Growing numbers of accountants, banks and consultants are signing lengthy office leases in Luxembourg and the Channel Islands as they flock to serve customers seeking the legal ways to cut their tax bills offered by having a offshore base.

That is in stark contrast to the traditional financial districts of London and Paris, where letting markets are lacklustre.

"The tax avoidance business is alive and well," tax adviser turned campaigner Richard Murphy told Reuters. "The economic downturn is not having any impact on this type of banking."

More than seven percent of offices in London's financial district are vacant - more than double the rate in Luxembourg's three business districts. Jersey's has "close to no vacant prime office space," said consultant Montagu Evans.

The equivalent of about seven soccer pitches of office space was let in Luxembourg in the first half of 2012, the highest level in four years, with almost 60 percent taken by banks, accountants and business consultants, data from property consultant Jones Lang LaSalle (JLL.N) showed.

The picture is similar in offshore centres in the Caribbean. Though hard data is thin, local property agents told Reuters the best Barbados offices are close to full occupancy while law firms and accountants expanded throughout the recession in the Cayman Islands.

Offshore centres tend to be characterized by their small geographical size, low tax regimes and financial sectors that are disproportionately large to the size of their domestic economies.

G20 CRACKDOWN

Last month, a Reuters report showed Starbucks (SBUX.O) had legally lowered its UK tax bill with inter-company loans, paying royalty fees to foreign subsidiaries and allocating money made in the UK to other units in so-called "transfer pricing".

Last week, British Prime Minister David Cameron said he was unhappy with the level of tax avoidance by big companies.

Jersey and Guernsey are the world's top offshore centres according to the Global Financial Centres Index, which scores cities on taxation, corruption, regulation, quality of staff and airports and the ratings of local employees.

In a list of global financial centres by size headed by London, they rank 21st and 31st respectively, while landlocked Luxembourg, which the index said competes in a similar way to offshore hubs, came 23rd.

They gained a reputation for sheltering tax exiles thanks to banking secrecy laws and have been targeted by G20 leaders in a crackdown on secretive financial centres that includes Switzerland's banking system.

Jersey and Guernsey generally tax companies at zero percent, while Luxembourg has low sales taxes and does not charge companies on interest made from loans to the UK.

In 2009, all three signed up to an international 'white list' of areas that are attempting to clean up their act by agreeing to internationally agreed tax standards.

But the recent reports linking them to tax reduction strategies by companies including Amazon (AMZN.O) and British celebrities such as comedian Jimmy Carr have triggered political anger and kept the negative image alive, even though what they do is legal.

PUBLIC OUTCRY

"Businesses don't always take notice of public outcry," said Prem Skikka, professor of accounting at the University of Essex.

Societe Generale SOCN.PA took the most space of any company in Luxembourg in the first half of 2012, signing a deal for about 98,000 square feet in a new office block for about 10 years, local property agents said. The bank declined to comment.

"It may sound counterintuitive but what's been driving the Luxembourg market for the last 12 months is the financial sector," said Pierre-Paul Verelst, Jones Lang LaSalle's head of research for the Benelux region.

Chinese banks are also shifting their European offices from London to Luxembourg.

On Jersey, accountant KPMG moved into a new office twice as big as its previous one in August while PricewaterhouseCoopers will move into a newer, larger office in coming months. Both signed 15-year leases, said Montagu Evans.

Accountants, banks and lawyers that advise companies on offshore tax planning often take much larger offices and hire more staff than their clients, whose presence in these hubs can sometimes amount to no more than a letter box.

Jersey has the "right tax neutral and transparent infrastructure in place" to attract clients like private equity companies to the island, meaning PwC will stay for the long-term, said Brendan McMahon, PwC partner in Jersey.

"Moving to new premises is a sign of our confidence that economic conditions in Jersey will improve," said Jason Laity, KPMG Jersey's managing director.

Other residents of the rocky islands off the French coast include private equity tycoon Guy Hands, commodities trader Glencore (GLEN.L) and Abu Dhabi Commercial Bank.

But as the political temperature rises, some have expressed fear over the fragility of what are relatively small property markets as the scrutiny grows.

"The market has been very robust," said Chris Daniels, managing director of Jersey at BNP Paribas Real Estate. "But with all the uncertainty that surrounds us, these guys could almost disappear overnight." (Additional reporting by Tom Bill and Tom Bergin; Editing by Helen Massy-Beresford)

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