Editorial: Geopolitics and economic sabotage

The recent ‘blacklisting’ by the Council of the European Union [EU] of a number of regional jurisdictions, including Barbados, “for having a harmful tax regime and for failing to meet agreed tax governance standards” is intended to and may have the consequence of seriously and negatively impacting our international business regime in the long term. More immediately, it will restrict our access to European funding machinery under the Economic Partnership Agreement.

As the Honourable Minister of International Business, Mr Donville Inniss, acknowledged, “When multinational groupings, particularly as powerful as the EU is, issue these kinds of lists and reports, they are picked up by other groupings and organisational bodies, including financial institutions. They may then decide that the cost of doing business … in jurisdictions like ours have to be increased or they may go to the full gamut of restrict[ing] the doing of business in domiciles such as Barbados.

This current initiative may be viewed as another aspect of a continual assault by groupings such as the EU and the OECD on those regional jurisdictions that they perceive as “tax havens” that unfairly attract offshore investment by their individual and corporate entities; investment that results in a substantial loss of tax revenue for their member states.

Nonetheless, the charge of being a tax haven is what criminal lawyers might call “bad for duplicity” since the jurisdiction, as the accused, is not made clearly aware of what charge it, or he, is facing. This is owed to the fact that the accusation of being a tax haven may encompass a plurality of meanings.

According to one dictionary definition, “a tax haven is a country or place which has a low rate of tax so that people choose to live there or register companies there in order to avoid paying higher tax in their own countries”. Another investment glossary chooses to define the term as “a country that offers foreign individuals and businesses a minimal tax liability in a politically and economically stable environment, with little or no financial information shared with foreign tax authorities”. And according to the Financial Times Lexicon, the accusation describes “a country with little or no taxation that offers foreign individuals or corporations residency so that they can avoid tax at home”.

The dictionary definition and that of the Financial Times are clearly too broad and would arguably include all those jurisdictions that have a lower rate of tax than the offended country. The second definition appears more suited to the current context, although Barbados would arguably escape liability here, given its numerous double taxation agreements concluded with cosmopolitan states.

While the pique of the member states of the EU and the OECD at this loss of potential tax revenues may be understandable, it smacks of overkill that they should seek to focus on sabotage of the beneficiary jurisdictions rather than seek to punish their own individual and corporate nationals.

It is tantamount, in our view, to a wife seeking not to chasten her errant husband but aiming rather to destroy a rum shop simply because her husband spends most of his weekly wages there before he returns home from work.

Two weeks ago, we likened those of us in the region to the children of Sisyphus, condemned by the gods, as he was, to pushing a stone up a hill only for it to roll back down again. Similarly, any attempt to diversify the regional economies, whether through the initiative of economic citizenship or by offshore investment or otherwise has been met with disfavour by the more geopolitically advanced jurisdictions.

At least it seems as if this latest salvo is easily remediable through appropriate legislative reform.

Barbados Advocate

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