric and not close at hand. Investors may be wary about putting their money there."

However, Jersey is still a viable tax haven for investors as it has already signed the UK Government's Tax Information Exchange Agreements. The Treasury said this had strengthened Jersey's reputation as a jurisdiction committed to good governance in tax matters.

A delegation from Jersey Finance is in Edinburgh on Wednesday to explain its benefits as an international finance centre, or tax haven, to accountants, lawyers and investors.

Robert Kirkby, technical director of Jersey Finance, said it wanted to remind the UK of the opportunities it offered for private wealth planning. Jersey is likely to prove particularly attractive during the recession. Although the downturn has had some impact on its financial centre, it still has no public debt. Its total value of funds under investment management is 18.8 billion.

Another beneficiary of the downturn which is wreaking havoc on stock markets is Lloyd's of London. Investing in Lloyd's insurance market remains high risk, partly because of its unpredictability, and it is only suitable for more sophisticated clients. But it is being seen as an increasingly attractive option because of the comparatively poor performance of equities.

Private investors are vital for Lloyd's to raise capital. Investors have seen that lucrative returns are available from putting money in to its vehicles, in comparison with the stock market.

Last week, Hampden Agencies, the largest adviser to private capital at Lloyd's, was in Scotland to talk to existing and potential clients. Hampden acts for 1,200 members of Lloyd's, including 200 north of the Border.

Nigel Hanbury, chairman of Hampden, said: "We're proving more popular as we don't correlate with other asset classes. Lloyd's had a problem about 10 years ago, but it is now in good shape."

Hampden is expecting to sign up 100 new UK clients before the deadline of the end of August, each of whom will have at least 350,000 to invest.