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|Posted: Mon Sep 07, 2009 2:28 pm Post subject: Where to locate Web gambling site - Tax Considerations
|Where to locate an Internet gambling site - Tax Considerations:
Financial hurricanes shake the tax havens
From the Isle of Man to the Caribbean, the coffers are being drained, writes Nick Mathiason
|In other parts of the globe, storms are also buffeting what were once havens of financial tranquillity. Leaders of the world's most powerful countries have turned on offshore centres, blaming them for contributing to the financial meltdown. And tax havens are facing serious financial hardships of their own. From the seemingly serene Caribbean islands of Grand Cayman and Antigua through to Jersey and the Isle of Man, all are under serious pressure raising questions of their ability to cope.
In recent years the Isle of Man, for instance, has invested hugely in tempting internet gambling firms and financial institutions to locate there. It was the first UK-dependent tax haven to cut its corporation tax rate to zero. Critics argue it can only do this because it has an arrangement with the UK government going back 100 years that is still allowing the island to be subsidised by Britain to the tune of £200m a year. Its government rejects this interpretation.
For Jersey in the Channel Islands, the challenge is different. It was forced to compete with the Isle of Man's zero corporation tax and introduced a similar arrangement. But this has left a hole in its finances of around £80m out of a total income of £590m. It has introduced a sales tax to make up the difference, but for many of the poorer islanders this has proved hugely unpopular. And it may have to increase the tax because Jersey is also facing a further £50m shortfall in revenue because of the economic crisis. Last week, HSBC announced it was cutting its workforce by 35 out of its island total of 500. The result is that Jersey has revised its economic forecast and is projecting a budget deficit of up to £100m.
But Jersey's treasury minister, Philip Ozouf, is confident that the island has the financial strength to cope: "We are stronger and more prudent and less aggressive than many of our competitors. We have been for a long time a quality brand that sets us apart. Yes, 53% of our economy is in financial services, but that's 53% of quality."
He says the island has £550m in strategic reserves, a stabilisation fund of £140m and a current account with "sufficient money", adding: "We have no debt and are funding our response to the economic downturn with our cash to take us through a very difficult period. We're pushing public spending up in 2010 by 4.5% and would not do that if we thought we couldn't afford to."
Last week, it emerged that the Caymans are in the midst of a serious budget crisis. Home to 80% of the world's hedge funds and the fifth biggest banking centre in the world, it is so financially stretched it could not afford to pay its own civil servants' pensions and health insurance. Contractors and suppliers to the government had bills left unpaid.
The situation is so grim that the authorities were forced to ask permission from the Foreign Office to borrow £278m. The response was withering. Chris Bryant, the UK's junior foreign office minister, refused to sanction increased borrowing, saying he was unconvinced the authorities had the wherewithal to repay the money.
The Cayman government is now in protracted negotiations with the Foreign Office to secure a smaller emergency fund package. If it cannot get hold of the cash within three weeks, the tax haven, which is home to 51,900, will not be able to pay its own bureaucrats.
Bryant has written to the Cayman leader suggesting he explore various tax-raising options. "I fear you will have no choice but to consider new taxes, perhaps payroll and property taxes such as in the British Virgin Islands," he said.
But closest to the edge is the tiny Caribbean state of Antigua and Barbuda, still reeling from the fraud scandal surrounding Texan billionaire Sir Allen Stanford. Last month, Venezuelan President Hugo Chavez provided $50m in urgent financial assistance to the twin-island state, which was at the heart of the far-reaching business empire run by Stanford that collapsed in February. The flamboyant sports entrepreneur faces US civil and criminal charges related to an alleged $7bn fraud prosecutors say was centred on certificates of deposit issued by his Stanford International Bank in Antigua. American prosecutors have accused an Antiguan regulator with abetting the fraud. Investors from the US, Mexico, Colombia and Peru are suing the tiny state for up to $24bn in damages, alleging it was a "partner in crime" with Stanford. Antigua and Barbuda's government denies this. It says the Stanford scandal hurt the economy of the small state of around 85,000 people, causing losses and layoffs and damaging its image as a finance destination. ...
Stanford investors suing Antigua
|The government of Antigua and Barbuda has been sued in a United States federal court by investors from four countries claiming that it benefited from and knew about Sir Allen Stanford's alleged Ponzi scheme. The lawsuit, which seeks US$8 billion in damages, was filed yesterday in a federal court in Houston, Texas, by investors from the United States, Mexico, Colombia and Peru (see Frank v. The Commonwealth of Antigua and Barbuda 4:09-cv-2217).
"Antigua is sovereign but not above the law. It became a full partner in Stanford's fraud, and reaped enormous financial benefits from the scheme," the lawsuit claimed. It also said that Sir Allen "stuffed Antigua's coffers and its officials' pockets with money stolen from unsuspecting customers". Sir Allen and other top executives are accused of defrauding 30,000 investors of US$7 billion in high-yield certificates of deposit issued by the Antigua and Barbuda-based Stanford International Bank (SIB). On June 25, he pleaded not guilty to the charges at the US District Court for the Southern District of Texas.
Former Antiguan regulator Leroy King has also been accused of involvement in the scheme. King has been arrested in Antigua and is awaiting extradition to the US to face trial. Sir Allen has been jailed in the US since June 8, awaiting trial on the criminal charges. Meantime, David Finn, the attorney for James M Davis, the former finance chief of the Stanford Financial Group, said his client is expected to plead guilty to three charges when he makes a return to court next week. Davis, 60, made his first court appearance yesterday after being charged last month as part of the federal government's criminal case against Stanford. Sir Allen, Davis as well as Stanford Group executives Laura Pendergest-Holt, Gilberto Lopez and Mark Kuhrt are accused of orchestrating a massive Ponzi scheme. Davis pleaded not guilty to conspiracy to commit mail, wire and securities fraud; mail fraud; and conspiracy to obstruct a Securities and Exchange Commission investigation. He was later granted a US$500,000 bond at his hearing.
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