Insurance companies lead the way out of tax havens with Ireland proving a popular choice for incorporation

News - Tax

Written by Ray Clancy

Wednesday, 24 February 2010 09:38

Leading companies are seeking ways to exit offshore financial locations and considering moves to Ireland in particular as they aim to avoid any flack from the backlash against tax havens.

Insurance company United America Indemnity is one of the latest to announce it wants to shift its legal home to Ireland from the Cayman Islands. The insurer plans to ask shareholders to approve the change saying Ireland offers a sophisticated regulatory environment and an extensive network of international treaties.

The company, which had previously been considering a move to Switzerland, said it would become a wholly-owned subsidiary of Irish company Global Indemnity.

Earlier this month, Seagate Technology said it plans to move its place of incorporation to Ireland from the Cayman Islands amid increased international scrutiny of offshore tax havens. It said proposed US legislation and regulatory measures ‘could increase our tax burden if we remained incorporated in the Cayman Islands’.

Last month, global insurer XL Capital noted the increasingly negative outlook for offshore financial centers in a filing announcing its decision to switch its legal home from the Cayman Islands to Ireland.

Other businesses that have recently shifted their holding companies from the iCaribbean nclude insurance broker Willis Group Holdings that has moved to Ireland from Bermuda and insurer ACE which moved to Zurich, Switzerland, from Cayman.

Thousands of international companies and hedge funds have traditionally been incorporated in offshore financial centres in the Caribbean and elsewhere, drawn by low tax rates and banking rules and legal systems that make it easy to move capital around the globe.

But in both the US and Europe lawmakers and regulators are weighing a number of proposals aimed at cracking down on abuses and collecting more tax revenue from multinational operations.

Caribbean locations such as the Cayman Islands, the British Virgin Islands and the Bahamas, have scrambled to sign new international tax treaties and defend an industry that has flourished as an alternative to tourism.

Richard Murphy, a British accountant and founder of the blog Tax Research UK, said fear of the crackdown is behind the shifts. He said Ireland is a popular choice because it is a low tax jurisdiction without having the stigma of being a tax haven.

Ted Bravakis, a spokesman for the Cayman Ministry of Finance, said that the Caribbean islands remain a thriving offshore financial sector.The Cayman Islands, which lie 150 miles south of Cuba, does not directly tax any of the roughly 80,000 companies registered there, and has no income tax or capital gains tax. Its offshore financial services sector accounts for about half of the islands’ economy.