UK starts offshore centre inquiry

The United Kingdom Parliament Treasury Committee announced an inquiry into offshore financial centres on Wednesday.

The Treasury Committee is inviting written evidence on 11 particular questions about offshore financial centres. The written evidence is due by noon on Thursday 19 June 2008.

Some questions seek to determine the importance of Offshore Financial Centres in the world’s financial industry or to specific financial instruments.

Other questions focus on possible negative aspects of Offshore Financial Centres, including:

  • To what extent does the use of Offshore Financial Centres threaten financial stability?
  • To what extent have Offshore Financial Centres ensured that they cannot be used in terrorist financing?
  • What has been as is the extent of double taxation treaty abuse within Offshore Financial Centres?
  • To what extent do Offshore Financial Centres investigate businesses and individuals that appear to be evading UK taxation?

The Treasury Committee’s press notice mentions no Offshore Financial Centre by name. Nor does it invite evidence from any specific entity in or outside the United Kingdom. It does, however, ask this question:

  • Are British Overseas Territories and Crown Dependencies well-regarded as Offshore Financial Centres, both in comparison to their piers and international standards?

Ted Bravakis, the director of public relations for the Portfolio of Finance & Economics said the Cayman Islands Government was aware of the inquiry.

‘[We] cannot confirm if we will be submitting evidence yet,’ he said, adding that any response would be subject to Cabinet Approval.

Cayman Islands Monetary Authority Chairman Tim Ridley was also aware of the inquiry, and said that input CIMA might give would be included in any submission the Cayman Island Government might make.

Mr. Ridley ventured a guess into what prompted the Treasury Committee’s inquiry.

‘I suspect the treasury inquiry is because of the nervousness that exists now about London’s competitiveness, and the serious media criticism in the UK of the use of offshore structures – for example Tesco,’ he said. ‘I suspect Treasury wants a better handle on the symbiotic relationship between London as a financial centre and the offshore centres that help London to remain competitive.

‘An example is the importance of investment hedge fund managers to London,’ he said. ‘Part of what keeps them in London is the ability to use hedge funds domiciled in places like Cayman for their clients. If the UK were to crack down on that, it might lose the managers who would migrate to, say Geneva, or even Cayman.’