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International Financial ServicesStatus & Trends
Overseas Countries and Territories Association (OCTA) of the European Union
Professor William H. Byrnes, IVWalter H. & Dorothy B. Diamond
International Tax & Financial Services Programwww.llmprogram.org
Thomas Jefferson School of Law (USA)www.tjsl.edu
+1 786 271 5202
Prof. William Byrnes – www.llmprogram.org
Past OCTA IFS factors
Ease of incorporation Low cost of incorporation and
maintenance Minimal, flexible corporate requirements (Quasi) Private Banking Secrecy / Privacy
Prof. William Byrnes – www.llmprogram.org
Past OCTA IFS factors
No tax cost
Exchange control
Embargo neutrality
Prof. William Byrnes – www.llmprogram.org
Developed States Past IFS Trend
Ring Fenced Incentive Regimes Treaty Networks Financial Intermediation Services Private Banking / Asset Management Secrecy / Privacy
Prof. William Byrnes – www.llmprogram.org
Current Conditioning Factors
Risk : world is at least or more dangerous relative to cold war
– Financial crimes– Kidnappings– Political economic conflicts and crimes– Internal and external armed conflicts
Prof. William Byrnes – www.llmprogram.org
Current Conditioning Factors
Tax Burden potential increase over 20 years – demographics of social insurance and safety nets
Regulatory costs overkill for SMEs
Basel 2 – may impact bank lending to developing jurisdictions – opportunity for investment funds
Prof. William Byrnes – www.llmprogram.org
Conditioning Factors
HNWI and funds deploying > 20% of assets
Global litigation and regulatory increasing
Communications & Information Technology
Prof. William Byrnes – www.llmprogram.org
Conditioning Factors
Asian & Indian market will accelerate as wealth creator 2010 - 2020 for business, trade and HNWI
EU member IFCs (e.g. Cyprus)
Singapore
Prof. William Byrnes – www.llmprogram.org
International Initiatives
OECD Harmful Tax Competition OECD Access to Bank Information for Tax OECD TIEA initiative FATF & CFATF OGBS UN / G7 IMF Assessments (Financial Stability / AML) Tax Amnesties (e.g. US, Italy, Belgium, RSA)
Prof. William Byrnes – www.llmprogram.org
More International Initiatives
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 (Caricom)
US, Ca, UK, Australia Revenue Tax Avoidance Task Force in New York (other OECD anticipated to join)
Prof. William Byrnes – www.llmprogram.org
EU Initiatives
Tax Directives– Savings– Royalties / Interest– Code of Conduct
Tax Collection AML 2 and 3 EU – US MLAT EU – US Extradition
Prof. William Byrnes – www.llmprogram.org
UK Reports
Gallagher Mokoro Cook Edwards & KPMG Byrnes/Kitchen/Richardson - Maxwell Stamp
Prof. William Byrnes – www.llmprogram.org
UK Initiatives
Gate keeper AML rules
Tax Shelter/Avoidance Reporting
Prof. William Byrnes – www.llmprogram.org
US Initiatives
Qualified Intermediary Regime Patriot Act & correspondent banking New Tax Shelter/Avoidance Reporting coupled with
aggressive IRS public relations – criminalizing avoidance – bankrupting providers
New Financial Regulations & Corporate Governance Class Actions State A.G. activism in securities / tax issues State – IRS coordination
Prof. William Byrnes – www.llmprogram.org
Economic Indicators: HNWIs
Since 1996, IFC sector expanded (average 10%) but for 2000-03 international recession
Over $33 trillion held by nearly 9 million HNWIs
Over $11 trillion in assets held offshore (1/3) Home country economic return – risk relatively less attractive
HNW portfolios alternative investments 3% (2000) 20% (2006)
Prof. William Byrnes – www.llmprogram.org
• 830,000 investment professionals• Over 20 million financial industry
Economic Indicators
Prof. William Byrnes – www.llmprogram.org
Economic Indicator: Employment
20 million staff all financial services
50,000 professionals in offshore financial services industry
Salaries increasing relative to other sectors such as tourism and fishing
Prof. William Byrnes – www.llmprogram.org
High Paying Jobs Examples
Transfer Pricing/Supply Chain Partner, London up to £500,000 Transfer Pricing Manager, London or Amsterdam Up to £80,000 Transfer Pricing Manager, Zurich 120,000 CHF – 150,000 CHF National Head of Transfer Pricing, France & Germany €200,000 - €300,000 International Transfer Pricing Director, London £120,000 - £160,000 Senior Transfer Pricing Advisor, London £70,000 - £90,000 Transfer Pricing Advisor, London £55,000 - £65,000 International Tax Manager/Senior Manager, Eastern Europe From £65,000 - £80,000
+ Bonus + Benefits International Tax Manager – Transfer Pricing, FTSE 100, London £65,000 +
package Transfer Pricing Manager, US Investment Bank, London c£80,000 + £30,000 Bonus M&A Tax Senior Manager/Director, Moscow, Russia Starting from $ US 180,000 International Tax Senior Manager, Moscow From 150.000 USD + Bonus + Benefits Transfer Pricing Director, Sydney $150,000 - $200,000 + benefits Transfer Pricing Director/ Partner, Paris Competitive Salary + Benefits Transfer Pricing Analyst, New York $120,000 plus stock options and pension Senior Manager - Russian Tax Desk, London £75,000 - £110,000 + benefits
Prof. William Byrnes – www.llmprogram.org
(Certifying) Professional Bodies > 250,000 members and growing
15,000 members
100,000 members
22,000 members
1,500 institutions, several regulators
150 law firms
105,000 members
10,000+ members
Economic Indicators
Prof. William Byrnes – www.llmprogram.org
Economic Indicators: Information
Legal, Tax and Regulatory (LTR) market
6.5% CAGR for the LTR publishing market ‘06 – ‘09
$18.3 billion in LTR publishing revenues by 2009
Prof. William Byrnes – www.llmprogram.org
Current OFC Economic Trend
Stabilized since 2000-03 global recession, continuing Upward trend
– Foreign $ stabilized 2003, growing since 2004
– New entities stabilized 2003, increasing since 2004
– Value added svcs expanding e.g. law, fund admin
– Services diversifying e.g. technology
Prof. William Byrnes – www.llmprogram.org
Some OFC Growth Areas
Estate Planning Trend Charitable structures continue Insurance continues: Corporate and Private Trade Services Technology Services
Prof. William Byrnes – www.llmprogram.org
More OFC Growth Areas
IP R&D and Management (TMs, Processes) Financial Intermediation - TMC Capital Markets – Exchange Asset Management ADR with Common Law Courts
Prof. William Byrnes – www.llmprogram.org
Challenges
– Increasing regulatory regimes and costs– Discriminatory trade in capital and services through
fiscal legislation (anti-deferral, CFC, black listing)– No lobbying or voting blocs– NGO beauracracy will create new regulations that it may
perpetually keep itself employed– Lack of Asian Language skills (Mandarin)– Lack of value added (high) skills
Prof. William Byrnes – www.llmprogram.org
Impact Trend for IFCs
Diversification of Micro-Economies GDP and Personal Income growth FDI Economic and Social Stability increased
Prof. William Byrnes – www.llmprogram.org
Services 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%
Prof. William Byrnes – www.llmprogram.org
Tourism
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 US passport rules will favor PR & USVI New price and place competitive market entrants
– Cuban re-entry will impact Caribbean