...and Anguilla's beggin' for $40 mil or so... Cheers, RAH -------- <http://www.guardian.co.uk/business/2009/sep/13/british-tax-havens-need-bailo uts/print

Britain 'may be forced to bail out tax havens'  Collapse of offshore centres could cost UK many millions  Liberal Vince Cable says it is wrong to reward mismanagement Nick Mathiason guardian.co.uk, Sunday 13 September 2009 21.00 BST Grand Cayman, where the cash-strapped islands' government has been forced to ask the UK to allow a #278m loan. Photograph: Panoramic Images/Getty Images/Panoramic Images Britain could be forced to bail out one or more of its offshore tax havens at huge cost, according to early drafts of a Treasury report, because the economic crisis has wrecked their finances. Offshore expert Michael Foot will next month set out a number of options to government ministers in the report as anxiety grows within Whitehall over the health of Britain's overseas territories and crown dependencies. Senior insiders say early drafts of Foot's report suggest that the government may need to make provisions for the financial failure of British tax havens. Experts suggest the failure of a major tax haven could potentially cost the UK tens, if not hundreds, of millions of pounds. Government officials say they are aware that some British overseas territories are facing serious problems which could get worse. In the event of further economic deterioration, they could become failed states and be dragged into the illegal drugs trade, Whitehall insiders warn. Two weeks ago, the Guardian revealed that the Cayman Islands, the capital of the world's hedge fund industry and the fifth biggest banking centre, was so cash-strapped it may not be able to pay its own civil servants. The Caribbean tax haven was forced to ask the Foreign Office permission to borrow #278m to repair huge deficits. The Foreign Office refused, advising the island's authorities to impose property or payroll taxes. Talks are ongoing over a #30m emergency loan package. Jersey, Guernsey and the Isle of Man are all UK crown dependencies. The 14 overseas territories under British sovereignty include Bermuda, the Cayman Islands, Gibraltar and the British Virgin Islands  among the world's most important tax havens. Any suggestion that Britain will have to rescue offshore financial centres would be extremely controversial as tax havens drain the UK economy of an estimated #25bn annually through their role in aggressive tax avoidance and evasion. Vince Cable, the Liberal Democrat Treasury spokesman, said: "Britain obviously has some responsibility towards these small number of territories and that's clearly right, but we can't get into an open- ended bailout that would reward financial mismanagement. "It would be extraordinary to bail out these tax havens, especially as additional money that went to them would come out of aid budgets to the detriment of poorer countries that have managed themselves properly." The Foot report is likely to suggest that tax havens should boost their balance sheets with new taxes, though this would have to be carefully handled as it could drive away businesses that are valuable to them. Foot will say that tax havens will require additional cash to abide by new international protocols, and that some do not have the expertise or staff to weather the economic crisis. He is thought to be concerned at the accuracy of some islands' economic analysis and modelling. Sources close to Foot suggest he is particularly concerned that tourism on Caribbean islands is also suffering which is compounding the downturn. The Treasury insisted that it was not in "the business of bailing out tax havens", while Foreign Office officials said overseas territories were responsible for their own finances. But the global recession has had a severe effect on tax havens  even those close to home. Jersey is projecting a budget deficit of #100m. The Isle of Man is facing problems associated with the collapse of Icelandic bank, Kaupthing, which had a business on the island. It may be forced to spend hundreds of millions of pounds to compensate savers who have been unable to claw cash back from Kaupthing. Guernsey could also face similar issues after the collapse of a Channel Island subsidiary of Landsbanki. Britain has imposed direct rule and suspended the government of the Caribbean Turks & Caicos islands amid claims of systemic corruption there. Meanwhile there are also suggestions that an ongoing government review of online gambling sites, many of which are based in the Isle of Man and Gibraltar, may seek to impose more stringent regulation of them, which could threaten their offshore futures.