23 May 2002

IHT: Babel of rules keeps offshore sites in fashion

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(Excerpt)
“Though Europeans, and their money, can now cross many borders without a passport, their mutual funds still have a harder go of it. In contrast with the United States, with its mature fund industry, the European fund market remains highly fragmented.” Eric Panner argues in an article of the International Harald Tribune

“Regulations on taxation and marketing are changing by the month, but they still vary widely among the 15 members of the European Union - not to mention Switzerland and other financial centers. That means investors hoping to take advantage of pan-European investment opportunities still must wade through a thicket of potential snags. Not the least of them is terminology.”

“Changes in regulations and reporting requirements mean it is increasingly difficult for investors to avoid paying taxes on gains from these funds. A proposed European savings tax directive remains elusive, though; under the latest version being discussed, most countries would agree to exchange information on a variety of accounts, including those in cross-border funds; during a transitional period, several countries would be required to levy a minimum withholding tax.”

“Until a true pan-European market gains legislative and legal footing, analysts say, demand-led changes in the European investment marketplace will push ever harder on this string. PricewaterhouseCoopers estimates that 10 percent to 20 percent of the E4 trillion ($3.7 trillion) or so that is invested in European mutual funds is in cross-border, or offshore, funds. Around 80 percent of the offshore total is in funds domiciled in Luxembourg.

“For many would-be pan-European players, it is much easier to domicile a group of funds in Luxembourg than to sort out the different regulations of each individual market. 'If you are distributing your funds in 20 countries, you can imagine the administrative problems and costs you are dealing with,' said Marc Saluzzi, investment management leader at PricewaterhouseCoopers in Luxembourg.”

“Some other barriers have fallen recently. But significant hurdles remain in place. PricewaterhouseCoopers cites factors ranging from the long time of period required to register a UCITS in a foreign market - up to eight weeks, or more if this time limit is not honored - to differences in accounting and advertising rules.

Full article: Babel of rules keeps offshore sites in fashion

© International Herald Tribune