Why Nothing’s Been Published About British Offshore Financial Centres Report

Isn’t it interesting how, in the build up to the publication of Michael Foot’s independent review of British offshore financial centres, the media were right on the story telling us how it would reveal that centres like Jersey and Guernsey not only drain the UK tax coffers of billions, but that they are now in crisis and that the British tax payer will have to bail them out.

Then, when the report is published and it actually reveals that British offshore financial centres are responsible for propping up the British economy, are very well run in many cases and that they have a vital role in the ongoing health of Britain’s banks and overall economy, no one wants to publish such interesting yet seemingly ‘boring’ news!

In this article we’re going to explain why nothing’s been published about the British Offshore Financial Centres Report because the facts and findings contained therein are not the stuff of scurrilous headlines that will sell papers on the back of fear.  Rather, the findings are fascinating and prove to anyone who has an interest in all things offshore that offshore jurisdictions are critically important not only to international business, but to the British government as well!

Michael Foot was commissioned by the Chancellor of the Exchequer to conduct a complete review of the “long-term opportunities and challenges facing the British Crown Dependencies and Overseas Territories as financial centres,” and the culmination of his investigations is that Crown Dependencies make a “significant contribution to the liquidity of the UK market.”  Hardly the fear factor that will launch a string of gratuitously gory headlines to sell a million copies of the Guardian is it!

It would appear from the report that in the second quarter of 2009 alone, Crown Dependencies provided net funds to banks in the UK totalling $323 billion, of which $218 billion came from Jersey, $74 billion from Guernsey and $40 billion from the Isle of Man.  Quoting directly from the report: UK banks “have significant deposit-gathering capacity in the Crown Dependencies,” these funds are then channelled to parent banks onshore in the UK for management and investment purposes.  It’s a symbiotic relationship with Crown Dependencies being critical in terms of directing significant capital inflows to Britain – therefore, far from it being a fact that Britain will be required to bail out Crown Dependencies, without Crown Dependencies Britain would be the one seeking a bail out.

The British Offshore Financial Centres document dispels another myth that tabloid style headlines so often like to misreport, and that is that Crown Dependencies are only so popular because of their low tax status and their alleged use in taxation avoidance schemes.  Rather it would appear that such headlines - produced thanks to the likes of the TUC which allegedly misreported that the treasury loses upwards of almost £12 billion through tax avoidance via Crown Dependencies - are completely false.  Michael Foot’s findings highlight the recent dissection of the TUC research by accountancy firm Deloitte which proves that actually: “we estimate the total UK corporation tax potentially lost to avoidance activities to be up to £2 billion per annum, although it could be much lower,” said Deloitte.

The report does suggest that Britain’s offshore financial centres might need to consider diversifying their taxation base in a bid to secure the long-term future of their economic success, and that Britain’s offshore jurisdictions will continue to be pressured to meet the new standards on financial regulation and tax information-sharing – but this is not news to the Crown Dependencies themselves.  On the whole, the major offshore players have welcomed this report and embraced its findings as supporting their own annually declared position.  The only trouble is, the findings were so dull in terms of producing nothing of great fear or shock that nothing’s really been published about the British Offshore Financial Centres Report in the popular media!  Oh well!