IFC Economic Report 2022

BEYOND TAX

It is well-known that the ability to structure funds in a tax neutral way is important – and in many cases so is the ability to access double tax treaties. This has led to the development of numerous tax-exempt legal structures in jurisdictions that otherwise would apply taxes to passive income.

While recognising that having tax incentives is an attractive feature of many IFCs, our cover story will look Beyond Tax and the outdated and redundant notion of ‘tax havens’ by considering the wider role of IFCs and how jurisdictions are not necessarily defined by their tax rates.

Bringing together opinions, commentary and input from leading academics and prominent practitioners, this feature will demonstrate how IFCs offer a wide array of business entities and regulated spaces for different industries and services, including but not limited to:

• FinTech & Blockchain: With regulation being more important than tax for FinTechs, we consider the rise of RegTech and focus on which jurisdictions are innovating in this sector.

• Alternative Investment Funds: Jurisdictions such as the Cayman Islands are a popular choice of domicile for investment vehicles. We look at trends in fund structuring and management across specialist IFCs.

• Insurance/Reinsurance: Jurisdictions are increasingly introducing new initiatives in a bid to become leading risk management and insurance-linked securities centres. We look at how IFCs are positioning themselves as leaders in this industry.

• Family Offices: The pandemic proved to be a catalyst for “the great wealth transfer”. As the next generation are digital natives, family offices need to adapt to the increased awareness of social inequality and environmental sustainability, as well as the increased use of digital technology and investment in crypto-assets. With this in mind, we consider what family offices use IFCs for beyond tax planning.

• Philanthropy: The disruption of 2020 has led to a change in priorities for wealthy businesses and individuals and has highlighted the importance of effective and mindful investment. With this in mind, we consider which jurisdictions are ideal for the formation and administration of philanthropic structures.

• ESG: Investments that integrate environmental, social and governance factors continue to gain traction, particularly in the post-pandemic environment. We look at the opportunities ESG is presenting to asset managers around the globe; as well as consider the current frameworks that have been adopted by jurisdictions.

We will also consider how post-pandemic government debts, digital trade and shifting global economic power are combining to redefine tax regimes and the role of IFCs.

In addition, we look at why it is important for IFCs to continue to champion evidence-based research to underpin the value they add, particularly in the wake of the pandemic as countries look to rebuild and in the face of a number of regulatory, legislative, political and reputational challenges coming down the track.

PLUS:

IN THE CHAIR

Don’t miss our comprehensive interview with Pascal Saint-Amans, director of the OECD's Centre for Tax Policy and Administration, on the issues of most concern to IFCs, including the details of the G20 minimum corporate tax initiative, tax challenges arising from the digitalisation of the economy, the implementation of the EOI standards and the BEPS minimum standards.

GLOBAL REGULATION AND POLICY

Interview with IMF: We question the IMF on topics such as a solidarity tax to aid COVID recovery, wealth tax, sustainable finance, FinTech and citizenship by investment.

EU: The EU has now created a monitoring body (Tax Observatory) to help drive policies against tax evasion and avoidance, as well as a new AML Authority to strengthen the EU’s financial system against money laundering and terrorist financing. We look at these new authorities and legislative proposals in more detail.

The future of Beneficial Ownership: The EU has been pushing member states to introduce public registries of beneficial ownership for some time, but will other regions follow suit? What are the challenges to implementing and maintaining public registries?

The legacy of Economic Substance: How has it ultimately impacted on IFCs? Despite initial warnings that economic substance enforcement could sound the death knell for IFCs, they have managed to jump yet another regulatory hurdle – how have they done this given that increased costs were inevitable and increased competition was likely from centres such as Singapore and Hong Kong? How has the Asian investment market responded? We also look at recent legislative changes in jurisdictions such as Bermuda, Cayman Islands, Guernsey and Jersey.

Money laundering: We look at how several jurisdictions are implementing mechanisms to combat money laundering and illicit finance; including Guernsey, which has established an Economic and Financial Crime Bureau (EFCB) to investigate money laundering and recover assets obtained through unlawful conduct. We also take a look at what Barbados is doing to combat money laundering. Meanwhile, following Malta’s recent addition to the UK’s list of high-risk countries for money laundering and terrorist financing, we consider how the country can fight back and continue to secure offshore investment.

ALSO: TECHNICAL ANALYSIS ON…

POST-BREXIT

Nearly one year on from the end of the transition period, we ask:

• How are the overseas territories faring in the post-Brexit environment?
• Which jurisdictions have seen an uptick in business and investment since Britain’s exit from the EU?
• How can IFCs benefit from a relationship with independent Britain?
• How will the UK maintain its strength on the global financial stage? E.g. By developing “FinTech bridges” with Singapore and Hong Kong; and establishing freeports offering lower tax rates.

ESG – INVESTING FOR THE FUTURE

Recently, companies are becoming increasingly judged by their Environmental, Social and Governance behaviour, particularly in the aftermath of the pandemic.

In this special focus, we look at:

• ESG trends for the future e.g. family offices; regulatory initiatives; economic activism; data & technology and geopolitics.
• What is Greenwashing and how it can it be stopped?
• Emerging Markets
• We also provide updates on ESG initiatives that are being implemented in several jurisdictions.

TRUSTS & FIDUCIARY

The pandemic has demonstrated that there is a constant need for effective asset protection and succession planning structures. We look at how trusts continue to be a key component of the financial services landscape.

INHERITANCE TAX

An inheritance tax is on the cards in jurisdictions such as Singapore and New Zealand, as well as a tax hike in the UK, in order to address wealth inequality. We consider the implications of this tax for wealth management and structuring in these regions and beyond.

CRYPTO CRACKDOWN

As UK prepares to introduce the “Britcoin”, and other countries including China and the US investigate similar moves, what does the future hold for investors (e.g. a global tax regime to be enforced on cryptocurrency)?

ARTIFICIAL INTELLIGENCE

Artificial Intelligence (AI) is becoming an increasingly influential phenomenon in the finance industry. We take a look at the latest initiatives and frameworks being introduced by jurisdictions such as:

• Hong Kong
• Jersey
• Luxembourg
• Malta
• Singapore
• Switzerland

AROUND THE JURISDICTIONS

As we emerge from the COVID-19 pandemic, we take a look at the latest regulatory and legislative developments and structuring techniques across the world’s leading IFCs, including but not limited to:

• Barbados: Corporate Miscellaneous Provisions Bill 2021
• Bermuda: Investment Funds Amendment Act 2021
• British Virgin Islands: Trustee (Amendment) Act, 2021
• Guernsey: The Private Investment Fund Rules and Guidance 2021
• Luxembourg: Securitisation Law
• United Arab Emirates: UAE Trusts Law

We also focus on upcoming and developing IFCs, including:

• Kigali, Rwanda
• Nairobi, Kenya
• Pudong New Area of Shanghai
• Astana/Nur-Sultan, Kazakhstan

MARKETS: MIDDLE EAST

Substantial numbers of the world’s high net worth individuals (HNWI) and ultrahigh-net-worth individuals (UHNWI) are located in the Middle East, and those numbers are growing. We consider trends and developments in this growing market and look at which jurisdictions are the most popular for wealth structuring, asset protection and succession planning. We also review the development of wealth management structures based on local free trade zone laws and those of wider national application, in the context of the long-established use of foreign structures.

ALSO:

GFCI 2021: Z/Yen provide an overview of the key findings from the most recent edition of the Global Financial Centres Index.

BOOK REVIEW: Offshore Financial Centres and the Law: Suspect Wealth in British Overseas Territories by Dr Dominic Thomas-James; reviewed by Derek Sambrook, Managing Director, Trust Services, S.A.

RESEARCH/REPORTS: Comment and analysis on recent research pertaining to offshore finance and global wealth management, including:

• Have European Banks Left Tax Havens? Evidence From Country-By-Country Data, EU Tax Observatory, September 2021

• Transformation of the private offshore wealth management service industry in the emerging economy, Jonathan Chitumbura & Oliver Takawira, Journal of Governance & Regulation, April 2021