New York, New York
By Tony Best
“Caribbean Immigrants shouldn’t believe the Democrats are the only ones with the keys to the future.”
That statement from a Caribbean diplomat in Washington wasn’t seeking to put a case for the Republicans in the White House or on Capitol Hill. Far from it.
Instead, the speaker was reacting to a Democrat-led drive that could hurt a vital sector of the economies of several countries ““ from Barbados, The Bahamas and the Cayman Islands to Antigua, Saint Kitts – Nevis and St Vincent.
On the other hand Michael King, Barbados’ Ambassador in Washington, proposes a somewhat different view.
“Here we are in 2007 and we are going back to deal with an issue we had hoped had largely disappeared from the radar screen after our battles with the so-called ‘Harmful Taxation Initiative’ of the Organisation for Economic Co-operation and Development (OECD),” he said.
Dr Denzil Douglas, prime minister of St Kitts – Nevis, agreed with King.
“We are disappointed that we have to go through this again,” he told the WEEKEND NATION in New York.The prime minister and King were reacting to the introduction of three bills in the United States Senate that seek to reduce the presence of United States firms in the region’s offshore financial services sectors coming as they do about eight years after an international battle with the OECD of which the United States is a key member, they have every reason to fear what some senators want to do.
For if United States Senator Barack Obama and his misguided colleagues should get their way, United States firms would suffer tax penalties for doing business in countries which appear on a list of “tax havens”, prepared by Senate staffers and others.
Unfortunately for Barbados, it is on that list.
“Misguided” and “totally unfair.” Those sharp words characterised Barbados’ opening salvo in what may be a long and arduous battle to protect a legitimate sector of its economy.
The elected officials in the upper chamber led by Obama, a candidate for the Democratic presidential nomination, have proposed the enactment of a bill designed to penalise United States firms that use offshore centres they call “tax havens” by forcing them to pay more than an estimated US$100 billion in taxes which they are supposed to be avoiding paying to the United States Treasury through the use of secrecy laws in the Caribbean and elsewhere.
In an aide memo to Obama, Congressman Charlie Rangel, chairman of the powerful Ways and Means Committee of the United States House of Representatives, and several other elected officials, Barbados has warned that any passage of legislation which labels the country a “tax haven” would not only be “misguided and totally unfair” but could “seriously undermine or result in the override of the Barbados/United States Double Taxation Agreement.”
Barbados’ ambassador, in a move to clear the air and his country’s name, said that lawmakers couldn’t justify naming his country.
“Certainly Barbados has determined from the inception of its entry into the regime of financial services that we would be a reputable international financial services centre,” King said.
“Interestingly, Barbados and Cyprus, two countries which have concluded American double taxation agreements with the United States, have appeared on the list. We do hope that those people who have been misguided in sponsoring the legislation would check their records carefully to note OECD members do not conclude double taxation treaties with any country deemed to be a tax haven.”
For example, the proposed “Stop Haven Act” characterises The Bahamas, Antigua, Barbados and a host of other small countries as secret domiciles that allow investors to avoid paying taxes.”
In its aide memo and a statement by King, Barbados explained that the United States /Barbados double taxation treaty, recently amended by the two countries, allows for a free flow of individual and corporate financial information about Americans, and in their firms that have established a presence in the country.
Secondly, OECD has “confirmed that Barbados is not a tax haven. It does not attract international financial services on the basis of secrecy”.
As a matter of fact, both the International Monetary Fund and the Caribbean Financial Action Task Force have reported that “Barbados has a robust anti-money laundering and transparency of corporate vehicles regimes” that prevent abuse.
Clearly, the senators’ naming of Barbados is weak. But getting its message across would take more than the aide memo.
The country and its neighbours have friends in Congress who sit on the Financial Services Committee and they must reach out to them. Among them are members of the Congressional Black Caucus.
Ironically, Obama belongs to the Caucus.