Thirty-four companies in Barbados are allegedly listed among the thousands named in the 11.5 million confidential papers leaked from the Panamanian law firm Mossack Fonseca, detailing the establishment of offshore companies for the global elite. However, Executive Director of the Barbados International Business Association (BIBA) believes that while this may be an area to watch, there is no reason for Barbados to panic.
“Developments of this sort are typically a cause for concern for us, as Caribbean and Latin American international financial centres (IFC) are always tarred with the same brush,” says Mr Holmes. “However, we must be confident about what Brand Barbados stands for and focus on the continuous improvement of what this jurisdiction offers, both in terms of products and providers,” he said.
The Executive Director made reference to the recently enacted Corporate & Trust Service Providers Act which has initiated the process of licensing and regulating firms providing corporate, trust and management services to international companies and investors.
“The setting up of corporate structures in IFCs for the purpose of global tax minimisation is not an illegal activity,” states Mr Holmes. “However, since the beginning of the global financial crisis and its deleterious effect on the tax revenues of the developed countries the offshore financial centres have been targeted as the reason and made to suffer vilification and harassment”.
“The motivation for this seems very much a political reaction to moral outcries of the citizens of these countries who, with their limited understanding of how economies work, are of the view that the companies that are practicing global tax planning are not paying their fair share of the tax and therefore engaging in something that is dishonest,” said the Executive Director. “Perhaps there are circumstances where the individuals behind the corporate structures are under a duty to declare the existence of these types of companies and when they don’t this may lead to the view that they are hiding something, or worse engaging in something that is illegal”.
OECD’s Secretary-General Angel Gurría issued a statement that the Mossack Fonseca leak “shone the light on Panama’s culture and practice of secrecy”. He described Panama as “the last major holdout that continues to allow funds to be hidden offshore from tax and law enforcement authorities”, and said the OECD has been “consistently warned of the risks of countries like Panama failing to comply with the international tax transparency standards.”
“One can only surmise from his comments that more pressure, and blacklisting / naming and shaming of this type will follow, whether it is warranted or not,” said Mr Holmes.
“Barbados does not have a reputation for secrecy. We are perceived as a well regulated jurisdiction insisting on transparency,” he continued. “The question you may wish to ask is “If a list of companies incorporated and managed by a law firm in Delaware, Nevada or Wyoming was to be leaked would the global reaction be the same?”
Minister of Industry, International Business, Commerce and Small Business Development, and Vice Chair of the Steering Group of the Global Forum on Transparency and Exchange of Information for Tax Purposes within the Organisation for Economic Cooperation and Development, Donville Inniss noted in a recent Press Release, that Barbados has long embraced transparency and the exchange of tax information between governments. As evidenced, Barbados has officially and publicly endorsed the OECD’s Global Standard for the Automatic Exchange of Information and has agreed to facilitate compliance with the US Foreign Account Tax Compliance Act.
“Additionally, beyond being highly cooperative and transparent, Barbados’ position as a preeminent low tax jurisdiction attracts business of substance and ethical business structures that provide significant benefits to both domestic markets and the global economy,” said Minister Inniss.