British Territories Fight to Maintain Their Tax Haven Secrecy
The leaders of various British Overseas Territories recently made headlines when they entered talks with the ministers in hopes of reversing the UK’s decision to end bank secrecy related to offshore tax havens. The MPs made an unexpected vote in early May in favor of imposing public registers of the share ownership in each British Overseas Territory. This led to a strong reaction from high-net-worth individuals and others who protested in the streets, demanded constitutional separation, and boycotted the queen’s birthday celebrations.
A Major Crisis
This disagreement between the British Overseas Territories and the UK government could lead to the largest constitutional crisis for the territories and London in decades. Even a phone call from Theresa May that lasted 35 minutes and Lord Ahmad, the Foreign Office minister, visiting some of the territories did not resolve the issue.
Why the Concern
The concerns of the territories, including the Turks and Caicos Islands, Cayman Islands, Bermuda, and the British Virgin Islands, is that the end of tax secrecy will disrupt the financial services in the local economies. As the local economies depend on these financial service industries, the loss of portfolios from high-net-worth individuals who seek low taxes and secrecy would have a strong impact. The territories additionally expressed concerns that the vote in the Commons is an infringement upon the islands’ constitutional right of overseeing their domestic legislation. Within the British Virgin Islands alone, more than 1,000 people marched to protect the change.
Why the Potential Change in Rules?
On the other side of the spectrum, the members of the UK government who want to revoke the tax secrecy for these offshore tax havens point to the widespread money-laundering exposed in the Panama Papers. Despite government pleas, the MPs were in favor of a bill that amended the anti-money laundering and sanctions bill that requires beneficial ownership listed in public registers by the close of 2020. In regards to the claims of the territories that this violates their constitutional rights to oversee domestic legislation, MPs in favor of the change say that as they have the same queen and share the same flag, they must share the same values.
What Is Being Done
The talks on the fight for tax secrecy involve representatives of the territories traveling to London. For example, Dr. Kedrick Pickering, the pro-independence deputy premier and the leader of the British Virgin Islands delegation, hired Withers. The law firm plans to fight the change on constitutional grounds. The Cayman Islands was yet to decide whether they should join the same legal action or file a separate one but agreed that it would join the fight. David Burt, who is the premier of Bermuda, went as far as to tell May that he would not go ahead and implement the law, as Bermuda does not recognize the UK Parliament’s right to make legislation on this matter. While the various leaders and delegations were in London, there were also plans to discuss other important matters, including UK government aid for the islands due to the previous year’s hurricanes and how Brexit affects the territories.
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