offshore financial center workshop

Offshore Financial ServicesTrends, Challenges & Opportunities

Government Workshop 2004discussion points

Professor William H. Byrnes, IVFounder, Walter H. & Dorothy B. Diamond

Graduate International Tax Program

St. Thomas University School of Law, Miami

[email protected] or +1 786 271 5202

www.llmprogram.org

Professor William H. Byrnes, IV; Team Leader, 900 page Maxwell Stamp Report on the Economic, Socio-Economic and Regulatory Impact of EU Savings Directive and Code of Conduct on Business Taxation to the UK COTs

[http://www.llmprogram.org]

biographybiography

Created world’s first International Tax & Offshore Financial Centers program in 1994

Pioneered online distributive legal education globally and in US in 1998

Creating international tax and offshore training for Central Law Training (CLT)

Professor, St. Thomas University School of Law, Miami and Visiting Professor of International Tax, University of the Witwatersrand, South Africa

Formerly Senior Manager/Associate Director, International Tax, Coopers & Lybrand; relationship manager to Sovereign Group

Author of books, chapters, academic and professional articles, government reports

Professional speaker on tax, e-commerce, economics, trade/investment, and government policy issues at over 100 conferences and training events since 1994

Independent board member on audit and compensation committees of corporations and on non-profit charities as well as professional bodies

Academic member, Royal Society of Fellows



Draft TopicsDraft Topics Global OFC trends: past & present

Economic and Social Economic Impact of Offshore Financial Services

Forecasting future OFC and its services

Challenges to OFCs

Global Initiatives that Impact OFCs

EU Initiatives

Domestic UK, US, Italian, other Initiatives



Past SDIS OFC TrendPast SDIS OFC Trend Ease of incorporation

Low cost of incorporation and maintenance

Minimal, flexible corporate requirements

No tax cost

Secrecy / Privacy

(Quasi) Private Banking



Developed States OFC TrendDeveloped States OFC Trend

Ring Fenced Tax Incentive Regimes

Treaty Networks

Financial Intermediation Services

Private Banking / Asset Management

Secrecy / Privacy



Impact Trend for OFCsImpact Trend for OFCs Employment and Education/Training

Diversification of Micro-Economies

Higher Valued Added Services sector development

GDP and Personal Income growth

FDI increases

Economic and Social Stability increased

Increase government revenue



Services SectorServices Sector

contribution expanding in OECD and more developed SDIS

Caribbean SDIS – net export in tourism & ofc (less e.g. transportation) pays for net import in trade of goods from US and EU

US 80%, St Luc 71%, Bar 80%, EU 65%



TourismTourism Caribbean dependent on 80% US tourists

Cruiseships contribute much less to local economy than air arrivals but cruiseships travel increasing

High elasticity and sudden, immediate impact

New price and place competitive market entrants

Cuban re-entry will impact Caribbean



Current OFC Economic TrendCurrent OFC Economic Trend Stabilized since 2000-03 global recession,

now Upward trend

Foreign $ stable 2003 and growing 2004

New entities stable 2003, increasing 2004

Value added services expanding e.g. law

Services diversifying e.g. technology



WHY?WHY? World more dangerous – not safer

(crime & internal / external unrest)

Home Country Economic Risk not decreasing

Regulatory costs overkill for SMEs

(Sarbanes-Oxley)

Litigation increasing against individuals and companies in US (EU and elsewhere)



WHY?WHY? World cross-border trade increasing

Seamless multi-jurisdictional supply-chain provision of services and manufacturing is a reality

Communications & Information Technology



WHY?WHY? Tax Burden increase over 20 years –

demographics of age and social-net expectation

Tax Policy shift from company tax to VAT and personal tax increases personal impact

Internal EU tax rate and base competition

0% v 10% v 12% v 20% v …

EU passporting of services



WHY?WHY? Basel 2 weighting of asset/risk may allow

for more allocation to international investments

Smaller private investment funds trend

USA Patriot Act / other actions may, relative to EU & Switzerland, damage USA for M.E., Asians and Latins



Some OFC Growth AreasSome OFC Growth Areas

Estate Planning Trend

Charitable structures

Residency and nationality for FDI

Insurance : Corporate and Private

Trade Services

Technology Services



More OFC Growth AreasMore OFC Growth Areas

IP R&D and Management (TMs, Processes)

Financial Intermediation – TMC

Asset Management & Family Service Office

Capital Markets – OFC Exchanges

ADR with Common Law Courts



ASIAN OpportunityASIAN Opportunity

Asian/Indian market is wealth creator next decade for business, trade and millionaires

1/6 of China investment through BVI

Will Mauritius DTAs compete with new EU members prospective DTAs



ChallengesChallengesIncreasing OFC regulatory regimes and costs

No lobbying or voting blocs

New EU members may mitigate

NGO beauracracy will create new regulations that it may perpetually keep itself employed



Tax Policy ChallengesTax Policy ChallengesTransfer Pricing requires substance – a good thing

Thin cap legislation mitigated within EU by EU ECJ ruling

Customs tax mitigated by WTO

VAT impacts domestic and foreign and probably can’t be applied to result in a customs tariff (WTO)

Discriminatory trade in capital and services through fiscal legislation (anti-deferral, CFC, black listing) is the real threat



International InitiativesInternational Initiatives OECD Harmful Tax Competition

OECD Access to Bank Information for Tax

OECD TIEA

FATF & CFATF

OGBS

UN / G7

IMF Assessments (Financial Stability / AML)



More International TrendsMore International Trends OECD Art. 27 (cross border collection)

OECD Model Convention for Mutual Administrative Assistance in the Recovery of Tax Claims 1981

Convention on Mutual Administrative Assistance in Tax Matters (OECD & Council of Europe) 1988

Regional Multi-Lateral Tax Treaties (Scandinavia/Caricom)

New US, Ca, UK, Australia Revenue Tax Avoidance Task Force in New York (other OECD anticipated to join)

New US and UK Tax Shelter reporting requirements



New EU InitiativesNew EU Initiatives Tax Directives

Savings

Royalties / Interest

Code of Conduct

AML #2

EU – US MLAT

EU – US Extradition



UK InitiativesUK Initiatives Gallagher

Mokoro

Cook

Edwards & KPMG

Byrnes/Kitchen/Richardson - Maxwell Stamp



UK InitiativesUK Initiatives

Gate keeper AML rules

New Tax Shelter/Avoidance Reporting

Others EU States examples

Italy Revenue ruling denying deductions to OFC services party

Portugal property regime



US InitiativesUS Initiatives QI

Patriot Act AML

New Tax Shelter/Avoidance Reporting coupled with aggressive and smart IRS public relations

New Financial Regulations & Corporate Governance

Class Actions

State A.G. activism in securities / tax issues

State – IRS coordination



OGBSOGBS

info. “ultimate” B.O. & controllers

is known to FSP & is properly recorded

companies, partnerships,

other legal entities

trustees, settlor, protector/beneficiaries



Offshore Group of Banking Offshore Group of Banking SupervisorsSupervisors

adequate, effective and appropriate mechanism in place for info

to be made available to all the relevant authorities (i.e. law enforcement, regulatory bodies)

no barrier to the appropriate flow of info to the authorities