Annex III - In-depth analysis evaluating the legal, political and institutional framework concerning offshore practices related to tax evasion, money laundering and tax transparency in the Overseas Countries and Territories (OCTs) of the United Kingdom, as defined in Annex II of the Treaty on the Functioning of the European Union (TFEU), and the relations of the United Kingdom with those OCTs

Clegg, Peter

Abstract

This report focuses on the OCTs of the UK; and especially those located within the Caribbean and West Atlantic. Relations between the UK and its so-called Overseas Territories have been shaped by many centuries of history. More contemporary relations were established in the 1960s with two key Acts of Parliament – the West Indies Act 1962 and the Bermuda Constitution Act 1967, later supplemented by the Anguilla Act 1980. These Acts give the UK sovereign power over the territories, and this is reinforced by the Colonial Laws Validity Act 1865 and the Interpretation Act 1978. The resultant authority allows the UK to create constitutions for each territory via Orders in Council. Orders have also been used to introduce more particular pieces of legislation. Therefore, on first sight it seems that the UK does have clear authority to impose changes to improve the territories’ offshore practices.

However, the reality is rather different, and there are various reasons for this. The report considers them in some detail. First, the constitutions of the territories have always provided a separation of responsibilities between the Governor, appointed by the UK, and the local territory government. Further, the constitutions that have been more recently introduced – through consultation, not imposition – have given greater autonomy to the territories. It is true that the UK has retained key powers for the Governor, for instance in regard to defence and the public service, but there is a clear dilution and blurring of UK power from those original Acts of Parliament. This picture is complicated further because each territory has slightly different levels of autonomy, including in relation to their offshore financial sectors. Second, day-to-day relations between the Governor and the territory government can also be difficult and sometimes conflictual in the area of offshore finance. Third, there are political and economic factors that help shape relations, such as the UK’s sensitivity to being seen as a ‘colonial’ power if it intervenes too strongly and too often, or the demand of the UK that the territories should be economically self-sufficient. By exploring these issues, with the support of case studies, the report offers a nuanced picture of how relations are carried out and how despite the UK’s sovereign authority on paper, in practice its role is checked.

So the deep-seated complexities of managing the territories; the reluctance of the UK to allocate more funds to them, including to help diversify their economies; the view that the territories should largely manage themselves; together with the absence of concerted international action, means at this time the UK is unlikely to take a more forceful role in addressing the concerns about the territories’ offshore practices related to tax evasion, money laundering, and tax transparency.

• Report Type: Technical Report
• Publication Date: Apr 20, 2017
• Deposit Date: May 2, 2017
• Peer Reviewed: Peer Reviewed
• Keywords: legal, political, institutional framework, offshore practices, tax evasion, money laundering, tax transparency, Overseas Countries and Territories, OCTs, United Kingdom, Treaty on the Functioning of the European Union, TFEU
• Public URL: https://uwe-repository.worktribe.com/output/889006
• Publisher URL: http://www.europarl.europa.eu/thinktank/en/document.html?reference=EPRS_STU(2017)593803#
• Contract Date: May 2, 2017