UK: The Offshore Community In The Year 2001 - Confidence Grows Again

Last Updated: 27 April 2001

In the year 2000 offshore centres were emerging from being regarded as tax havens into serious international business centres. This was against the background of them actually having progressed, in most cases, from this trivial pursuit into more serious activities. It has taken perhaps as long as ten years before the general perception has caught up with reality. Political and media perception lags even further behind. In line with most comments made at the start of the Millennium the mood was optimistic about the future. Does such a positive attitude prevail a year later?

In the last year offshore business has again changed considerably. This has been due, principally, to the offshore centres' governments taking the activities of the international agencies more seriously than before. Perhaps a stream of criticism, most unjust and ineffectual, over the years has lead to the feeling that if nothing is done the critics will tire and go on to something else. This has not happened this time. The deliberations of the Financial Action Task Force continue. We have not heard the last from them by any means although there the remedy is simple: install anti-money laundering laws and procedures and get onto the list of co-operative countries. That is straightforward even though it may be ineffectual. That is not the fault of the offshore centres. If the anti-criminal money regimes which have been given gospel status have been misconceived and superficially directed at the fringes of the activities that is not the offshore community's fault. The blatant cases of vast amounts of criminal money passing with apparent ease through London and New York are regrettable but of less concern than a rumoured offshore trust and company structure being used by a public figure who is then branded as a likely crook. But that is the way of the world or, at least, the way of the offshore world.

Plenty of other things have happened. The Edwards Report passed quietly into history after having considerable influence that was generally beneficial to the jurisdictions examined. Their reputations have been enhanced with the now implied approval of the UK government. The game is on to get international approvals. It is not only a public relations campaign but also a real challenge. The reward is acceptance by an international community of non-offshore experienced prophets. The game isn't compulsory. Some may choose to remain aloof and ride out the storms of enquiry, confident of their positions and enduring appeal of their advantages. This needs a position of strength, which is denied to many aspiring centres and which depends on preserving their reputation. This is sometimes difficult: the criteria so often seems to require a highly developed regulatory system which, in emerging centres, is not required or practical. Local knowledge is often more effective than a formal framework riddled with loopholes. Nevertheless, standards are global. Big or small, the offshore centres have to attain them. The international supervisors have to look at the substance rather than the form of regulation. How often have we heard that before but applied to condemn an over-elaborate tax structure? Can it be sustained to criticise excessively formal regulation?

The emergence of the OECD's activities at the beginning of 2001 is the dominating offshore influence. Many offshore centres have not yet come to terms with the OECD's modified programme. Time is short. By June the labels will be issued and more than one offshore centre will find itself branded in the wrong half of the offshore world by default. By October 2000 the way forward was clear. Low tax itself is no longer condemned. This was a great breakthrough following constructive criticisms of the OECD's position on legal , economic and political grounds. Many offshore centres ignored the issue and now seem to be taking up the cause when the issue is over. The need now is to work positively and constructively to achieving an acceptable position, or staying out altogether and taking what comes.

There was little expectation of the problems that the first OECD Report would cause. The whole concept put forward by them of harmful tax regimes at first was received quietly by the offshore centres. They were somewhat stunned. There was the OECD, an organisation of prosperous states, apparently, pointing a finger at the lowly offshore jurisdictions with the implication that these offshore jurisdictions were robbing the main industrial countries of their rightful taxation. Of course, it was nothing of the sort. At the best, it was perhaps a public relations miscalculation by the OECD and, at worst, it was probably a misunderstanding by the OECD countries, the majority of which have a civil law background, of the way in which offshore centres are managed. After a while criticisms became plentiful. Ample economic, political and legal arguments were brought out to show that the worst interpretations of the OECD's intentions were a disaster for international relationships. Sovereignty appeared to be kicked aside. But this is no place to analyse the "harmful tax" concept. It is enough, thankfully, to note that matters seem now to be calming down. The criteria are now clarified even if the actions looked for are not acceptable. However the offshore centres react it will not be immediately appreciated and will be seen by the sensation seekers of the mainland press as merely panic measures of a technical nature. Rather than argue now about the role of the OECD the offshore centres should attempt to enlist the public relations efforts of the international agencies to improve the image of those who meet the requirements. But there is far more going on than a mere resistance or bad feeling towards the offshore centres campaign - the situation has a more global dimension.

On the one hand the industrial countries have seen their revenue from corporation tax decrease. There has been certain desperation by some of the OECD members' attempts to mop up what extra revenue they can find. Perhaps the offshore centres have been too successful. If they have, then tax advantages have played their part but had not been the entire reason for their success. Of course, to save tax, or even to defer it, is an attraction. But, contrary to the worst interpretation on the harmful tax regime theorists, they are not pits of tax evaders although the media may have thought otherwise. Offshore trusts and IBC's have become synonymous with tax evaders and international fraudsters. This is journalism at its best and ignorance at its worst.

To engage in these debates is a pointless activity. It is a permanently boring aspect of international finance. Point out to any critic that in any list of multinational companies the majority will have a complex international structure. This normal business practice is lost upon them. The tax advantages of these multinationals are controlled by some powerful legislation. Double tax treaties and controlled foreign company legislation are two areas that keep the taxation of international structures under control. The unitary taxation system of California was, at one time, an anti-avoidance regime which could have been adopted elsewhere, but little is now heard of this. Fashions change. The debate goes on year after year. But, where are we now? It certainly seems that we are entering into calmer waters. The offshore centres have found a new vigour. Their defence of their integrity and sovereignty has produced results. The result has been to illustrate that all offshore centres are not utterly pure and that when calmly expressed, the OECD's real objection has some justification. It would be going too far to suggest that they are entirely justified.

We must not forget that the OECD finger has also been pointed at their own members. It is not an anti-offshore centre campaign. At least the current principles of the OECD thinking are to look for transparency in each jurisdiction, from which offshore activities are carried on, the identity of the beneficial owners of the activities are known to someone in the jurisdiction and that, subject to proper application being made to that jurisdiction, information can be transferred abroad provided a just cause is made out and that the correct procedures are followed.

Rather more controversial is the "anti-brass plate" campaign. The OECD look for some substantial operation in a jurisdiction where a company or other vehicle is set up. This is clearly aimed at the abuses of the international business companies. This will prove more difficult to resolve.

Are IBCs Abused?

This will depend on how one looks at the concept of abuse. The old-fashioned offshore answer would be that IBCs are formed, managed and used according to the law of the jurisdiction in which they are incorporated. Sovereignty is all. On the other hand, other countries might feel that they are losing revenue because of these privileges and could conclude that they are insubstantial and contrived. No-one has dared yet to come up with the concept of a "sham" company, but it will not be long before they do.

At least both sides are now talking. Although the declaration looked for by the OECD of a firm intention to aim towards achieving their objectives by 2005 will remove an offshore from public damnation, there is still a difficult time ahead.

Then, there is the difficult spectre of money laundering and this is a personal topic. The test is whether an offshore centre has been co-operative with the FATF. This raises other questions. The FATF list has stimulated more questions than it has answered. Some of the comments entered against co-operative countries seem to be more severe than the reasons why others have been omitted from that list. Money laundering is another anomaly which exists between onshore centres and the big boys. Russian manipulation of several billion dollars through US banks can escape money laundering prosecutions in the US whereas offshore centres are called upon to justify some minor procedures. The anti-money laundering campaign is another example of the onshore countries trying to mould the offshore centres as they think they should be. Again, this may change. Despite the careful law enacted in offshore centres and its conscientious administration, money laundering continues undiminished. But where does the money go? It certainly does not go offshore in any large amounts. If even a fraction of the money went where the press claim it to go, it would be easily visible. Transparency is a grand name but in offshore communities, by their nature and size, are such that everybody knows what is going on in a small island economy. This is village life. This is something which the Whitehall warriors have long forgotten.

Strangely enough these and other campaigns have done much to strengthen the resolve of offshore centres. They will ultimately be the beneficiaries. They have shown that their intentions are as honourable and their actions are rather more efficient than those of their critics. Another result is that the offshore centres have joined the real world. No longer are offshore centres hidden behind a palm tree curtain. Their qualities have been revealed and they have willingly produced capable and real defences to allegations made against them. This is the real progress and the real promise. This is why we can again be confident that the future is bright and, in the offshore world, the sun never sets.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.