Tuesday, April 21, 2009

The Foot progress report into Britain's tax havens

Last December the British government announced an independent review of British offshore financial centres, that is, Jersey, Guernsey, Cayman, the Bahamas and the like. This is to be Britain's major review of the tax havens around the world over which it has a substantial measure of control. They asked Michael Foot CBE to conduct it. Today Michael Foot has issued a progress report, laying out the areas in which he will focus.

Recently we had felt real signs of hope when we received copies of letters that Britain's Prime Minister Gordon Brown had sent to these places, appearing to push for real change. This report appears to come from a very, very different angle. In short, it shocks us.

First, a word on the overall tone. Take this quote, for example, from the foreword:

"The most immediate issue facing the financial centres is how they can best deal with the current downturn in financial services business, particularly if it becomes prolonged."

followed by:

"Important questions for this Review are the ability of each financial centre to weather the downturn and to remain competitive in the future."

The message here is clear enough. It is this: 'how can we help our tax havens get through this difficult period?'

Now consider this, from the foreword:

"Even in a downturn, new opportunities may arise to offset retraction in certain areas of financial services business. Managing toxic assets from the banking sector may be an example of one such area."

What is the message here? It is this: 'Bring your toxic assets to us, and we'll put a cloak of offshore secrecy over them!' Is that the way to engender trust in the system?

Finally, we'd like to note this, which isn't new. Who is Michael Foot? He does have some impressive credentials, to be sure: a former executive director of the Bank of England, a former managing director of Britain's Financial Services Authority (FSA, known by the satirical British magazine Private Eye as the Fundmentally Supine Authority) and other posts. What else has he done? As his biography says:

"Michael was appointed Inspector of Bank and Trust Companies for the Bahamas November 1st, 2004 to May 2007. He then returned to become Chairman of PFG UK."

PFG is the Promontory Financial Group. As they say on their website:

"Our client roster has grown to include banks of all sizes, securities firms, insurance companies, investment advisers, private equity firms, hedge funds, broker-dealers and exchanges—in short, financial companies of every stripe."

Is this a conflict of interest? Is this an independent review? Make your own minds up. We will discuss the more detailed aspects of this progress report in a subsequent blog. Update: read more here.

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