This is in the Times:
Savers with money in tax havens such as Guernsey and the Isle of Man could be forced to pay tax on their offshore bank accounts to fund a deposit protection scheme.
Industry experts believe that the measure may be announced as part of a government-backed review into offshore financial centres.
Andrew Jupp, head of tax at Tenon, the accountant, said: "I would not be surprised if we saw a tax levy on income from offshore bank accounts as the quid pro quo for granting some level of protection, such as guaranteeing a certain level of cash deposits. The Treasury could try to strike a deal with overseas banks to ensure a certain amount of interest is withheld at source."
Most of the article is remarkably ill informed: so is this comment.
There is a tax withholding scheme in force in these places: it is the EU Savings Tax Directive. As we know, advisers do their utmost to avoid its requirements whilst still expecting investor protection. That is the nature of offshore free-loading, after all.
But this is not enough: a withholding tax is not information exchange, it is not enough to guarantee the deposits (let's be honest, as rates fall even the withholding 35% on 4% gross interest it will be just over 1% - and there are other uses for tax than providing insurance for tax abusers) and no doubt advisers will do their utmost to avoid any such tax anyway.
There's also the little issue that the only reason we don't have universal tax withholding on interest in Europe is that the UK Treasury opposed it when the EU STD was first opposed.
But either way, this is not a viable way to tackle the much deeper systemic issues at play here.
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Finally more balanced reporting, which truth for a change
LONDON, England: Hedge Week, December 10, 2008 — Following controversy in the UK over the lack of deposit protection for savers who had placed their money with subsidiaries of failed Icelandic banks in Jersey, Guernsey and the Isle of Man, the British government has decided to launch a review of financial services in the three crown dependencies as well as other UK dependent territories such as the Cayman and British Virgin Islands.
Many centres are fairly sanguine about the latest UK initiative. The Cayman Islands points to the number of tax information exchange agreements it has negotiated and signed with countries in Europe and North America as an indication of the efforts it has made to eschew business that essentially depends on tax evasion, as well as its retrospective due diligence for anti-money laundering purposes on all bank account holders – a move the US and UK shied away from as too difficult.
However, one suspects that the new focus on offshore jurisdictions by the EU and national governments (not to mention the OECD, which is threatening to draw up a new blacklist of uncooperative jurisdictions) is less about uncovering failings that have hitherto remained undetected than about looking for useful scapegoats for the global financial misery.
Let’s hope that the confidence in Jersey and Cayman that they will come through the latest inspections with flying colours is not misplaced, and that the various reviews will be conducted with fairness and objectivity. But there is a nagging fear that critics of the offshore world may not let the facts get in the way of a good case.