Stephen Platt Chairman of the BakerPlatt Group

With the US election looming on November 4, whoever is elected as the next president will have a major impact on global issues.

According to Stephen Platt, an English barrister and Chairman of the BakerPlatt Group, a Senator Barack Obama victory could be a particular threat to offshore centres, including the Cayman Islands.

Obama has vowed to do all he can to shut down offshore centres and, in February 2007, co-sponsored a Bill titled the ‘Stop Tax Haven Abuse Act’ introduced by Senator Carl Levin.

The Bill contains provisions aimed at combating what Levin described as the $100 billion per year drain on the US Treasury from offshore tax abuse.

Obama echoed this view on September 22 in a speech in Wisconsin, when he said, “We lose $100 billion every year because corporations get to set up mailboxes offshore so that they can avoid paying a dime of taxes in America. Imagine if you got to do that… I will shut down those offshore tax havens and corporate loopholes as President, because you shouldn’t have to pay higher taxes because some big corporation cut corners to avoid paying theirs.”

According to Platt, if Obama makes it to the White House in November, the Bill may gather an unstoppable momentum.

The Bill’s prime target is “offshore secrecy jurisdictions”, defined as jurisdictions which, in the judgment of the Treasury Secretary, have ‘corporate, business, bank, or tax secrecy rules and practices which… unreasonably restrict the ability of the United States to obtain information relevant to enforcement’.

As well as providing a statutory framework to determine what an ‘offshore secrecy jurisdiction’ is, the Bill includes a list of 34 countries which will, upon enactment, be automatically considered as such, including: Anguilla, Antigua and Barbuda, Aruba, Bahamas, Barbados, Belize, Bermuda, British Virgin Islands, Cayman Islands, Dominica, Grenada, Netherlands Antilles, St Kitts and Nevis, St Lucia, St Vincent and the Grenadines, and Turks and Caicos Islands.

“The Bill should ring alarm bells for all those that represent entities or individuals who have dealings with the US and the blacklisted countries, either directly or through subsidiaries,” said Platt.

“There is no doubt that the personal and corporate civil and criminal risk exposure will rise if the Bill is passed into law,” he added.

Platt believes the Bill may well help to reduce the incidence of tax evasion but that it goes too far.

“It is anti-competitive and will prevent legitimate individuals utilising the services of legitimate financial services,” he said.

There is, Platt said, suspicion that the Bill is not in fact motivated by a desire to stamp out the abuse of offshore financial services but by a need for the US to begin to exercise control over large pools of development capital.

“There again it could be a mere coincidence that the Bill has gathered momentum as the US economy has bombed and Main Street holds more sway than Wall Street,” he concluded.