Brussels, 13/09/2002 (Agence Europe) - Tax havens are not what they used to be. They have lost their power of attraction since the attacks of 11 September 2001 reactivated adoption of OECD and EU measures on money laundering and the banking secret, notes Mattias Levin in a report on "The Prospects for Offshore Financial Centres in Europe" published this week by the Centre for European Policy Studies. In this context, the young Swedish scientist raises the question of how legitimate the pressure being put on these countries is, on Switzerland in particular, in the field of taxation, the central element of a State's sovereignty.
In an analysis on the nature of these "offshore" centres and on their future, Mattias Levin defines them as countries or territories where the financial sector is an important element of the national economy, where regulations are light and where taxes are low, and which offer services essentially to non-residents. There are around 70 of these centres throughout the world, representing 1.2% of the world's population and 3.1% of GNP, but they manage one quarter of the world's financial assets. The amount of capital placed in the European offshore centres is around EUR 800 billion.
The success of measures taken at international and European level to reduce the interest of such centres has been greater than expected, notes Mattias Levin. The recommendations of the Financial Action Task Force (FATF) on money laundering, and of the Forum on financial stability in particular, "have been more or less swiftly implemented".
The success of OECD recommendations on tax competition on the other hand has been less obvious. Nonetheless, the EU and OECD members should eliminate their own adverse tax practices before calling for a similar effort from non-members, said Mattias Levin. Noting between the lines the advantages that the United Kingdom and the United States could reap if offshore centres were curbed, he notes that the main beneficiaries of curbing the major onshore financial centres would be primarily the City of London and New York.
In this context, the author speaks of the case of pressure that the EU puts on Switzerland to restrict unfair competition and reach an agreement on savings tax. He recalls that Switzerland has a complete control instrument and severe legislation on money laundering. It can also plead that it does not meet the descriptions of the OECD on tax havens in so far as its taxation on companies and investment is close to the OECD average, even if the application of taxes remains discretionary. Furthermore, the financial centre only represents 9% of its GNP, a figure higher than the United Kingdom (7%), but considerably lower than other offshore centres such as the Channel Islands or Caribbean islands associated to the United Kingdom or to the Netherlands, or other tax havens like Andorra, Liechtenstein, Monaco or Madeira.
Switzerland is not a member of the EU and is not obliged to do anything, Mattias Levin told the press. The scientist nonetheless argues along the lines of European negotiators. From the EU's point of view, the setting in place of information exchange between the tax administrations of the EU and of Switzerland would be more effective than pay-as-you-earn on savings income proposed by Swiss negotiators. An automatic exchange of information, refused by Bern for now, would also entail less red tape than exchange "on request", says Mattias Levin. Finally, limiting information exchange to cases of fraud only and not to tax evasion, "would undermine the meaning of the European directive which is to avoid tax evasion", he said.