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The new administration in the U.S. is trying hard to increase tax revenues in any way they can. The war on tax havens which was declared a while ago can be felt by global offshore financial centers worldwide. Switzerland might have received the most attention so far, mainly because of the UBS story, but the situation is very similar for all offshore financial centers.

But let me clarify one thing, there really is no such thing as a tax haven –‘haven’ is a relative concept for each of us. In practical tax terms, it simply means that these so called haven countries have their own taxation system and legal and regulatory frameworks.

In an attempt to achieve full transparency for financial transactions, and thus tax liabilities, the IRS in the U.S. as well as some of the larger European countries are demanding an increased exchange of bank account and financial transaction information. Politically, it is relatively easy to get support for such aggressive measures during times of financial distress and economic difficulty.

Finding something or somebody to blame for the current trouble gives at least temporary relief and probably more votes for politicians that claim to fight that war on behalf of its people. Today’s society and individuals have an almost chronic habit of trying to find somebody or something to blame for its own problems rather than take responsibility for one’s own action.

This behavior might in fact be the root of many of today’s problems, and, what might seem an appropriate solution today might be a very serious mistake in the long-term. We believe that the current aggressive measures against offshore financial centers will be very destructive to the economies of countries calling for such drastic regulation. Did you know that under the proposed law even Swiss citizens could become liable for U.S. inheritance taxes if U.S. securities are owned at the time of death?

This is a good reason for foreign investors to stay away from U.S. securities in my opinion – a big negative for U.S. investment markets. If you consider the almost “toxic” inheritance tax rates in the U.S., I think this makes a very convincing case against owning any U.S. securities at all. We think that the current administration in Washington is making several mistakes.

The bottom line is that this means it will get harder for U.S. corporations as well as the government to attract foreign capital at a time when the need for foreign capital is bigger than ever. A higher cost of capital is the ultimate consequence of such policies and this will in turn decrease competiveness and worsen the deficit of a country.