If you are an ‘offshore’ service provider on the corporate or private wealth side your fortunes are inextricably linked to that of the Offshore Financial Centre where you are based.
The calibre of your ‘home’ country’s response to the global business environment is just as important – if not more so – as your newly minted five year strategic plan or the unfinished one over which you and your staff are still labouring.
For any economic sector public-private sector partnerships are crucial. The ‘offshore’ sector is no exception as brand advocacy and defence; client-attraction and retention; and the design and implementation of international best practices cannot be executed by either side in insolation.
Some activities, however, fall entirely within the purview of the ‘home’ State whose action is a sine qua non for the continued viability of the ‘offshore’ sector and the business that service it.
If the strategic business plans of service providers aligned to the sector are to yield dividends ‘home’ States must take a proactive stance in relation to the following three key issues:
1. OECD Global Forum Phase II Assessment: For a number of small island ‘offshore’ centres who were unable or uninterested in pursuing a Combined Assessment at the start of the OECD’s Peer Review process in 2007, their Phase II Assessments begin later this year or early next year.
As was the case with Phase I, an unsatisfactory outcome will lead to another round of G-20-sponsored ‘blacklists’ and attendant sanction which might prove harder to dislodge especially for countries whose initial Phase I Assessment was sub-standard.
2. Increasing Aggression in the ‘West’ against International Tax Planning: The limits of ‘home’ State control over the legislative activity of other Sovereigns like the US FATCA; the second incarnation of the EU Savings Directive; and Recommendation 25 of the FATF are obvious. However, within the power of the ‘home’ State is access to good and reliable intelligence; effective and sustained lobbying; and prompt engagement with key governments, international agencies and the media.
This will be particularly important in the run-up to the U.S Presidential election since already some have characterised the provision of ‘offshore’ services as ‘financial terrorism’ to which the appropriate response is invasion by the US military!
3. Global Shift in Wealth Generation: ‘Home’ States ought to initiate the crafting of national strategies for the sector which take into account the fundamental shift in new wealth from the ‘West’ to the BRIC+ countries of Brazil, Russia, India, China, Africa and the Middle East. These strategies should provide for the speedy acquisition of new skills and tools the country must have to leverage the opportunities for investment from these countries. The traditional ‘home’ State toolkit must therefore be augmented to include laws and structures designed to meet the needs of the increasingly ‘globalised’ non-Western entrepreneur. The ‘portfolio mix’ of these investors will also demand strategies that deliberately facilitate and encourage the forging of onshore/offshore ‘twinning’ at the national and enterprise levels to adequately service these clients.
It is not an exaggeration to suggest that the failure of the ‘home’ State to take decisive, timely and concerted action with respect to these three key issues will ultimately determine how many ‘offshore’ service providers end up on the breadline.