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Wednesday, 17th April 2024
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Where tax issues are making a difference Back  
The developing agendas on tax are creating opportunities for financial centres said Pat Wall.
The debate regarding tax havens has been reignited by the Lichtenstein-Germany debacle, said Pat Wall. partner. However he cautioned that the emotion surrounding the subject should not prejudice the debate against legitimate international centres. ‘They are an extremely important mechanism in the operation of the international financial system and it’s all too easy to use the tax haven label as an excuse for anti-competitive or protectionist issues.’

He said that the ‘traditional tax haven’, characterised by low levels of regulation, an absence of tax treaties, low or no taxes, reliance largely on tax evasion, money laundering and no real value added services, no longer exists and has been in decline for some time. This decline can be attributed to various factors, including the liberalisation global tradeinf financial services the decline of centrally planned economies; the rollback of excessively restrictive regulatory and exchange controls and the gradual reduction in tax.

The resulting opportunities are massive, he said, but traditional financial centres, including London, New York, Frankfurt, Zurich and Tokyo were slow to respond to the changes - leaving the path clear for new centres, such as Dublin and Luxembourg, to seize the moment. ‘At this point providers were looking for gateways to markets rather than tax havens, with high standards of regulation and innovative approaches to product developments in the correct tax environment, access to major markets such as the OECD and the EU, a culture of compliance without international obligations and the rule of law, deep resources, technology and a flexible labour pool’.

Free movement of goods and services essentially constitute a correct tax environment, and the tax system should recognise that free trade in financial services is a positive. In terms of fair tax competition, he said that administration should be transparent and predictable – and that the recent controversies in the UK regarding the taxation of non doms highlight that any changes made should be done so through a process of consultation with the industry.

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