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June 2, 2009

Tax Special: Blue Skies, Grey Listed

By Spear's

The British Virgin Islands are not like other dodgy Caribbean tax havens and are lobbying hard to have their ‘grey’ status laundered white, says Mowbray Jackson

H onesty and integrity are of paramount importance to me and to the BVI.’ I strained to hear the soft, lilting voice of the Honourable Ralph O’Neal over pumping reggae music.

We were on the beach less than twenty metres from an industrial-sized speaker — not the most conducive place to interview the premier of the British Virgin Islands and question him on the ramifications of the communiqué which had just been issued by the G20 in London.

I had mentioned ‘Sir’ Allen Stanford and how his Caribbean presence might have brought the region into disrepute, thus playing into the hands of the media and G20 as a perfect illustration of the cliché ‘a sunny place for shady people’. 

‘He came here some time ago and wanted to do business… he didn’t smell right…’ O’Neal had judged correctly that the Texan billionaire was wrong for the BVI, for its image and reputation. His presence would have undermined the country’s efforts against those who come to the BVI to pursue nefarious activities. 

O’Neal poked and drew furrows in the sand with his cane to emphasise his points, expressing his disappointment in the manifesto and complaining that the BVI’s ‘long-standing commitment and implementation of OECD standards’ had not been recognised.

The BVI was one of the first financial centres to sign on to the transparency criteria set down by the OECD and entered into a tax information exchange with the US in 2002.

Although it is noted that the territory has signed three TIEAs (Tax Information Exchange Agreements), the BVI was on the ‘Grey List’, in the second level of compliance. These bilateral agreements are the criteria by which the levels of compliance of the offshore and low-tax territories (or ‘tax havens’, as per OECD) are judged.

W ith three already in place (with the UK, USA and Australia), the BVI was aiming to sign a further seven TIEAs on 18 May, and negotiations are continuing with other OECD countries, putting the BVI on course to meet the minimum requirement of twelve TIEAs which will put it on the White List by the July 2009 deadline.

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Sherri Ortiz is chief operating officer of the BVI IFC (International Finance Centre), established in 2002 as part of the government’s commitment to support the country’s expanding financial services industry, upon which the archipelago is increasingly dependent.

‘We are NOT a tax haven — we are a financial centre,’ says Ortiz. ‘All offshore financial centres, particularly in the Caribbean, are lumped in the same basket, unfortunately. The BVI has consistently maintained itself as a well-regulated jurisdiction and has been very open to international exchange of information.’ 

As for greater transparency, Ortiz says: ‘We have provided the US with information on occasions in the past but… the exchange agreement requires that information is requested on a legitimate basis, not a fishing expedition.’

She insists that ‘cracking down on finance centres which are facilitating structures is not the answer’ and suggests, reasonably, that major countries should be looking to their own financial centres to prevent people from believing that they can move money from their own countries that should be taxed within them. 

On the streets of Tortola there is real concern that in the wake of the OECD’s diktat the economy will be unjustly damaged. Indeed, ‘resentment’ is the mot du jour. Ortiz is positive about the future, though.

She does not believe there will be a significant loss of new or existing business, and is bullish on the reasons why companies would wish to register here now: stable political and economic infrastructure, with a reliable legal system based on English law.

The irony of a Paris-based OECD cracking down on these financial centres in order to maintain and strengthen global economic stability is not lost on the people. There is something rather tragicomic about the G20 countries coercing and threatening these small territories. Premier O’Neal likens it to a form of neocolonialism.

It is particularly unfortunate that Gordon Brown was chosen to issue this fatwa: a man so discredited, who so blatantly failed to regulate sufficiently at home, has little or no credibility in the shade of a palm tree on a sunny beach in Tortola.

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