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

1. International Financial Services
Status & Trends
Overseas Countries and Territories Association (OCTA) of the
European Union
Professor William H. Byrnes, IV
Walter H. & Dorothy B. Diamond
International Tax & Financial Services Program
www.llmprogram.org
Thomas Jefferson School of Law (USA)
www.tjsl.edu
+1 786 271 5202

2. 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

3. Prof. William Byrnes – www.llmprogram.org
Past OCTA IFS factors
 No tax cost
 Exchange control
 Embargo neutrality

4. 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

5. 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

6. 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

7. Prof. William Byrnes – www.llmprogram.org
Conditioning Factors
 HNWI and funds deploying > 20% of assets
 Global litigation and regulatory increasing
 Communications & Information Technology

8. 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

9. 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)

10. 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)

11. 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

12. Prof. William Byrnes – www.llmprogram.org
UK Reports
 Gallagher
 Mokoro
 Cook
 Edwards & KPMG
 Byrnes/Kitchen/Richardson - Maxwell Stamp

13. Prof. William Byrnes – www.llmprogram.org
UK Initiatives
 Gate keeper AML rules
 Tax Shelter/Avoidance Reporting

14. 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

15. 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)

16. Prof. William Byrnes – www.llmprogram.org
• 830,000 investment professionals
• Over 20 million financial industry
Economic Indicators

17. 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

18. 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

19. 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

20. 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

21. 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

22. 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

23. 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

24. 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

25. 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

26. 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%

27. 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