View all newsletters
Receive our newsletter - data, insights and analysis delivered to you
  1. Analysis
March 19, 2009updated 05 Jun 2017 11:40am

Levin bill ‘relies on flawed information’

Increasing international pressure on banking secrecy and tax havens is being led by a US assault which has its roots in a bill tabled by Senator Carl Levin, supported by President Obama William Cain reports.

By William Cain

Increasing international pressure on banking secrecy and tax havens is being led by a US assault which has its roots in a bill tabled by Senator Carl Levin, supported by President Obama. But the draft legislation itself is seen as controversial within the US Treasury. William Cain reports.

An official in the US Treasury Department has publicly criticised the use of a controversial list of tax havens which could form the centrepiece for potential economic sanctions. In an open letter to the General Accountability Office (GAO), the investigative arm of the US Congress, the Treasury Department says the current, 50-strong list of tax havens, put together by compiling three other lists, should be dropped.

The letter, from deputy assistant secretary Michael Mundaca, in the Treasury’s international tax affairs department, says: “Because any such list is likely to be regarded as a blacklist and may be used as the basis for imposition of sanctions or other measures, such a list may inappropriately negatively affect our economic and other relations with listed countries.”

The list, part of which is included in the Levin Bill, which has been submitted to both chambers of Congress in the US, has helped spark an international campaign against the lack of transparency in offshore jurisdictions.

Mundaca’s letter also says the Treasury is “concerned about the use of lists of so-called tax havens”, and states that the methodology which lies behind the construction of the blacklist, which includes Switzerland, Singapore and Hong Kong, is both “problematic” and “inapposite”.

Published in the GAO’s draft report, International Taxation, released in December, the letter continues “there is no agreed-upon definition of tax haven or list of jurisdictions that should be considered tax havens – yet the report proceeds to characterise jurisdictions as tax havens by including them on a tax haven list”.

Recent events unlikely to have impact

Recent moves by jurisdictions to form tax information sharing pacts with other countries, including Switzerland, Luxembourg, Austria, Switzerland, Singapore and Hong Kong, are unlikely to have an impact on the current US list, a GAO spokesman told PBI.

“There are other countries on the list in the bills that already have these agreements, so you could infer the recent developments would not have an impact,” he said.

Guernsey is one of the jurisdictions on the list which already has a tax agreement with the US. Peter Niven, who represents the financial interests of the dependency as CEO of Guernsey Finance, rejects its inclusion on the list, and said there was real concern ahead of the G20 negotiations.

“It could be very damaging from the point of view that the regulations are being brought in with no regard to the facts and the truth. The authorities need to have a big dose of reality,” Niven added.

There are concerns the 50-strong GAO list is being used to influence information the OECD is putting together on tax havens ahead of the G20 Summit in April. While the OECD could not confirm whether the GAO list was being used as part of this process, it does rely on information provided by its member nations.

An official in Senator Carl Levin’s office told PBI the bills before Congress, which are a separate issue, were aimed at shifting the burden of proof for tax evasion from the government to the client, and did not directly impact tax havens.

 

FINANCIAL CENTRES

Top 15 global financial centres

Rank 2009

Rank 2008

Financial centre

Rating

1

1

London

791

2

2

New York

768

3

3

Singapore

697

4

4

Hong Kong

684

5

5

Zurich

659

6

6

Geneva

938

7

8

Chicago

638

8

9

Frankfurt

633

9

11

Boston

618

10

13

Dublin

618

11

12

Toronto

615

12

16

Guernsey

613

13

14

Jersey

612

14

15

Luxembourg

611

15

7

Tokyo

610

Source: GFCI

FINANCIAL CENTRES

Bankers shift preference to onshore centres

There is no safe port in the current financial storm, with financial services professionals increasingly favouring domestic financial centres over international counterparts, according to recent research.

The annual Global Financial Centres Index, which ranks financial centres based on a survey of bankers’ attitudes, showed that London finished narrowly ahead of New York in the latest table.

More interestingly, it found perceptions in the finance industry showed a universal decline in confidence in the sector, with ratings of all of the financial centres declining.

“There is uncertainty about markets, assets and, of particular interest here, about which financial centres will prosper in the future,” the report said.

It added: “This uncertainty seems to have led to a flight to safety with greater faith placed in the leading, established financial centres than in less established, emerging centres.”

Zurich remained the leading private banking centre, while other offshore centres have also weathered the financial crisis relatively well so far. Guernsey moved up four places to 12th in the rankings, while Jersey improved one place to 13th.

One of the biggest fallers among the top players was Tokyo, which declined eight places to a surprisingly low 15th in the rankings.

However, smaller centres fared worse than their larger rivals, as concerns mounted over their stability, particularly in the current regulatory climate.

The main concerns regarding to the leading centres, London and New York, are potential regulatory knee-jerk reactions to the credit crunch and potential unintended consequences, and recession, the report continued.

NEWSLETTER Sign up Tick the boxes of the newsletters you would like to receive. A weekly roundup of the latest news and analysis, sent every Wednesday. The industry's most comprehensive news and information delivered every month.
I consent to GlobalData UK Limited collecting my details provided via this form in accordance with the Privacy Policy
SUBSCRIBED

THANK YOU

Thank you for subscribing to Private Banker International