Offshore Centres Warned Not to Resist OECD

by Robert Lee, Tax-News.com, London

25 September 2003

Offshore centres such as the Isle of Man must not succumb to the temptation of resisting the efforts of the OECD in its efforts to introduce and enforce exchange of information commitments on the banking sector, a leading tax expert has warned.

Richard Hay, international tax partner in the London office of Stikeman Elliott made his plea whilst addressing a conference hosted by the Isle of Man branch of the Society of Trust and Estate Practitioners (STEP) and warned that this approach "would concede the initiative back to the OECD and raises the certainty of further confrontations ahead.

"Instead, offshore centres should take the initiative now and have more control of the process going forward," said Mar Hay.

Ironically, Mr Hay points out that the European Savings Tax Directive may offer offshore jurisdictions an opportunity to advance their cause on the issue going forward as it comes directly into conflict with the OECD's policy on information exchange.

"OECD assurances that it would ensure adherence to similar standards by its own member states are now in doubt and the threatened sanctions for non-member jurisdictions are now inconceivable. With the risk of sanctions removed, why should the offshore centres endorse its project?"

Therefore, Mr Hay believes that this gives offshore centres a chance to seize upon this "pause" and allows them to advance their own agenda in the OECD.

However, Hay indicates that it is within offshore jurisdictions' longer term interests to cooperate with the larger economies as ultimately their business depends on these countries.

"Offshore centres should not expect unrestricted access to the banking and securities markets of larger countries without recognising certain responsibilities in response," said Hay, though he added that recent changes in the business make up of offshore means they are "now positioned to reap the benefits of a more seamless and complete integration into the world financial economy."

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