asked Her Majesty’s Government:
How they intend to work with other Governments to ensure that offshore financial centres respect the principles of openness and disclosure with a view to restoring financial stability in international markets.
My Lords, we are witnessing unprecedented turmoil in global financial markets that needs international solutions. Co-operation with international partners is crucial to an effective global response, and to this end we will continue to work with those partners, including the Financial Stability Forum and the G20. Given their role in hosting offshore financial centres, the Crown dependencies and Overseas Territories have an important role to play in this international response.
My Lords, I thank the Minister for that Answer. In his Statement yesterday, the Prime Minister promised that he would bring greater transparency to tax havens by including them in the scope of the financial system. Will the Minister confirm that “tax haven” and “offshore financial centre” are interchangeable concepts? I know that some Crown dependencies object very strongly to being called tax havens, but actually an offshore financial centre is a place where people put their money in order, among other things, to minimise their tax obligations, and therefore it is a tax haven.
Will he also confirm that half of the OECD-listed financial centres are under Crown sovereignty and that Britain therefore has a particular role to play not only with the Crown dependences but also the Overseas Territories in making sure that transparency and disclosure as promised by the FSB and the FATB are fulfilled?
My Lords, 10 of the 35 low-tax jurisdictions identified by the OECD are either Crown dependencies or Overseas Territories. We fully support the efforts being made by the OECD, in particular as a consequence of its meetings in Paris in October and the forthcoming meeting in Berlin, to improve transparency and the supervision of these centres in respect of both regulation and tax matters. We are encouraging offshore financial centres to enter into tax and information exchange agreements. I am pleased that there has been some progress, and we would like to see a lot more.
My Lords, let us hear from my noble friend Lord Barnett first. I am sure that there will be time for both noble Lords to speak.
My Lords, will my noble friend give a definition of an offshore financial centre? Under certain definitions, could the United Kingdom be considered to be one of those centres? Some billionaires, and even modest millionaires, come here from time to time and are evading or avoiding tax. Apparently, we are counting how many days a lot of these people spend here. How many people are being counted, and if are they considered to be avoiding or evading tax, do we disclose that fact?
My Lords, the UK is a world-leading financial centre, but it has not achieved that status for tax effectiveness reasons, and as such is clearly not included by the OECD in its list of territories. In recent years, we have taken steps to tighten up the process to reduce tax evasion, including through the tax and information exchange agreements to which I referred earlier. As a result of information exchanges with major banks, we recently secured more than £400 million of tax repayments, and we believe that there is considerable potential to extend the programme further. We also announced last year further changes to non-domicile status, in particular to ensure that those who stay here for longer than seven years make a fair contribution to British society and the British economy. I cannot quantify tax evasion because by its very nature it is not a figure that is easy to place. However, we are vigilant in our pursuit of tax evasion.
My Lords, I noticed that the Minister, in referring to international agencies, did not mention the European Union. May I suggest that he looks closely at the suggestions for added regulation coming from the EU that, if not checked, could have the result of driving all the banks offshore?
My Lords, we are looking carefully at the recent proposals for tightening the savings directive. Inasmuch as they reduce the risk of money-laundering, reduce the risk of money flowing into counterterrorism and lead to greater tax transparency, we will encourage them, but only on the basis that they do not impose disproportionate, excessive or unnecessary cost on UK financial institutions.
My Lords, I am not sure if I should declare this interest, but I will do so for the sake of protection: I am chairman of the All-Party Parliamentary Group for the Cayman Islands, a British Overseas Territory.
My Lords, is the Minister aware that the Cayman Islands financial services industry is fully committed to meeting international standards and criteria, that it has put in place the most rigorous regulatory and monitoring regimes and that it has enacted the relevant local legislation and demonstrated its commitment, as well as observing the European directive on bank accounts?
My Lords, I am so aware.
My Lords, does the Minister agree with President-elect Obama in wanting to crack down on tax havens, including Jersey, Guernsey and the Isle of Man? If so, and if the Government are committed to greater transparency in this area, why has the UK been blocking moves at the UN to upgrade its tax committee to intergovernmental status?
My Lords, we are committed to ensuring that people meet their tax obligations. Many offshore financial centres play a vital role in international economics that is not solely dependent on the tax status, but we are working with our colleagues in the United Nations, the Financial Action Task Force, the OECD and the EU to increase scrutiny and supervision of offshore financial centres.
My Lords, the original Question was about restoring financial stability in the international markets, but most of the supplementary questions have been about tax havens. Will the Minister explain what tax havens have to do with international financial stability?
My Lords, I am answering the questions that I am asked.