Tuesday, December 08, 2009

Gibraltar losing its tax haven image? Maybe not

Financial Times journalist Victor Mallet has reported that Gibraltar, a British overseas territory, is trying to lose its image as a tax haven. His article quotes Peter Caruana, chief minister of Gibraltar, saying:

“We have been repositioning Gibraltar away from the tax haven, the brass plate, the place where people just hide their money in the hope that nobody else will see it, much more into a financial centre of the onshore European variety, and we are 98 per cent complete in that task.”

As evidence of the changes underway, the FT notes that the Gibraltar administration will be abolishing its exempt company regime, under which companies not trading in Gibraltar are not liable for tax, and adopting a single rate 10 per cent corporation tax applicable to all companies. The administration has also signed tax information exchange agreements with 13 other jurisdictions and will be signing four more agreements before year-end 2009.

So why are we not celebrating? Well, just four weeks ago we published a report which showed that Gibraltar is assessed as opaque or non-cooperative in respect of all but one of the twelve key indicators used in the preparation of the Financial Secrecy Index.

On the positive side, Gibraltar does not have a law to protect banking secrecy.

But, take a look at the negatives:

1. Gibraltar does not put details of trusts on public record;
2. Gibraltar does not comply sufficiently with international regulatory requirements
3. Gibraltar does not require that company accounts be available on public record;
4. Gibraltar does not require that beneficial ownership of companies is recorded on public record;
5. Gibraltar does not maintain company ownership details in official records;
6. Gibraltar did not respond to Tax Justice Network requests for information;
7. Gibraltar does not participate in the European Union Savings Tax Directive;
8. Gibraltar has few tax information agreements;
9. Gibraltar does not have adequate access to banking information;
10. Gibraltar allows company redomiciliation;
11. Gibraltar allows protected cell companies.

Does this strike you as a place that is seriously shedding its image as a bolthole for people trying to hide illicit financial flows? Despite its tiny population of just 27,495 people, Gibraltar hosts 18 licensed international banks, which is far more than can possibly be required to serve domestic needs, so we can safely assume that the secrecy arrangements outlined above make Gibraltar a convenient place to hide capital in flight from the law, tax, and similar inconveniences.

On the basis of our assessment Gibraltar was awarded just 8 transparency credits out of a potential total score of 100. Far from repositioning itself away from 'brass plate' operations, Gibraltar remains wedded to legalised secrecy and conforms in almost all respects to our definition of a secrecy jurisdiction (a more useful term than 'tax haven', since this more accurately describes the services provided to the non-resident clients of such places). For more details about Gibraltar's legalised secrecy arrangements, check here.

None of the changes cited by the FT will substantively alter our assessment, not even the recently signed information exchange treaties, which are distinctly sub-prime in terms of effectiveness and fall far short of the minimum threshold of 60 agreements which should be required of an international financial centre.

We know that many secrecy jurisdictions are working flat out to shed their tax haven image. Jersey, for example, has retained the services of London-based public relations company Brunswick Group. Cayman is also trying to burnish its image. Caruana's assertions to the FT are part of this process. But FT readers (this blogger included) expect more than uncritical puffs put out by political spin-meisters.

The basis for international concern about Gibraltar (and other secrecy jurisdictions) lies more with the legalised secrecy provisions they offer to non-residents than with whether or not they charge VAT on goods and services bought within their borders. In this respect Victor Mallet is clearly not up to speed with current debate and his article is unbalanced and misleading.

Caruana claims to be 98 per cent on target towards Gibraltar losing its tax haven status. We assess Gibraltar as 92 per cent opaque. Check the facts underlying our assessment and judge for yourself.

4 Comments:

Anonymous Anonymous said...

You are out of date!

1. Gibraltar does not put details of trusts on public record;

Neither does the UK, not US for that matter

2. Gibraltar does not comply sufficiently with international regulatory requirements

It meets all OECD standards

3. Gibraltar does not require that company accounts be available on public record;

Yes it does as required by EU company law

4. Gibraltar does not require that beneficial ownership of companies is recorded on public record;

No UK, US or most other common law jurisdictions.

5. Gibraltar does not maintain company ownership details in official records;

This forms part of the company's statutory records.

6. Gibraltar did not respond to Tax Justice Network requests for information;

TIEAs have been concluded with over 12 jurisdicitons exactly for this purpose.

7. Gibraltar does not participate in the European Union Savings Tax Directive;

Yes it does as EU Directives apply to Gibraltar and information has been shared with other Member States for the last few years automatically.

8. Gibraltar has few tax information agreements;

Over 12 and counting.

9. Gibraltar does not have adequate access to banking information;

No different to UK.

10. Gibraltar allows company redomiciliation;

As do many other countries which are not tax havens.

11. Gibraltar allows protected cell companies.

And the UK is about to introduce them as well.

Get up to date!

11:31 pm  
Anonymous John Christensen said...

@ Anonymous

Your references to the UK and US support our own position: as you should know from press publicity, we have ranked the USA at the top of the Financial Secrecy Index, and the UK (City of London) ranked number five. Benchmarking Gibraltar against two such very poor examples highlights our case that the globalised financial markets are characterised by secrecy, which renders them largely criminogenic.

On the subject of the TIEAs, you should be aware that expert opinion agrees that the bilateral treaties signed under the OECD model treaty are largely ineffective and merely serve as a window-dressing to persuade the public that action has been taken.

Far from being out of date, we are well up to speed on what is going on, and we remain deeply unimpressed.

John


PS While writing the blog last night I chatted with a friend in Saint Helier, Jersey(director of a trust and company administration business) who tells me that Gibraltar is still regularly used by trusts and company administrators to locate offshore companies used for tax evasion. I realise that some things might have changed, but when I was working in the tax evasion industry Gibraltar was where we parked a lot of business at the dodgier end of the spectrum.

1:13 am  
Blogger Richard Murphy said...

I note what anonymous has to say and respectfully suggest he is wrong.

If he reads the criteria we used he will see that all our comments are justified and up to date

Just because the OECD says something is acceptable we do not

Likewise the EU

And we do not accept that 'the UK does not do it' is an excuse

The report we have produced is objective and seeks an objective standard of transparency

Please read the detail. Knee jerk reactions against unacceptable standards are not acceptable excuses for claims of compliance

Richard Murphy

For the Secrecy Jurisdictions Team

1:38 am  
Anonymous Anonymous said...

Tax evasion is a criminal offence. When you refer to your time spent "working in the tax evasion industry", I presume you are referring to tax avoidance (which is within the law), and not to your involvement in criminal activity?

7:17 am  

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