The wheels of financial history are spinning once more. Whereas offshore financial centres were all the rage just a few years ago, the world's most powerful countries are now causing them much discomfort as they seek to recover "lost" tax revenues. Interestingly enough, it was not always like this. Consider:
- Many G-8 nations were complicit in the creation of these offshore banking centres in the first place since they did not raise much of a fuss about their banks setting up shop in paradis fiscaux all those years ago;
- However, those things were allowed to happen during happier times when rich countries did not run habitual budget deficits;
- With there being no fiscal cushion to speak of in any number of wealthy countries, their mood towards tax cheats has unsurprisingly soured;
- Especially after the global financial crisis wiped out their tax bases, the political mood in developed nations has soured, the now-common refrain being one of "tax justice": why should us proletariats pay out a higher percentage in taxes than these wealthy folks who can shift their tax burdens elsewhere alike, say, Mitt "Bain Capital" Romney?
But, this issue appears to be approaching a non-debate. With the ever-so-subservient UK appearing to bow to American wishes on this issue, it appears the famous Caribbean offshores' days of milk and honey are numbered:
Given that UBS and other Swiss banks had their vaunted bank secrecy gutted by the IRS, anything seems possible. And FATCA has a global reach with what some are calling a new American Imperialism. All in all, the world is smaller and more transparent than ever before. And it may get smaller still.I remain conflicted over this issue: Small island nations have few development strategies available to them, and financial services have sustained many for years and years. At the same time, it's kind of dismaying for tax cheats to get away with fiscal tomfoolery on such a vast scale. All I can say is that it's going to become much more difficult to escape American fiscal dragnets in the near future.
In the current milieu, the UK may be feeling some parental misgivings. After all, it spawned some of the most notorious tax havens. Many of its self-governing regions turned out to be enablers. Perhaps Britain now feels a sense of obligation to make the largely island nations join the tax haven attack.
That’s one conclusion to draw from the UK Prime Minister David Cameron asking 10 territories and self-governing regions to join hands. Just execute the Multilateral Convention on Mutual Assistance in Tax Matters, Mr. Cameron urged. It’s a creature of the OECD, the Organization for Economic Cooperation and Development. The treaty has been signed by more than 50 countries.
One of its key features—you guessed it—is information sharing. That means these countries will all share information on individuals who hold bank accounts in their jurisdictions. The 10 include Bermuda, British Virgin Island, Cayman Islands, Gibraltar, Anguilla, Montserrat, Turks and Caicos, Jersey, Guernsey and the Isle of Man. Mr. Cameron’s announcement of the 10 crown dependencies and territories tied nicely with the G-8 Summit days later.