PwC Survey Foresees Major Downsizing Of Offshore Sector

by Jason Gorringe, Tax-News.com, London

15 July 2003

A recent survey conducted by accounting firm PricewaterhouseCoopers has concluded that the number of offshore centres around the world is set to reduce dramatically in the course of the next few years.

The tenth annual survey of global private banking and wealth management found that a high percentage of managers located around the globe thought that the number of financial districts in offshore jurisdictions would reduce to around 20 from its present level of 90 in the coming years, as firms shore up their operations in the more well reputable and well regulated locations.

"The recent European Union directive on withholding tax and the responses by some of the European countries affected is a good example of how the debate between on and offshore will rage for a number of years to come," the report stated. "In addition to the flow of funds, regulatory and tax considerations will be key with only well-regulated and secure centres surviving."

"The trend to erode protection and enforce the exchange of information is putting pressure on the offshore centres. It is evident that wealth managers will continue to consolidate their operations and reduce the number of offshore centres in which they operate to one key centre in each region," the report continued, adding:

"They will need to consider carefully where they locate their business, according to the source and flow of wealth of their clients, the regulatory and tax environment and the opportunity to reduce costs without undue impact on their services to customers."

However, PwC partner Peter Yates considers that ultimately the Channel Islands will be able to weather this downsizing of the offshore sector- despite the comparatively high costs associated with Jersey and Guernsey - citing political stability, a skilled workforce and the jurisdiction's advantageous time zone.

"Both Jersey and Guernsey should be able to maintain their position among the leading offshore centres provided that the cost base and tax environment remains competitive," Mr Yated observed in a recent Jersey Evening Post report, adding: "The big challenge for the islands will be to recruit, train and retain a quality workforce while keeping costs at a reasonable and acceptable level."

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