Worldwide: How Will Tax Transparency Affect The Offshore World?

Last Updated: 15 September 2009
Article by Peter Goddard

I recall the time when I first went to work in the Caribbean back in 1994. The universal reaction of colleagues, friends and family at the time was both surprising and frustrating. Any envy on their part was well hidden by gleeful comparisons with crooked lawyers in John Grisham's book, 'The Firm': the assumption was that I was off to assist criminals the world over in hiding their ill-gotten gains offshore! I still cannot watch repeats of that movie! But it highlighted to me the prevailing level of ignorance about the offshore world at that time, influenced heavily by the media's constant portrayal of the Cayman Islands (and the Caribbean in general) as the money launderer's jurisdiction of choice.

Fifteen years later, I have moved back to England, but attitudes remain unchanged. The onshore world still views the world's IFC's with deep suspicion, blaming them in part for the multitude of onshore scandals and fiscal difficulties that have arisen over the years. The majority of IFC's cleaned up their acts many years ago; but old prejudices are hard to dispel, apparently.

There had been earlier threats posed by the onshore world toward IFC's, which heralded undoubted improvements in risk management, regulation and compliance, and some modest gains in information exchange. IFC's absorbed the changes that were forced upon them, albeit sometimes grudgingly. Prior to the events of 9/11, the top tier of offshore IFC's were as a consequence better regulated, with tighter anti-money laundering regimes than most onshore sectors! Those IFC's adapted to the pressures and continued to thrive. But these international initiatives never produced the fiscal dividend that onshore governments had been looking for at the time.

Now, though, driven by the need to collect additional revenues to service burgeoning national debts and, no doubt, with the aim of deflecting attention (and blame) away from themselves, governments and cross-border organizations are targeting IFC's as never before; and this time their efforts (together with domestic amnesties aimed at bringing the non-compliant back into the tax network) have met with unprecedented success.

The OECD's grey-listing of IFC's that fall short of their criteria for transparency has resulted in a sudden spate of Tax Information Exchange Agreements ('TIEAs') being implemented by IFC's, desperate to reach the threshold of 12 TIEA's to achieve white-listed status and thereby avoid sanctions.

The UK's TIEA with Liechtenstein will be the model for agreements with other IFC's; and its more widespread purge on offshore accounts generally has already the names of many potentially defaulting UK taxpayers, with further disclosures from up to 300 banks set to follow.

The recent settlement of the case between the US and UBS will result in the disclosure of 5,000 errant, non-tax paying US citizens. The IRS already has in its possession hundreds of thousands of names of US holders of foreign credit cards released by the credit card companies themselves. Non-compliant US and UK taxpayers would be wise to accept the opportunities for voluntary disclosure presently on offer before the net closes in on them.

The playing field has definitely changed, or at least it has in relation to the fiscal affairs of the major economies of the western world. IFC's can no longer turn a blind eye to tax evasion. In truth, service providers in a few IFC's were already demanding tax compliance for UK and US clients. But it will be a brave trust company or bank that accepts a client in future from certain countries without ensuring that the client is tax compliant both before and after any structure is established. Unless tax evasion is made a predicate offence under IFCs' anti-money laundering legislation, a dual standard toward tax compliance will continue to exist, particularly as regards Latin America where personal security is often the governing motive for offshore planning. That dual standard, though, is not limited to IFC's.

Nor can IFC's continue to market confidentiality in the same way, to the extent to which some of the more prominent European centres have until now. Individuals are perfectly entitled to keep their legitimate personal affairs private; but they cannot expect the same right to keep their illicit affairs private as well. IFC's will have to reflect that distinction in their legislation and in the way in which they and their service providers promote their jurisdictions.

Does this present dismantling of confidentiality and tax transparency mark the beginning of the end of IFC's as we know them? For those centres (the dinosaurs of the industry) that have thrived on offering evasive secrecy, perhaps it will over time. As other jurisdictions have discovered in the past, once you attract a bad reputation, it is difficult to get rid of it, no matter how much you change. There is presently a noticeable flight to quality, at least in European circles, with top tier IFC's benefitting at the cost of centres that have been tainted by recent exposés.

For the more progressive and enlightened IFC's, tax transparency should yield its own dividends. There will always be a need for tax efficient, tax compliant structuring for private clients in centres of excellence, so that line of business should continue. Clients will be able to maintain confidentiality of their affairs, provided they are not breaking the law.

With tax evasion no longer a valid criticism going forward, and with a sophisticated regulatory, anti-money laundering and anti-terrorist financing infrastructure firmly in place in each jurisdiction, the only possible objection to the top tier of IFC's is the fact that they are zero-tax centres. But then, some major onshore jurisdictions have deliberately offered zero-tax options in the hope of attracting similar business; and still others thrive on offering very low-tax solutions to international businesses (often hosted by trust companies rather than run by those businesses themselves) that would have no other commercial reason to establish operations there. So, if that is a valid criticism of IFC's, it is one that must also be levelled at some OECD and EU member states as well.

Now that there will be tax transparency offshore, all the moral arguments against top-tier IFC's should now fall away. Perhaps now we have finally reached the stage when those IFC's can justifiably demand a level playing field with the world's largest economies.

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.