In April the leaders of the G20, the world’s most powerful nations, held a summit in London with the avowed aim of addressing the world economic crisis. One of their main pledges was “to take action against non-cooperative jurisdictions, including tax havens”. The G20 leaders threatened to hit tax havens with a “toolbox” of “effective counter measures”, including withholding taxes, reviewing tax treaty policy, and putting pressure on development banks and aid programs. Although attacking tax havens was by no means their only initiative, the importance which G20 leaders attach to it is clear.
Bermuda, one of the world’s most important reinsurance markets, was on the list of “tax havens” published by the OECD and referred to by the G20. Bermuda is in fact likely to be removed from the OECD’s list. After the G20 summit, Bermuda signed further Tax Information Exchanging Agreements and plans more soon, bringing it over the magic number of 12 such agreements required by the OECD to be off the list.
Whatever the correctness or otherwise of the G20 in naming and shaming other governments, there is a wider issue here. The G20 London summit was an opportunity for the world’s leading politicians to address together the worst economic crisis in living memory. Instead they chose to spend much of their time planning to hurt many offshore financial centres, which in reality had very little to do with the crisis.
The world financial crisis was not caused offshore. It was caused by speculation by banks and investors onshore: in New York, London, Paris and Frankfurt – the financial centres of the G20 nations themselves. But our politicians did not promise any “toolbox” of “effective counter measures” against New York, London, Paris or Frankfurt. I wonder why.
David Sandham, editor