ALLEGED CARIBBEAN JURISDICTIONS MISCHIEF However, despite this progress the allegations against the Caribbean continue. At the root have been various claims by largely ill-informed third parties about monies either being illicitly hidden or taken from developing countries illegally. Even though these claims, in some cases, are decades old, they continue to be widely reported by media. In turn they have been taken up by political leaders from outside the Caribbean and continue to spiral. These claims have been assessed in more detail by leading international consultants, Capital Economics. I borrowed the following from a study recently commissioned for the BVI which will be published in June. You would be familiar with many of these allegations. “These headline grabbing numbers do not bear scrutiny... All are based on data sources that are unsuitable for the task and incapable of supporting the conclusions that the authors draw.” But do they care? Absolutely not! They sound impressive to their readers, raise their ire and that’s all that matters. The fact is that it is global financial centres, large and small, which have enabled globalization and the cross-border trade that is at its heart, to happen. Further, the processes in place which ensure this trade, are supported by jurisdictions such as ours, which are entirely legitimate, and from a regulatory perspective meet the requirements of international standard setters. The trouble is that the dimensions of the 2008 financial crisis were extraordinary and have left many OECD countries still reeling. As the Capital Economics Report points out ‘Increasing debt burdens have put pressure on government finances, and while globalization has increased prosperity across the world, not everyone has benefitted equally. In fact, it is often the lower middle classes in these major developed western economies which have perhaps fared the worst. And how have OECD Governments responded to this ongoing crisis? By identifying gaps in tax revenues and placing the public blame for such gaps largely on Caribbean jurisdictions with low or tax neutral bases. We have been the easy targets, when in fact such gaps in revenue are much more likely to be down to lack of tax collecting capacity; maladministration and simple non-payment.
So while the noisier advanced western economies have seen sectors of their populations struggle,
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Taken during the BVI Business Outlook, 2017, TScrub Island, BVI
it is undeniable that globalization has made the wider world a better place, as you would observe from this World Bank slide. Over the last 25 years the number of people around the world living in extreme poverty has declined by 1 billion. A significant number by any calculation, led by China and India but includes over 60 countries globally. Through our corporate structures that are used by the World Bank, the European Bank for Reconstruction and Development and so on, developing countries have greater access to technologies from global markets, including in agriculture and health, better infrastructure and the like. Rather than apologize, the Caribbean should be proud of what it contributes to the rest of the world and we should be more vocal in that pride.
PANAMA PAPERS While the Caribbean can indeed be proud of progress made, the challenges we face will continue. On the 10th of last month, just following the anniversary of the Panama Papers, along with my favorite journalist, Peggy Noonan of the New York Times, the International Consortium of Investigative Journalists (ICIJ) also received a Pulitzer Prize for journalism and I congratulate them. This presentation would therefore be incomplete without at least a footnote on the Panama Papers, which have been squeezed for all their worth over the last twelve months. We all recall our own Kerry Harris in her inimitable style, last year recounting to this very audience how the Panama Papers became public. We were all spellbound! From our perspective, the Consortium identified roughly 114,000 BVI Business Companies incorporated by Mossack Fonseca since 1977. Many of you were still running around in diapers then! In fact, most of BVI Business Companies listed in the Panama Papers have been identified as either ‘inactive’, ‘discontinued’, ‘dissolved’ or ‘defaulted’. The ICIJ very well knew that between 1985 and 1999, 90 per cent of all BVI Business Companies incorporated by that firm were not active. But had they reported that, the sensationalism would be lost. As we know the world has changed radically since 1977 and certainly we in the BVI have transformed, improved and innovated with it. Given the stringent rules and systems now in place in the territory to stop money laundering, financial crime and abuse of other jurisdictions’ tax codes, there is every reason to believe that the 30,000 active BVI Business Companies identified in the Panama Papers are legitimate vehicles being used to facilitate cross-border trade and investment.