Britain's Channel tax havens feel chill of recession

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JERSEY- Is the sun about to set on Britain's empire of tax havens?

It doesn't feel that way in the early evening sun on the patio of a chic cafe in Jersey's capital of St. Helier, where smartly dressed islanders talk business over beer or white wine. But shadows are gathering over places like Jersey, a 118-square-kilometre island in the English Channel with 90,000 people, 33,000 registered companies, 48 banks and 200 billion pounds (NZ$511 billion) in deposits.

As the global recession deepens, Jersey and territories like it have been attracting the attention of cash-strapped governments who believe that the funds flowing into tax havens should be filling their coffers instead. Jersey's financiers say the island is being made a scapegoat. "To blame offshore centres for the credit crunch is very naive," said Robert Kirkby of Jersey Finance, which promotes the island's financial sector. "We're the cat being kicked on the way home from the office."

For years money has poured into Jersey, drawn by low tax rates and an enticing array of investments that have made this small island off the French coast a highly prosperous financial centre. Its per capita gross national income was 41,000 pounds in 2007, among the highest in the world.

Now Britain's Treasury is looking at Jersey and other havens as potential sources of much-needed tax revenue. The Trades Union Congress, a labour federation, estimates that the Treasury is losing 4 billion pounds a year through the rich putting money in offshore tax havens like Jersey. Prime Minister Gordon Brown is urging a global clampdown on tax havens. Last month he called on leaders of the Group of 20 rich and developing countries to take action against havens when they meet in London this week. Brown repeated the message last week, saying that "the old tax havens have no place in this new world."
Critics say Brown has been short on details, and note that his criticism of tax havens tends to focus on countries like Switzerland, rather than places with ties to Britain.

Many of the world's tax havens have British links, from overseas territories like Bermuda and the Cayman Islands to the "Crown dependencies" of Jersey, Guernsey and the Isle of Man. As Britain's colonies gained independence after World War II, London encouraged several small Caribbean islands to become tax havens as a means to self-sufficiency. Jersey and Guernsey, which are possessions of the British Crown but not part of the United Kingdom, have been havens for the British rich and their money since the 1920s.

Tax-reform campaigners say Britain has dragged its feet on closing tax loopholes because the furious flow of money through tax havens - large amounts of it in offshoots of London-based banks - helped fuel the decade-long economic boom that made London's business district, the City, the world's leading financial centre.

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