Global OFC trends: past & present Economic and Social Economic Impact of Offshore Financial Services Forecasting future OFC and its services Challenges to OFCs Global Initiatives that Impact OFCs EU Initiatives Domestic UK, US, Italian, other Initiatives

1. Offshore Financial Services
Trends, Challenges & Opportunities
Government Workshop 2004
discussion points
Professor William H. Byrnes, IV
Founder, Walter H. & Dorothy B. Diamond
Graduate International Tax Program
St. Thomas University School of Law, Miami
williambyrnes@hotmail.com or +1 786 271 5202
www.llmprogram.org

2. Professor William H. Byrnes, IV; Team Leader, 900 page Maxwell Stamp Report on the Economic, Socio-Economic
and Regulatory Impact of EU Savings Directive and Code of Conduct on Business Taxation to the UK COTs
[http://www.llmprogram.org]
biographybiography
• Created world’s first International Tax & Offshore Financial Centers program in 1994
• Pioneered online distributive legal education globally and in US in 1998
• Creating international tax and offshore training for Central Law Training (CLT)
• Professor, St. Thomas University School of Law, Miami and Visiting Professor of
International Tax, University of the Witwatersrand, South Africa
• Formerly Senior Manager/Associate Director, International Tax, Coopers & Lybrand;
relationship manager to Sovereign Group
• Author of books, chapters, academic and professional articles, government reports
• Professional speaker on tax, e-commerce, economics, trade/investment, and government
policy issues at over 100 conferences and training events since 1994
• Independent board member on audit and compensation committees of corporations and
on non-profit charities as well as professional bodies
• Academic member, Royal Society of Fellows

3. Professor William H. Byrnes, IV; Team Leader, 900 page Maxwell Stamp Report on the Economic, Socio-Economic
and Regulatory Impact of EU Savings Directive and Code of Conduct on Business Taxation to the UK COTs
[http://www.llmprogram.org]
Draft TopicsDraft Topics
• Global OFC trends: past & present
• Economic and Social Economic Impact of Offshore
Financial Services
• Forecasting future OFC and its services
• Challenges to OFCs
• Global Initiatives that Impact OFCs
• EU Initiatives
• Domestic UK, US, Italian, other Initiatives

4. Professor William H. Byrnes, IV; Team Leader, 900 page Maxwell Stamp Report on the Economic, Socio-Economic
and Regulatory Impact of EU Savings Directive and Code of Conduct on Business Taxation to the UK COTs
[http://www.llmprogram.org]
Past SDIS OFC TrendPast SDIS OFC Trend
• Ease of incorporation
• Low cost of incorporation and maintenance
• Minimal, flexible corporate requirements
• No tax cost
• Secrecy / Privacy
• (Quasi) Private Banking

5. Professor William H. Byrnes, IV; Team Leader, 900 page Maxwell Stamp Report on the Economic, Socio-Economic
and Regulatory Impact of EU Savings Directive and Code of Conduct on Business Taxation to the UK COTs
[http://www.llmprogram.org]
Developed States OFC TrendDeveloped States OFC Trend
• Ring Fenced Tax Incentive Regimes
• Treaty Networks
• Financial Intermediation Services
• Private Banking / Asset Management
• Secrecy / Privacy

6. Professor William H. Byrnes, IV; Team Leader, 900 page Maxwell Stamp Report on the Economic, Socio-Economic
and Regulatory Impact of EU Savings Directive and Code of Conduct on Business Taxation to the UK COTs
[http://www.llmprogram.org]
Impact Trend for OFCsImpact Trend for OFCs
• Employment and Education/Training
• Diversification of Micro-Economies
• Higher Valued Added Services sector development
• GDP and Personal Income growth
• FDI increases
• Economic and Social Stability increased
• Increase government revenue

7. Professor William H. Byrnes, IV; Team Leader, 900 page Maxwell Stamp Report on the Economic, Socio-Economic
and Regulatory Impact of EU Savings Directive and Code of Conduct on Business Taxation to the UK COTs
[http://www.llmprogram.org]
Services SectorServices Sector
• contribution expanding in OECD and more
developed SDIS
• Caribbean SDIS – net export in tourism &
ofc (less e.g. transportation) pays for net
import in trade of goods from US and EU
• US 80%, St Luc 71%, Bar 80%, EU 65%

8. Professor William H. Byrnes, IV; Team Leader, 900 page Maxwell Stamp Report on the Economic, Socio-Economic
and Regulatory Impact of EU Savings Directive and Code of Conduct on Business Taxation to the UK COTs
[http://www.llmprogram.org]
TourismTourism
• Caribbean dependent on 80% US tourists
• Cruiseships contribute much less to local economy
than air arrivals but cruiseships travel increasing
• High elasticity and sudden, immediate impact
• New price and place competitive market entrants
Cuban re-entry will impact Caribbean

9. Professor William H. Byrnes, IV; Team Leader, 900 page Maxwell Stamp Report on the Economic, Socio-Economic
and Regulatory Impact of EU Savings Directive and Code of Conduct on Business Taxation to the UK COTs
[http://www.llmprogram.org]

10. Professor William H. Byrnes, IV; Team Leader, 900 page Maxwell Stamp Report on the Economic, Socio-Economic
and Regulatory Impact of EU Savings Directive and Code of Conduct on Business Taxation to the UK COTs
[http://www.llmprogram.org]

11. Professor William H. Byrnes, IV; Team Leader, 900 page Maxwell Stamp Report on the Economic, Socio-Economic
and Regulatory Impact of EU Savings Directive and Code of Conduct on Business Taxation to the UK COTs
[http://www.llmprogram.org]
Current OFC Economic TrendCurrent OFC Economic Trend
• Stabilized since 2000-03 global recession,
now Upward trend
Foreign $ stable 2003 and growing 2004
New entities stable 2003, increasing 2004
Value added services expanding e.g. law
Services diversifying e.g. technology

12. Professor William H. Byrnes, IV; Team Leader, 900 page Maxwell Stamp Report on the Economic, Socio-Economic
and Regulatory Impact of EU Savings Directive and Code of Conduct on Business Taxation to the UK COTs
[http://www.llmprogram.org]
WHY?WHY?
• World more dangerous – not safer
(crime & internal / external unrest)
• Home Country Economic Risk not decreasing
• Regulatory costs overkill for SMEs
(Sarbanes-Oxley)
• Litigation increasing against individuals and
companies in US (EU and elsewhere)

13. Professor William H. Byrnes, IV; Team Leader, 900 page Maxwell Stamp Report on the Economic, Socio-Economic
and Regulatory Impact of EU Savings Directive and Code of Conduct on Business Taxation to the UK COTs
[http://www.llmprogram.org]
WHY?WHY?
• World cross-border trade increasing
• Seamless multi-jurisdictional supply-chain
provision of services and manufacturing is a
reality
• Communications & Information
Technology

14. Professor William H. Byrnes, IV; Team Leader, 900 page Maxwell Stamp Report on the Economic, Socio-Economic
and Regulatory Impact of EU Savings Directive and Code of Conduct on Business Taxation to the UK COTs
[http://www.llmprogram.org]
WHY?WHY?
• Tax Burden increase over 20 years –
demographics of age and social-net expectation
• Tax Policy shift from company tax to VAT and
personal tax increases personal impact
• Internal EU tax rate and base competition
0% v 10% v 12% v 20% v …
• EU passporting of services

15. Professor William H. Byrnes, IV; Team Leader, 900 page Maxwell Stamp Report on the Economic, Socio-Economic
and Regulatory Impact of EU Savings Directive and Code of Conduct on Business Taxation to the UK COTs
[http://www.llmprogram.org]
WHY?WHY?
• Basel 2 weighting of asset/risk may allow
for more allocation to international
investments
• Smaller private investment funds trend
• USA Patriot Act / other actions may,
relative to EU & Switzerland, damage USA
for M.E., Asians and Latins

16. Professor William H. Byrnes, IV; Team Leader, 900 page Maxwell Stamp Report on the Economic, Socio-Economic
and Regulatory Impact of EU Savings Directive and Code of Conduct on Business Taxation to the UK COTs
[http://www.llmprogram.org]
Some OFC Growth AreasSome OFC Growth Areas
• Estate Planning Trend
• Charitable structures
• Residency and nationality for FDI
• Insurance : Corporate and Private
• Trade Services
• Technology Services

17. Professor William H. Byrnes, IV; Team Leader, 900 page Maxwell Stamp Report on the Economic, Socio-Economic
and Regulatory Impact of EU Savings Directive and Code of Conduct on Business Taxation to the UK COTs
[http://www.llmprogram.org]
More OFC Growth AreasMore OFC Growth Areas
• IP R&D and Management (TMs, Processes)
• Financial Intermediation – TMC
• Asset Management & Family Service
Office
• Capital Markets – OFC Exchanges
• ADR with Common Law Courts

18. Professor William H. Byrnes, IV; Team Leader, 900 page Maxwell Stamp Report on the Economic, Socio-Economic
and Regulatory Impact of EU Savings Directive and Code of Conduct on Business Taxation to the UK COTs
[http://www.llmprogram.org]
ASIAN OpportunityASIAN Opportunity
• Asian/Indian market is wealth creator next
decade for business, trade and millionaires
• 1/6 of China investment through BVI
• Will Mauritius DTAs compete with new EU
members prospective DTAs

19. Professor William H. Byrnes, IV; Team Leader, 900 page Maxwell Stamp Report on the Economic, Socio-Economic
and Regulatory Impact of EU Savings Directive and Code of Conduct on Business Taxation to the UK COTs
[http://www.llmprogram.org]
ChallengesChallenges
Increasing OFC regulatory regimes and costs
No lobbying or voting blocs
New EU members may mitigate
NGO beauracracy will create new regulations that it
may perpetually keep itself employed

20. Professor William H. Byrnes, IV; Team Leader, 900 page Maxwell Stamp Report on the Economic, Socio-Economic
and Regulatory Impact of EU Savings Directive and Code of Conduct on Business Taxation to the UK COTs
[http://www.llmprogram.org]
Tax Policy ChallengesTax Policy Challenges
Transfer Pricing requires substance – a good thing
Thin cap legislation mitigated within EU by EU ECJ ruling
Customs tax mitigated by WTO
VAT impacts domestic and foreign and probably can’t be
applied to result in a customs tariff (WTO)
Discriminatory trade in capital and services through fiscal
legislation (anti-deferral, CFC, black listing) is the real threat

21. Professor William H. Byrnes, IV; Team Leader, 900 page Maxwell Stamp Report on the Economic, Socio-Economic
and Regulatory Impact of EU Savings Directive and Code of Conduct on Business Taxation to the UK COTs
[http://www.llmprogram.org]
International InitiativesInternational Initiatives
• OECD Harmful Tax Competition
• OECD Access to Bank Information for Tax
• OECD TIEA
• FATF & CFATF
• OGBS
• UN / G7
• IMF Assessments (Financial Stability / AML)

22. Professor William H. Byrnes, IV; Team Leader, 900 page Maxwell Stamp Report on the Economic, Socio-Economic
and Regulatory Impact of EU Savings Directive and Code of Conduct on Business Taxation to the UK COTs
[http://www.llmprogram.org]
More International TrendsMore International Trends
• OECD Art. 27 (cross border collection)
• OECD Model Convention for Mutual Administrative
Assistance in the Recovery of Tax Claims 1981
• Convention on Mutual Administrative Assistance in Tax
Matters (OECD & Council of Europe) 1988
• Regional Multi-Lateral Tax Treaties (Scandinavia/Caricom)
• New US, Ca, UK, Australia Revenue Tax Avoidance Task
Force in New York (other OECD anticipated to join)
• New US and UK Tax Shelter reporting requirements

23. Professor William H. Byrnes, IV; Team Leader, 900 page Maxwell Stamp Report on the Economic, Socio-Economic
and Regulatory Impact of EU Savings Directive and Code of Conduct on Business Taxation to the UK COTs
[http://www.llmprogram.org]
New EU InitiativesNew EU Initiatives
• Tax Directives
Savings
Royalties / Interest
Code of Conduct
• AML #2
• EU – US MLAT
• EU – US Extradition

24. Professor William H. Byrnes, IV; Team Leader, 900 page Maxwell Stamp Report on the Economic, Socio-Economic
and Regulatory Impact of EU Savings Directive and Code of Conduct on Business Taxation to the UK COTs
[http://www.llmprogram.org]
UK InitiativesUK Initiatives
• Gallagher
• Mokoro
• Cook
• Edwards & KPMG
• Byrnes/Kitchen/Richardson - Maxwell
Stamp

25. Professor William H. Byrnes, IV; Team Leader, 900 page Maxwell Stamp Report on the Economic, Socio-Economic
and Regulatory Impact of EU Savings Directive and Code of Conduct on Business Taxation to the UK COTs
[http://www.llmprogram.org]
UK InitiativesUK Initiatives
• Gate keeper AML rules
• New Tax Shelter/Avoidance Reporting
Others EU States examples
• Italy Revenue ruling denying deductions to
OFC services party
• Portugal property regime

26. Professor William H. Byrnes, IV; Team Leader, 900 page Maxwell Stamp Report on the Economic, Socio-Economic
and Regulatory Impact of EU Savings Directive and Code of Conduct on Business Taxation to the UK COTs
[http://www.llmprogram.org]
US InitiativesUS Initiatives
• QI
• Patriot Act AML
• New Tax Shelter/Avoidance Reporting coupled
with aggressive and smart IRS public relations
• New Financial Regulations & Corporate
Governance
• Class Actions
• State A.G. activism in securities / tax issues
• State – IRS coordination

27. Professor William H. Byrnes, IV; Team Leader, 900 page Maxwell Stamp Report on the Economic, Socio-Economic
and Regulatory Impact of EU Savings Directive and Code of Conduct on Business Taxation to the UK COTs
[http://www.llmprogram.org]
OGBSOGBS
info. “ultimate” B.O. & controllers
is known to FSP & is properly recorded
companies, partnerships,
other legal entities
• trustees, settlor, protector/beneficiaries

28. Professor William H. Byrnes, IV; Team Leader, 900 page Maxwell Stamp Report on the Economic, Socio-Economic
and Regulatory Impact of EU Savings Directive and Code of Conduct on Business Taxation to the UK COTs
[http://www.llmprogram.org]
Offshore Group of BankingOffshore Group of Banking
SupervisorsSupervisors
• adequate, effective and appropriate
mechanism in place for info
• to be made available to all the relevant
authorities (i.e. law enforcement,
regulatory bodies)
• no barrier to the appropriate flow of info to
the authorities