the UK's own White Paper on the Overseas Territories -- to protect a multi-trillion dollar business in the City of London.

And last night Shadow Finance Minister Grant Gibbons said the UK threat showed that the major nations appeared to be picking on so-called tax havens -- but had problems themselves.

Dr. Gibbons said: "Clearly, these are issues within Europe itself -- one amusing thing is where French bakers and hairdressers are incorporating in the UK to get around the higher rates of tax in France.

"This was causing considerable annoyance across the English Channel in France.'' Finance Minister Eugene Cox could not be contacted for comment.

The UK White Paper contained a warning about an EU draft directive to ensure countries placed a withholding tax on cross-border income from savings accounts held by individuals.

And the White Paper said member states should also commit themselves to ensure "equivalent measures'' were imposed in overseas possessions like Bermuda.

It also said information on savings income held in another country should be shared among member states.

But on Wednesday UK Prime Minister Tony Blair warned he would use Britain's veto in the EU to block a withholding tax if negotiations to protect the City of London's lucrative Eurobond market failed.

"We will not hesitate to use our veto if it is necessary,'' Blair told the House of Commons.

Last week, British Chancellor of the Exchequer -- Finance Minister -- Gordon Brown pledged to win the best deal for Britain on a proposed EU withholding tax that could wreck the Eurobond market. He insisted the government had made no concessions over the tax to retain Britain's rebate in Europe.

Britain is pushing for interest earned on Eurobonds to be exempt from the tax proposed by the European Commission. London is home to much of the $3.25 trillion Eurobond market and industry associations have predicted big job losses if the tax drives business out of the EU.

The plan is being pushed by the German government to try to stop individual investors ducking tax on interest at home by investing abroad. It is expected to seek a solution before its six-month term as EU president ends in June.

European Union finance ministers have agreed to consider a "halfway house'' where Eurobond holdings above 40,000 euros ($42,350) would be exempt from the tax to limit the impact on institutional investors.

Bermuda and other offshore jurisdictions are currently under the spotlight from the Organisation for Economic Cooperation and Development, the European Union and the UN.

The multi-nation groups all want tougher rules on offshore business -- backed up by the threat of landing on a hitlist of dodgy jurisdictions if the countries targeted do not toe the line.