But the Bill is back.

The newly proposed law — backed by the Obama administration — would place a greater burden on taxpayers using so-called offshore secrecy jurisdictions to show that transactions are legitimate, ban patenting of tax avoidance plans, and empower US courts and tax agencies to use stiffer fines and penalties against non-compliant jurisdictions, among other initiatives.

The legislation’s reintroduction is the latest news in a whirlwind press blitz, as European and American leaders caution that greater transparency and regulation is coming to the world’s offshore finance centres — in anticipation of April’s Group of 20 meeting.  

Germany is planning similar legislation, after discovering a pipeline of lost revenue streaming into secret accounts in Liechtenstein. And France’s President Nicolas Sarkozy suggested last Sunday that Switzerland might soon find itself on a tax haven blacklist being readied for the April summit — to which the alpine nation was denied an invitation.

Meanwhile, according to London’s Guardian Newspaper, UK Prime Minister Gordon Brown is preparing to unveil a blacklist of harmful tax havens to be published before the crucial London meeting, while the Paris-based Organisation of Economic Cooperation and Development is poised to produce a blacklist of its own.

For some, the notion of a “blacklist” strikes at the heart of the VI’s dilemma. Despite a rigorous legislative and regulatory regime, new Tax Information Exchange Agreements and increased transparency, the territory remains one of 33 “offshore secrecy jurisdictions” included in the revised Stop Tax Haven Abuse Act.

“VI government officials are continuing to challenge any negative perceptions of VI industry and continue to reiterate VI’s cooperation and transparency in international matters,” said Acting International Affairs Secretariat Director Elise Donovan, when asked about the US legislation.

The Bill’s many supporters say measures are needed to plug the $350 billion dollar tax gap, between taxes owed and taxes paid in the US.

But critics argue that the US is ignoring its own lax regulatory regime, which contributed not only to the global recession but also blindly overlooked the gross excesses of Bernie Madoff and Sir Allen Stanford, two of the largest Ponzi schemes in history.

The Stop Tax Haven Abuse Act also lacks any discernible criteria for its list of so-called tax havens. One reason may be that the blacklist was drawn, in part, from a 2007 US Government Accountability Office (GAO) report, which relied on an outdated OECD report and a US IRS  “John Doe” summons.

Last year Michael Mundaca, deputy assistant secretary for International Tax Affairs, in the US Treasury Department, testified before the US Senate that oversimplification could lead to misunderstandings and mistakes.

“Even though coming up with a list of tax haven countries has a significant appeal, any list of countries is likely to be under-inclusive as well as over-inclusive, depending on the problem meant to be addressed,” Mr. Mundaca said.

He also noted that “such a list may inappropriately negatively affect the [US] economic and other relations with listed countries,” if the blacklist is used as the basis for sanctions or other negative measures.

In the past, the VI has lobbied the US Treasury Department and, while no concrete plans are in place, Ms. Donovan said the VI is planning on lobbying the US government again.

The full story appears in the March 12, 2009 issue.