fp Turks and Caicos

The directive to sign these agreements came by way of form lettre from The Rt. Hon. Gordon Brown, MP - Prime Minister of Great Britain - demanding that by September 2009, every British Overseas Territory sign 12 such agreements, thereby removing constitutional protection from foreigners who maintain companies in the Territories; where the co-signing nations request information on their citizens.

Cayman, Bermuda and BVI (The Bahamas and Singapore) are the largest International Financial Centres in the world, outside the OECD. For 10 years these jurisdictions were advised to develop tax neutral business models and ensure inward investment through their financial services mechanisms. None adhered to that advice. The TIEAs - as they are called - will mean that any nation with whom an agreement is signed can request information on its citizen living or investing in Turks and Caicos.

Tax evasion is against the law of all nations, even so-called "no tax" countries like Turks and Caicos. However, tax avoidance is not against the law. There is a danger that these agreements blurred the lines between evasion and avoidance. Either way, for the International Financial Centres, their time and opportunity is gone.

The Centres died because it has now been proved that they cannot defend, and G20 nations have no regard for the lawful means by which International Financial Centres were established; oftentimes, ironically, by large G-20 multinational banks.

The small International Financial Centres in an onslaught by the OECD that really began in 1984, and was put down by Pierre Darier of then Darier Hentsch (Now Lombard Odier Darier Hentsch) one of the most prestigious Swiss Banks. The OECD returned in 1998, with a "Blacklist", and this time, they attacked small financial centres, mostly in the Caribbean. The Publisher of this paper was central to negotiations with the American government - particularly then Secretary of the US Treasury The Hon. Paul O'Neill to reject the OECD's Black list.

The fp asked its Publisher Gilbert NMO Morris why he believed that the financial services business would survive. "The reason that the financial services business will survive even as the International Financial Centres die (mostly in the Caribbean) is because the business will simply move to those jurisdictions that can say no to the OECD, and which have or cultivated strategic leverage against the world's largest or high tax nations. The small Caribbean jurisdictions failed to reform and become competitive.” He said, "Brazil, India, Russia and China (The BRIC nations) all have their financial centres. None of them will close or comply as Caribbean centres have. Additionally, China has $2 trillion US dollars which says it will not be pushed about. India is in a strategic location, Russia needs no explanation and Brazil has emerged as the most important second nation in the Americas.

Morris and his colleagues including Dr. Richard Rahn - former President of the US National Chamber of Commerce and Dr. Dan Mitchell of the CATO Institute, traveled the world with the reform message from 1998 to 2006; with Morris explaining in particular that tax arbitrage was not a real business, and that financial centres needed to reform and develop genuine financial services business. He said in May 2001 at a briefing for White House Economic Staff: "This issue is not about tax competition. It concerns the Economic Philosophy of the Future. Most financial centres grew up by accident. And as such, most are not equipped to survive or defend themselves against the impositions of the OECD nations, who fail to apply the same rules to themselves."

What followed was a 'game-changer": September 11th 2001.

In its aftermath, it seemed that the US and the G20 nations in general lost all interest in the legal arguments surrounding financial services, and simply demanded that International financial centres comply with their rules; even though the financing of terrorists was done through G20 nation banks and by countries (Saudi Arabia) with whom they kept company.

Turks and Caicos must sign another 9 TIEAs in the next 7 weeks. The impact will prove significant but small says Morris, since TCI is a micro-financial centre. "However, I believe says Morris TCI has the best chance of most centres to develop a new kind of business."