'Tax Havens' Are Here To Stay In UK, Report Suggests

by Robert Lee, Tax-News.com, London

01 October 2002

An Observer report has argued that the recent revelation that the UK's Inland Revenue and Customs departments sold some 700 buildings to a property company based in Bermuda, coupled with an increasing reliance by government agencies on captive insurers based in locations such as Guernsey means that 'tax havens' are here to stay, despite the government's protestations to the contrary.

'The Chancellor has campaigned to stop corporations and individuals depriving the Exchequer by moving their funds offshore. But an increasing number of Government agencies are themselves using Guernsey's low-tax laws to save money,' the report suggested, revealing that: 'Network Rail, London Underground and the Strategic Rail Authority are all funnelling millions to the Island, where insurance costs less. Rising premiums in Britain mean that more public bodies are likely to follow suit.'

Since September 11, many insurers have massively raised their charges, meaning that for the aforementioned public bodies - which could potentially need to make huge payouts in the event of a disaster - it is often cheaper to establish their own 'captive' insurers in offshore jurisdictions. This not only enables them to directly access the international reinsurance market, but also means that money used to fund the offshore captive grows faster due to the reduced tax burden.

The newspaper report, published in late September suggested that, despite Gordon Brown's pledges to fight tax evasion and increase revenue, which have resulted in the closure of several 'loopholes' in territories such as Jersey, Guernsey, and Gibraltar: 'Overall, the Inland Revenue's achievements in reducing tax leakage have been modest. Its special investigation section, which scrutinises sophisticated tax avoidance schemes, is clawing back less money than in 1997.'

It added that: 'The Government's new-found willingness to make use of offshore ruses itself - and, in particular, the 'captive insurance' market in Guernsey and Bermuda - may signal an official acceptance that tax havens are here to stay.'

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