Offshore money appears to be flowing out of offshore centres such as the Channel Islands and the Isle of Man, according to a report in the F...

Offshore money appears to be flowing out of offshore centres such as the Channel Islands and the Isle of Man, according to a report in the Financial Times. The outflow is a direct result of the European Union’s Savings Tax Directive, which came into force on July 1st.

The report said UK banks with operations in the Channel Islands and the Isle of Man have reported cash outflows of about 5 per cent of the funds from personal deposit accounts. But most banks say the impact of the directive has been less than expected, with some banks anticipating as much as 25 per cent of money in deposits leaving.

Banks such as NatWest Offshore, Lloyds TSB Offshore and Britannia International all confirmed to the FT that savers are withdrawing cash.

The Channel Islands and the Isle of Man had around £250 billion ($440.4 billion) held in bank deposits in June last year.

The tax can be avoided by setting up tax-avoidance products such as trusts or structured bonds. Many banks and fund managers have been busy launching new products to take advantage of the tax loophole, according to the report.

The report did not mention flows out of offshore centres such as Switzerland and Luxembourg, which are also subject to the directive.