It is the firm belief of Third District Representative Hon. Julian Fraser, RA that the whole issue of 'tax havens' has only come about because of the global economic downturn and the industrialized world now looking for a ‘scapegoat’. Photo: VINO/file

British Prime Minister David Cameron had sent a letter to 10 British crown dependencies and overseas territories regarding the critical issues of tax information exchange and beneficial ownership, “a practice which uses a nominal third-party resident in a low-tax state to shield income from taxation”. Photo: Provided

Hon. Fraser also believes that the National Democratic Party (NDP) Government is yet to accept this fact.

Speaking exclusively to Virgin Islands News Online on a recent article published in the international media about the British Prime Minister David Cameron writing to leaders of ‘overseas tax havens’, urging them to help with efforts to combat tax evasion and avoidance, Hon. Fraser opined that acceptable practices in financial services have suddenly become unacceptable especially due to the economic downturn and its effects on industralised nations and the underdeveloped ones.

According to Hon. Fraser, the circumstances are that the Virgin Islands is operating under standards established by international organizations such as the Organization for Economic Cooperation and Development (OECD); And the International Monetary Fund (IMF), in addition to a series of local laws to ensure compliance and that the practice under those same set of rules amounts to the promotion of tax avoidance.

“And this is where I think our Government is missing the boat; they are arguing the facts, instead of arguing the circumstances. There is no question in my mind that the practice was acceptable (whether the FSC) knows this I can't say but what has happened is, because of the terrible economic downturn globally, particularly in the industrialized world, and the devastating impact indirectly on the undeveloped world, they are looking for a scapegoat, and places like the BVI are prime,” said Hon. Fraser.

According to News Asia, Cameron had sent a letter to 10 British crown dependencies and overseas territories regarding the critical issues of tax information exchange and beneficial ownership, “a practice which uses a nominal third-party resident in a low-tax state to shield income from taxation”.

The UK has been an active co-conspirator in the matter, because they are the major benefactor, given that that is where the lion's share of the $32 trillion claimed to be in tax avoidance is being banked, according to Hon Fraser who further explained that even now former UN Secretary General Kofi Annan, and OXFAM are calling for drastic and immediate action.

He went on to justify his position by explaining that the Global Financial Integrity (GFI) lauded Annan and the Africa Progress Panel (APP), for highlighting the devastating impact that illicit financial outflows have on economic development and poverty alleviation across the continent of Africa in the 2013 Africa Progress Report published on May 10, 2013.

According to The Global Financial Integrity's President Raymond Baker, a longtime authority on financial crime, “Illicit financial flows, facilitated by tax haven secrecy and anonymous shell companies, are the most damaging economic problem facing the African continent.”

GFI’s research shows that illicit financial outflows cost Sub-Saharan Africa $385 billion between 2001-2010.  That’s nearly $400 billion that could have been used to invest in healthcare, education, and infrastructure—that could have been used to pull people out of poverty and save lives. 

“What the BVI has to fear is the fact that the Africa Progress Panel's report has cited The Global Financial Integrity's research on illicit financial flows and calls upon the G8 to require full, public disclosure of the beneficial ownership information of all corporate entities within the next year,” said Hon Fraser.

He continued, “I have always contended that the UK, despite its involvement and undeniable benefits, will sooner rather than later conveniently push the BVI under the proverbial bus, since it (the UK) has much more to gain on the International stage by cooperating.

Last month, UK Prime Minister David Cameron called for the G8 to endorse public registries of beneficial ownership information—effectively banning anonymous shell companies. Kofi Annan’s endorsement raises the pressure on the United States, Canada, Japan, Russia and other G8 members to follow suit with full public registries, explained Hon Fraser.

According to the News Asia report, Prime Minister Cameron wrote "As you know, I have made fighting the scourge of tax evasion and aggressive tax avoidance a priority for the G8 Summit which the UK is hosting next month."

The Virgin Islands is among the ten Territories written to by the British Prime Minister Cameron. However, according to Hon Fraser, it is his opinion that the NDP Government is treating the issue as they are local politics. He said that they are still in a state of denial and the sooner that they would deal with the facts the better they would be.

The other Territories written to are Bermuda, Cayman Islands, Gibraltar, Anguilla, Montserrat, Turks and Caicos Islands, Jersey, Guernsey and The Isle of Man.

Prime Minister’s letter to UK Overseas Territories on tax information exchange

“As you know, I have made fighting the scourge of tax evasion and aggressive tax avoidance a priority for the G8 Summit which the UK is hosting next month. With one month to go, this is the critical moment to get our own houses in order. I am looking to all the Overseas Territories and Crown Dependencies to continue to work in partnership with the UK in taking the lead on two critical issues: tax information exchange and beneficial ownership.

Let me set out exactly why. I have said before that I want to see the Overseas Territories and Crown Dependencies flourish, and I respect your right to be lower tax jurisdictions. I believe passionately in lower taxes as a vital driver of growth and prosperity for all. But lower taxes are only sustainable if what is owed is actually paid - and if the rules to achieve this are set and enforced fairly to create a level playing field right across the world. There is no point in dealing with tax evasion in one country if the problem is simply displaced to another.

So I very much welcome the commitments you have made to automatic tax information exchange, both on a bilateral and multilateral basis, which will help us to reach our goal of setting a global standard in tax transparency. There is a critical mass building. Last week’s European Finance Ministers meeting showed that the EU is getting on board. And I hope others around the world will follow the lead we are setting together.

We also need to ensure information exchange works effectively for all, particularly the poorest countries in the world. That is why we strongly support the Multilateral Convention on Mutual Assistance in Tax Matters. I know many of you have been considering joining and I ask you all to commit to do so in the run-up to the G8 Summit.

But dealing with tax evasion is not just about exchanging information. It is also about improving the quality and accuracy of that information. Put simply, that means we need to know who really owns and controls each and every company. This goes right to the heart of the ambition of Britain’s G8 to knock down the walls of company secrecy.

Some of you have already led the way with public commitments to produce Action Plans on beneficial ownership - and I hope those who have yet to can do so as quickly as possible. Getting the right content in these plans will now be critical. These will need to provide for fully resourced and properly managed centralised registries, that are freely available to law enforcement and tax collectors, and contain full and accurate details on the true ownership and control of every company.

As we continue our negotiations over the coming weeks, I look forward to working with you to ensure we fully meet the spirit as well as the letter of the Financial Action Task Force standards on beneficial ownership. The UK is hosting a high level event on 15 June to showcase progress on tax, trade and transparency, and I hope you can join us on the day to showcase the progress you have made. This is a real opportunity to set the global standard on transparency - and I am confident the Overseas Territories and Crown Dependencies will rise to the challenge.

David Cameron.