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Will Offshore Tax Havens Face More Scrutiny in 2014?

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Standard and Poors says offshore tax havens will face tighter regulation in 2014. Could stocks be affected?

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The Isle of Man is kind of like the United Kingdom's version of the Cayman Islands. Technically it's a crown dependency, and the British government is responsible for its defense and foreign relations. But it's also completely self-governing with one of the oldest Parliaments in the world.

The "Island Administration," which sits in the middle of the Irish sea, is a popular tax haven for British bankers. It's no coincidence that the island's financial sector accounts for more than a third of the gross domestic product. So why did the ratings agency Standard and Poors recently downgrade The Isle of Man's credit rating from a AA+ to a AA?

As a major tax haven, it has no wealth, capital gains, or corporate or inheritance taxes -- and as a result, it has benefited handsomely from a thriving offshore banking industry. However, Standard and Poors thinks that's about to change, as governments reform and try to clamp down on companies and individuals that stash money overseas.

While economists and analysts differ in their understandings of what exactly constitutes a tax haven, the countries that are most consistently labeled as such are Bermuda, the Netherlands, the Cayman Islands, and Ireland. As a result of their low taxes, many of these countries house headquarters for companies that do most of their business elsewhere -- like Accenture plc (NYSE:ACN).
If Standard and Poor's is right, and these regions of the world are facing tighter regulations in the coming years, then some of the companies that save money by moving offices there could see their costs go up. Many companies from Facebook (NASDAQ:FB) to Herbalife (NYSE:HLF) participate in corporate inversion to save money on taxes.

We decided to build a list of companies that have headquarters in tax-haven countries, and look for signs that might corroborate S&Ps thinking. We started with a list of stocks based in one of the four countries previously mentioned. Starting with a list of about 100, we screened for signs of institutional selling. This means that hedge funds and and institutional investors have been selling the stock.


Click on the interactive chart to view data over time.


1. Central European Media Enterprises Ltd. (NASDAQ:CETV): Operates as a vertically integrated media company operating broadcast, content, and new media businesses in central and eastern European countries. Market cap at $391.38 million, most recent closing price at $2.89.

Net institutional sales in the current quarter at -6.3 million shares, which represents about 9.61% of the company's float of 65.57 million shares.

2. RenaissanceRe Holdings Ltd. (NYSE:RNR): Provides reinsurance and insurance products and services worldwide. Market cap at $4.10 billion, most recent closing price at $94.99.

Net institutional sales in the current quarter at -2.2 million shares, which represents about 5.33% of the company's float of 41.30 million shares.

3. LyondellBasell Industries NV (NYSE:LYB): Manufacturers and sells chemicals and polymers, refines crude oil, produces gasoline blending components, and develops and licenses technologies for production of polymers. Market cap at $47.92 billion, most recent closing price at $85.80.

Net institutional sales in the current quarter at -43.2 million shares, which represents about 9.96% of the company's float of 433.65 million shares.

4. Sensata Technologies Holding NV (NYSE:ST): Develops, manufactures, and sells sensors and controls primarily in the Americas, the Asia Pacific, and Europe. Market cap at $6.90 billion, most recent closing price at $40.51.

Net institutional sales in the current quarter at -16.4 million shares, which represents about 11.71% of the company's float of 140.00 million shares.

5. Amarin Corporation plc (NASDAQ:AMRN): Focuses on developing treatments for cardiovascular diseases. Market cap at $331.54 million, most recent closing price at $1.94.

Net institutional sales in the current quarter at -18.9 million shares, which represents about 11.69% of the company's float of 161.67 million shares.

Editor's note: This story by James Dennin originally appeared on Kapitall.

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No positions in stocks mentioned.
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