Counterpoint: Lot of funds from safe havens flow into property around the world

The way tax authorities in most EU countries and the United States are pressuring tax havens and offshore jurisdictions to disclose more information is increasingly coming under question. Mainly led by the US, what started as a hunt for what was called terrorist money has turned into a massive search for cash that has been avoiding taxes in its home countries.

With the opening of secretive doors into tax havens in the Isle of Man, Jersey, the Bahamas and BVI jurisdictions to start looking at what happens there, was an inevitable expansion of the search.

There is considerable discomfort in most of these jurisdictions as to the extent to which they are being exposed to pressure. Indeed, the fact is that many business people from the US and the EU and elsewhere have used these jurisdictions to conduct their business. This is natural given that the legal system was more balanced and certainly clear in many cases.

Protection

Thus there was nothing illegal about having a business registered in these jurisdictions. In fact, placing funds there was not illegal and is not so even today. The secrecy laws covering banking and disclosure also protected the account holders and added to the safe haven concept.

Until recently the argument from the regulators in these jurisdictions was that if, for example, a US or an EU citizen brought his business into these places there was nothing wrong as long as the funds were not criminal. In many countries, there is a distinction made between not paying your tax and avoiding higher taxes. However, there is a genuine concern that the veil of secrecy over money has been lifted and many will feel uneasy about these developments.

The question is will there be a flight of this capital from these jurisdictions. Indeed, this will happen and some would suggest that it is already happening. On a broader level of thinking, one wonders what will happen to tax safe havens under a WTO regime. My view is that money earned in one jurisdiction can be taxed in the same jurisdiction but it cannot be taxed twice! Thus, once the tax is paid, the money should be free to go to any jurisdiction and not become the subject of inquiry.

In addition, a large amount of business conducted on the international platform mostly through international trading forms the pool of funds and actually propels business.

In effect, a lot of the funds flowing into real estate and property around the world are from these safe havens. To many, the regime of regulation will become even more intrusive and hence it is better for the owners of these funds to keep them in property rather than expose them to prying eyes. I agree that the scrutiny should remain for illegal funds but not to the extent that the average businessman panics. For the moment it would seem the world property scene is benefiting from this money, so let it be.

- The writer is a UAE-based president of Sher Consulting