Offshore centres such as Bermuda, which are under threat from the major industrial countries for what's being labelled as "harmful tax competition'', will continue to prosper as long as they comply with international standards, the author of a controversial UK review on tax matters in crown dependencies told a conference here on Friday.

But the offshore centres can expect some loss of business due to the crackdown, Andrew Edwards, a former deputy secretary for the UK Treasury said.

"The good centres may suffer to some extent as the strategies used by individuals and companies for efficient tax planning within the law, or tax avoidance, become more transparent,'' he said. "The major countries will probably act more quickly to counter such strategies where necessary to protect their own revenue collection and investment. "Offshore centres may even have to end discrimination in tax matters between residents and non-residents.'' Bermuda has argued that it is not a tax haven because it does not have a two-tier tax system -- one for residents and the other for international business -- as other offshore centres.

Mr. Edwards, author of the 1998 Review of Financial Regulation in the Crown Dependencies, was generally optimistic about the future for offshore havens that followed international standards, saying that they would still be useful in a world that is cracking down on tax evasion, money laundering and banking secrecy.

"Good'' offshore centres, those that comply with demands from the European Union, the OECD and the G7 nations can still attract business because they are positioned to supply certain categories of financial and other services, he said.

International clients will also find offshore centres useful as a means of spreading their risks, and as tax-neutral or low-tax bases for business which is directed at a variety of jurisdictions.

In order to comply, offshore centres will have to cooperate in tracking down money launderers and tax evaders, and put a halt to "aggressive tax policies clearly designed to deprive the major centres of business and revenue'', he said.

Sanctions against offshore centres will take three forms once the non-compliant tax havens are identified, he believes. The countries will move formally to prohibit transactions between their residents and the designated centres, prohibit resident banks and financial institutions from clearing cheques drawn on institutions in tax havens and cut off loans.

In the coming new international regime co-operating centres will be able to set their own tax structures in exchange and be exempt from financial sanctions in exchange for being more transparent about activities in their jurisdictions, he expects.

"I would not, however, expect the outcome to be life-threatening for good offshore centres,'' he told delegates. "The effects on individual offshore centres would depend critically on whether there is concerted progress through international agreements, so that all centres, offshore and onshore, make similar changes at the same time.'' In what he labels as "the brave new world of fair tax competition'' the compliant offshore centres will still be able to maintain their individuality by looking to exploit advantages for certain financial activities.

Mr. Edwards was speaking at the Tax Efficient Commercial Structures for Electronic Business conference which focused on offshore centres. Mr. Edwards' 1998 report dealt with tax matters in Jersey, Guernsey and the Isle of Man and caused some worry that the UK would crack down on them for harmful tax measures.

`Some loss of business for Bda' In other news Bermuda seems to have escaped being singled out in a report on unfair business taxation in a report being prepared by European Union member states.

A report in Friday's Financial Times newspaper said an EU committee chaired by Dawn Primarolo, the UK paymaster general, has counted 16 harmful measures in the British dependent territories of Guernsey, Jersey, the Isle of Man and the British Virgin Islands plus three in Gibraltar, which is subject to EU law.

The Netherlands' dependencies of Aruba and the Netherlands Antilles are home to seven harmful measures, according to the newspaper.

The Primarolo report is due to be presented to EU finance ministers on November 29. The group investigated nearly 300 measures in drawing up a code of conduct which is meant to form part of a tax co-ordination package to be agreed by the EU's December 10-11 summit. The UK objects to a separate proposal for a 20 percent withholding tax on non-resident savings and could prevent agreement on the overall tax package.

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