EU presentation for Offshore Financial Centers

International Financial ServicesStatus & Trends

Overseas Countries and Territories Association (OCTA) of the European Union

Professor William H. Byrnes, IVWalter H. & Dorothy B. Diamond

International Tax & Financial Services Programwww.llmprogram.org

Thomas Jefferson School of Law (USA)www.tjsl.edu

+1 786 271 5202

Prof. William Byrnes – www.llmprogram.org

Past OCTA IFS factors

Ease of incorporation Low cost of incorporation and

maintenance Minimal, flexible corporate requirements (Quasi) Private Banking Secrecy / Privacy


Past OCTA IFS factors

No tax cost

Exchange control

Embargo neutrality


Developed States Past IFS Trend

Ring Fenced Incentive Regimes Treaty Networks Financial Intermediation Services Private Banking / Asset Management Secrecy / Privacy


Current Conditioning Factors

Risk : world is at least or more dangerous relative to cold war

– Financial crimes– Kidnappings– Political economic conflicts and crimes– Internal and external armed conflicts


Current Conditioning Factors

Tax Burden potential increase over 20 years – demographics of social insurance and safety nets

Regulatory costs overkill for SMEs

Basel 2 – may impact bank lending to developing jurisdictions – opportunity for investment funds


Conditioning Factors

HNWI and funds deploying > 20% of assets

Global litigation and regulatory increasing

Communications & Information Technology


Conditioning Factors

Asian & Indian market will accelerate as wealth creator 2010 - 2020 for business, trade and HNWI

EU member IFCs (e.g. Cyprus)

Singapore


International Initiatives

OECD Harmful Tax Competition OECD Access to Bank Information for Tax OECD TIEA initiative FATF & CFATF OGBS UN / G7 IMF Assessments (Financial Stability / AML) Tax Amnesties (e.g. US, Italy, Belgium, RSA)


More International Initiatives

OECD Art. 27 (cross border collection)

OECD Model Convention for Mutual Administrative Assistance in the Recovery of Tax Claims 1981

Convention on Mutual Administrative Assistance in Tax Matters (OECD & Council of Europe) 1988

Regional Multi-Lateral Tax Treaties (Caricom)

US, Ca, UK, Australia Revenue Tax Avoidance Task Force in New York (other OECD anticipated to join)


EU Initiatives

Tax Directives– Savings– Royalties / Interest– Code of Conduct

Tax Collection AML 2 and 3 EU – US MLAT EU – US Extradition


UK Reports

Gallagher Mokoro Cook Edwards & KPMG Byrnes/Kitchen/Richardson - Maxwell Stamp


UK Initiatives

Gate keeper AML rules

Tax Shelter/Avoidance Reporting


US Initiatives

Qualified Intermediary Regime Patriot Act & correspondent banking New Tax Shelter/Avoidance Reporting coupled with

aggressive IRS public relations – criminalizing avoidance – bankrupting providers

New Financial Regulations & Corporate Governance Class Actions State A.G. activism in securities / tax issues State – IRS coordination


Economic Indicators: HNWIs

Since 1996, IFC sector expanded (average 10%) but for 2000-03 international recession

Over $33 trillion held by nearly 9 million HNWIs

Over $11 trillion in assets held offshore (1/3) Home country economic return – risk relatively less attractive

HNW portfolios alternative investments 3% (2000) 20% (2006)


• 830,000 investment professionals• Over 20 million financial industry

Economic Indicators


Economic Indicator: Employment

20 million staff all financial services

50,000 professionals in offshore financial services industry

Salaries increasing relative to other sectors such as tourism and fishing


High Paying Jobs Examples

Transfer Pricing/Supply Chain Partner, London up to £500,000 Transfer Pricing Manager, London or Amsterdam Up to £80,000 Transfer Pricing Manager, Zurich 120,000 CHF – 150,000 CHF National Head of Transfer Pricing, France & Germany €200,000 - €300,000 International Transfer Pricing Director, London £120,000 - £160,000 Senior Transfer Pricing Advisor, London £70,000 - £90,000 Transfer Pricing Advisor, London £55,000 - £65,000 International Tax Manager/Senior Manager, Eastern Europe From £65,000 - £80,000

+ Bonus + Benefits International Tax Manager – Transfer Pricing, FTSE 100, London £65,000 +

package Transfer Pricing Manager, US Investment Bank, London c£80,000 + £30,000 Bonus M&A Tax Senior Manager/Director, Moscow, Russia Starting from $ US 180,000 International Tax Senior Manager, Moscow From 150.000 USD + Bonus + Benefits Transfer Pricing Director, Sydney $150,000 - $200,000 + benefits Transfer Pricing Director/ Partner, Paris Competitive Salary + Benefits Transfer Pricing Analyst, New York $120,000 plus stock options and pension Senior Manager - Russian Tax Desk, London £75,000 - £110,000 + benefits


(Certifying) Professional Bodies > 250,000 members and growing

15,000 members

100,000 members

22,000 members

1,500 institutions, several regulators

150 law firms

105,000 members

10,000+ members

Economic Indicators


Economic Indicators: Information

Legal, Tax and Regulatory (LTR) market

6.5% CAGR for the LTR publishing market ‘06 – ‘09

$18.3 billion in LTR publishing revenues by 2009


Current OFC Economic Trend

Stabilized since 2000-03 global recession, continuing Upward trend

– Foreign $ stabilized 2003, growing since 2004

– New entities stabilized 2003, increasing since 2004

– Value added svcs expanding e.g. law, fund admin

– Services diversifying e.g. technology


Some OFC Growth Areas

Estate Planning Trend Charitable structures continue Insurance continues: Corporate and Private Trade Services Technology Services


More OFC Growth Areas

IP R&D and Management (TMs, Processes) Financial Intermediation - TMC Capital Markets – Exchange Asset Management ADR with Common Law Courts


Challenges

– Increasing regulatory regimes and costs– Discriminatory trade in capital and services through

fiscal legislation (anti-deferral, CFC, black listing)– No lobbying or voting blocs– NGO beauracracy will create new regulations that it may

perpetually keep itself employed– Lack of Asian Language skills (Mandarin)– Lack of value added (high) skills


Impact Trend for IFCs

Diversification of Micro-Economies GDP and Personal Income growth FDI Economic and Social Stability increased


Services Sector

contribution expanding in OECD and more developed SDIS

Caribbean SDIS – net export in tourism & ofc (less e.g. transportation) pays for net import in trade of goods from US and EU

US 80%, St Luc 71%, Bar 80%, EU 65%


Tourism

Caribbean dependent on 80% US tourists Cruiseships contribute much less to local

economy than air arrivals but cruiseships travel increasing

High elasticity and sudden, immediate impact New US passport rules will favor PR & USVI New price and place competitive market entrants

– Cuban re-entry will impact Caribbean

EU presentation for Offshore Financial Centers

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