I must thank all those persons who, on Monday November 8, 2010, took the time in so many ways and via all sorts of media to extend birthday greetings to me. It was not expected; it was not necessary; it was not sought after but it was extremely gratifying to know that there were still quite a number of people who thought enough of me to want make that day seem special. I was especially pleased to receive a call that evening from the Hon. Evan Gumbs, my elected representative, also expressing his best wishes --- it was indeed very courteous and gracious of him. The truth is that I cannot recall any birthday that I received this level of attention. One of my friends suggested, humorously, that most of the calls were simply to find out my age so that they could play it in the Spanish Lottery. To which I replied that first of all the lottery has been closed down and secondly most of my friends already know that were it not for bad luck in such games of chance I would have absolutely no luck at all.
It was a refreshing change to hear kind words pouring out from radio stations that normally act as “bully pulpits” for my detractors. And even though I knew that it would be only for a couple of hours --- it reinforced my belief that perhaps we ought not to take these things personal. Of course that is easy for someone to say whose name is not constantly the topic of negative conversation --- when one is continually being maligned by some uninformed “talking heads” who relish in the opportunity to expound on matters that they know precious little about. And some “so-called” journalists whose knowledge of what constitutes a reliable source, is tempered by partisan affiliations and delusions of grandeur.
In my article last week I dealt with the overwhelming discussion by the Chief Minister on transshipment I will return to that later in this piece but I must mention an important item he breezed over in that press statement because it has value for our economic development. The Chief Minister said that while he was in Barbados he visited the Canadian High Commission to sign another “TIEA”. A “TIEA” is a Tax Information Exchange Agreement which, of course, means exactly what it says that is an agreement to exchange information on tax matters. It would be realized that Anguilla being a “no tax” jurisdiction as far as direct taxes on income is concerned would have less to benefit from such agreements. And the fact that the amount of our nationals or Anguillian companies operating in other jurisdictions is much less than the other way around would certainly require us to provide more information than we receive. To arrive at some parity in these agreements it is therefore necessary for a developed country to provide some concessions or incentives to small places like Anguilla all of which would form a part of these agreements. During my tenure as Minister of Finance I signed the first eleven of these with a number of European Countries and Scandinavian Countries as well as New Zealand, Faroes Islands and Greenland. The Chief Minister would have subsequently signed with Germany and Australia just over a month after coming into office and with Canada just two weeks ago.
The importance of the TIEA’s is the fact that as we increase the number of signed agreements we improve our rating as a cooperative jurisdiction and as such avoid the negative “black, grey and white listing” labels that affect our ability to be a serious player in Financial Services. Like it or not Financial Services is the other important plank of our development strategy and has the capacity, if we can achieve a viable niche market, to equal Tourism in its contribution to our economy. I therefore congratulate the Chief Minister and the Government for pursuing this course and rather than being xenophobic, they are trying to understand the requirements for exploiting the opportunities that this may create. My satisfaction is based on the fact that while in Opposition the Chief Minister was very critical about regulation and oversight measures being implemented through legislation in the House of Assembly and of the fact that the Governor was ultimately responsible for the regulation of the financial sector.
There is of course much to be concerned about with the trends in promotion of international cooperation in tax matters. Small states like Anguilla could have their financial sector regulated out of existence by many of the models that developed countries have been seeking to impose under the guise of eliminating “harmful tax practices”. In recent times however, the OECD (Organization for Economic Cooperation and Development) has put together a Global Forum Working Group that seeks to incorporate all the interests of non-OECD countries in arriving at an effective model for dealing with international tax matters. By involving non-OECD member states in the “rule-setting” process and the design of the model agreements, the OECD has been able through the Working Group to establish a much more level “playing field” for international cooperation in tax matters.
The TIEA that the Chief Minister signed with Canada presents some very interesting possibilities for Anguilla. Canada unlike many other developed countries fully subscribes to the theory that “going international” is healthy for their countries business; that the waiving of tax for legitimate structures is better than loosing it all through money hidden offshore, and; that an incentive process ensures that the cash will ultimately be repatriated to be utilized in the parent country or reinvested thereby stimulating business in general. The new TIEA announcement means that Canadian corporate investors are entitled to exemption from the normal 36% tax in dividends or capital gains received from their subsidiary companies in Anguilla. This can be a very lucrative marketing initiative for Anguilla. Barbados that has always maintained a double taxation agreement with Canada has benefitted from Canadian corporate investors with an estimated CAN$38 billion in 2008. The advantage for Anguilla if we were to pursue this opportunity is that unlike Barbados we do not have local income and capital gains taxes and would therefore be more attractive to Canadian companies operating in our jurisdiction.
The interesting reality is that before 1995 when the Canadian treaty with Anguilla was cancelled we had and still have a number of private and public Canadian companies resident in Anguilla. They are transparent and unaffected by the tax information exchange agreements and make excellent references as models for new companies desirous of taking advantage of the positive legitimate tax savings for their investors. Like in the transshipment initiative it could be beneficial for the GoA to outsource its promotion and business development services to our knowledgeable and well-resourced professionals in Anguilla.
Speaking of Transshipment! I had the opportunity to be a guest on “In Your Face” on Saturday to an open discussion but which for the most part centered around transshipment. I was at pains to explain to my hosts, as well as certain persons who had called in, the course of action that the Government of the day took to pursue the opportunities in the Overseas Countries and Territories Association (OCTA) Agreement 1991 which created that possibility but in my estimation my efforts were in vain. It appeared that the hosts and others were intent on looking for improprieties on the part of the Government of the day rather than trying to understand genuine efforts of that Government to seek out available revenue sources at a time when donor countries had begun to suffer fatigue. On the other hand the European Union maintained a special relationship with the OCT’s as far back as 1957 in Article 131 of the Treaty of Rome where it states:
• “The purpose of association shall be to promote the economic and social development of the countries and territories and to establish close economic relations between them and the community as a whole.
• In accordance with the principles set out in the preamble to this Treaty, association shall serve primarily to further the interests and prosperity of the inhabitants of these countries and territories in order to lead them to the economic, social and cultural development they aspire.”
The very first Article 1 of the 1991 Decision gives a clear and good indication of the Council’s motivation, which reads: “The aim of this Decision is to promote and accelerate the economic cultural and social development and to strengthen the economic structures of the OCT”. It then goes on in Article 101 to describe one of the programs through the international trade sector. As has been pointed out time and time again this provision could not have been achievable without some aid or assistance from the OCT. There can be no doubt that it was up to the OCT to develop its unique program of transshipment if it wished to exploit the opportunity in this Article. That fact is obvious from the different approaches used by St. Pierre and Miquelon, Anguilla and the Netherland Antilles. But the common factor has always been that there had to be incentives. The quantum of those incentives has never been an issue with authorities and traders in the EU member states. It has always been the interpretation of whether or not what was done constituted a refund of customs duty. In fact the decision with which the British Government is now wrangling is the accuracy of the interpretation of the relevant proviso and as a consequence its liability to refund the estimated “losses”.
In my discussions on Saturday night it became obvious that the preoccupation of the hosts was with whether or not the Government of Anguilla had done anything wrong and they then extrapolated that because the Court decision came to that conclusion then it should follow that the GoA willfully and knowingly committed a fraud. For the life of me I am unable to understand why the hosts should go out of their way to support the Commission’s view when Anguilla had clear legal opinions to support its position as well as the approval of the United Kingdom. Unlike actions being taken by this present Government at every stage of the process the Government and in particular the Ministry of Finance followed good governance procedures including appropriate due diligence. In the end I was forced to suggest to one of the hosts that he was in fact making a case for the European Commission against Anguilla when there was solid grounds for our defense.
Upon leaving the Radio Station I gave the main host of the program copies of documents that explained Anguilla’s case as well as our efforts to sway the authorities at the EU/OCT Forum. Those documents clearly showed our thinking and our willingness to defend our actions at the highest level. I was therefore extremely surprised to hear that same host on another talk show on Monday night with a host who exhibits more passion than substance in his poor attempts at being a journalist. The conversation that ensued before I found other useful distractions included a statement by one of the callers that he felt there was something suspicious about transshipment when he saw Customs Officers and other officials preparing to board one of the vessels after midnight. Obviously, that caller did not realize that the nature of the transshipment arrangements required precision such that whatever time of day or night the vessel arrived the customs inspection process had to take place. The discussion that followed seemed to suggest that somebody in that Government should be held responsible for paying back the funds and one could sense that the implication was the former Minister of Finance.
As the discussions proceeded and the usual callers had their say I suddenly experienced an epiphany. It came to me that: “The talk about transshipment to day and in the past has nothing to do with whether or not the payments made constitute a refund of customs duty; has nothing to do with whether or not the British has liability for the refund of losses; has nothing to do with whether or not transshipment received the approval of the UK Government; has nothing to do with whether or not transshipment brought significant revenues to the Government of Anguilla, and; has nothing to do with whether or not there are grounds to appeal the EU Court decision. What really matters to many of those persons involved in this debate is that there is the feeling that someone made “a lot of money” and most importantly it was not them! May be I am late with my epiphany --- some of my readers may have already arrived at that conclusion!
Victor F. Banks
Sachasses Estate
November 9, 2010
It was a refreshing change to hear kind words pouring out from radio stations that normally act as “bully pulpits” for my detractors. And even though I knew that it would be only for a couple of hours --- it reinforced my belief that perhaps we ought not to take these things personal. Of course that is easy for someone to say whose name is not constantly the topic of negative conversation --- when one is continually being maligned by some uninformed “talking heads” who relish in the opportunity to expound on matters that they know precious little about. And some “so-called” journalists whose knowledge of what constitutes a reliable source, is tempered by partisan affiliations and delusions of grandeur.
In my article last week I dealt with the overwhelming discussion by the Chief Minister on transshipment I will return to that later in this piece but I must mention an important item he breezed over in that press statement because it has value for our economic development. The Chief Minister said that while he was in Barbados he visited the Canadian High Commission to sign another “TIEA”. A “TIEA” is a Tax Information Exchange Agreement which, of course, means exactly what it says that is an agreement to exchange information on tax matters. It would be realized that Anguilla being a “no tax” jurisdiction as far as direct taxes on income is concerned would have less to benefit from such agreements. And the fact that the amount of our nationals or Anguillian companies operating in other jurisdictions is much less than the other way around would certainly require us to provide more information than we receive. To arrive at some parity in these agreements it is therefore necessary for a developed country to provide some concessions or incentives to small places like Anguilla all of which would form a part of these agreements. During my tenure as Minister of Finance I signed the first eleven of these with a number of European Countries and Scandinavian Countries as well as New Zealand, Faroes Islands and Greenland. The Chief Minister would have subsequently signed with Germany and Australia just over a month after coming into office and with Canada just two weeks ago.
The importance of the TIEA’s is the fact that as we increase the number of signed agreements we improve our rating as a cooperative jurisdiction and as such avoid the negative “black, grey and white listing” labels that affect our ability to be a serious player in Financial Services. Like it or not Financial Services is the other important plank of our development strategy and has the capacity, if we can achieve a viable niche market, to equal Tourism in its contribution to our economy. I therefore congratulate the Chief Minister and the Government for pursuing this course and rather than being xenophobic, they are trying to understand the requirements for exploiting the opportunities that this may create. My satisfaction is based on the fact that while in Opposition the Chief Minister was very critical about regulation and oversight measures being implemented through legislation in the House of Assembly and of the fact that the Governor was ultimately responsible for the regulation of the financial sector.
There is of course much to be concerned about with the trends in promotion of international cooperation in tax matters. Small states like Anguilla could have their financial sector regulated out of existence by many of the models that developed countries have been seeking to impose under the guise of eliminating “harmful tax practices”. In recent times however, the OECD (Organization for Economic Cooperation and Development) has put together a Global Forum Working Group that seeks to incorporate all the interests of non-OECD countries in arriving at an effective model for dealing with international tax matters. By involving non-OECD member states in the “rule-setting” process and the design of the model agreements, the OECD has been able through the Working Group to establish a much more level “playing field” for international cooperation in tax matters.
The TIEA that the Chief Minister signed with Canada presents some very interesting possibilities for Anguilla. Canada unlike many other developed countries fully subscribes to the theory that “going international” is healthy for their countries business; that the waiving of tax for legitimate structures is better than loosing it all through money hidden offshore, and; that an incentive process ensures that the cash will ultimately be repatriated to be utilized in the parent country or reinvested thereby stimulating business in general. The new TIEA announcement means that Canadian corporate investors are entitled to exemption from the normal 36% tax in dividends or capital gains received from their subsidiary companies in Anguilla. This can be a very lucrative marketing initiative for Anguilla. Barbados that has always maintained a double taxation agreement with Canada has benefitted from Canadian corporate investors with an estimated CAN$38 billion in 2008. The advantage for Anguilla if we were to pursue this opportunity is that unlike Barbados we do not have local income and capital gains taxes and would therefore be more attractive to Canadian companies operating in our jurisdiction.
The interesting reality is that before 1995 when the Canadian treaty with Anguilla was cancelled we had and still have a number of private and public Canadian companies resident in Anguilla. They are transparent and unaffected by the tax information exchange agreements and make excellent references as models for new companies desirous of taking advantage of the positive legitimate tax savings for their investors. Like in the transshipment initiative it could be beneficial for the GoA to outsource its promotion and business development services to our knowledgeable and well-resourced professionals in Anguilla.
Speaking of Transshipment! I had the opportunity to be a guest on “In Your Face” on Saturday to an open discussion but which for the most part centered around transshipment. I was at pains to explain to my hosts, as well as certain persons who had called in, the course of action that the Government of the day took to pursue the opportunities in the Overseas Countries and Territories Association (OCTA) Agreement 1991 which created that possibility but in my estimation my efforts were in vain. It appeared that the hosts and others were intent on looking for improprieties on the part of the Government of the day rather than trying to understand genuine efforts of that Government to seek out available revenue sources at a time when donor countries had begun to suffer fatigue. On the other hand the European Union maintained a special relationship with the OCT’s as far back as 1957 in Article 131 of the Treaty of Rome where it states:
• “The purpose of association shall be to promote the economic and social development of the countries and territories and to establish close economic relations between them and the community as a whole.
• In accordance with the principles set out in the preamble to this Treaty, association shall serve primarily to further the interests and prosperity of the inhabitants of these countries and territories in order to lead them to the economic, social and cultural development they aspire.”
The very first Article 1 of the 1991 Decision gives a clear and good indication of the Council’s motivation, which reads: “The aim of this Decision is to promote and accelerate the economic cultural and social development and to strengthen the economic structures of the OCT”. It then goes on in Article 101 to describe one of the programs through the international trade sector. As has been pointed out time and time again this provision could not have been achievable without some aid or assistance from the OCT. There can be no doubt that it was up to the OCT to develop its unique program of transshipment if it wished to exploit the opportunity in this Article. That fact is obvious from the different approaches used by St. Pierre and Miquelon, Anguilla and the Netherland Antilles. But the common factor has always been that there had to be incentives. The quantum of those incentives has never been an issue with authorities and traders in the EU member states. It has always been the interpretation of whether or not what was done constituted a refund of customs duty. In fact the decision with which the British Government is now wrangling is the accuracy of the interpretation of the relevant proviso and as a consequence its liability to refund the estimated “losses”.
In my discussions on Saturday night it became obvious that the preoccupation of the hosts was with whether or not the Government of Anguilla had done anything wrong and they then extrapolated that because the Court decision came to that conclusion then it should follow that the GoA willfully and knowingly committed a fraud. For the life of me I am unable to understand why the hosts should go out of their way to support the Commission’s view when Anguilla had clear legal opinions to support its position as well as the approval of the United Kingdom. Unlike actions being taken by this present Government at every stage of the process the Government and in particular the Ministry of Finance followed good governance procedures including appropriate due diligence. In the end I was forced to suggest to one of the hosts that he was in fact making a case for the European Commission against Anguilla when there was solid grounds for our defense.
Upon leaving the Radio Station I gave the main host of the program copies of documents that explained Anguilla’s case as well as our efforts to sway the authorities at the EU/OCT Forum. Those documents clearly showed our thinking and our willingness to defend our actions at the highest level. I was therefore extremely surprised to hear that same host on another talk show on Monday night with a host who exhibits more passion than substance in his poor attempts at being a journalist. The conversation that ensued before I found other useful distractions included a statement by one of the callers that he felt there was something suspicious about transshipment when he saw Customs Officers and other officials preparing to board one of the vessels after midnight. Obviously, that caller did not realize that the nature of the transshipment arrangements required precision such that whatever time of day or night the vessel arrived the customs inspection process had to take place. The discussion that followed seemed to suggest that somebody in that Government should be held responsible for paying back the funds and one could sense that the implication was the former Minister of Finance.
As the discussions proceeded and the usual callers had their say I suddenly experienced an epiphany. It came to me that: “The talk about transshipment to day and in the past has nothing to do with whether or not the payments made constitute a refund of customs duty; has nothing to do with whether or not the British has liability for the refund of losses; has nothing to do with whether or not transshipment received the approval of the UK Government; has nothing to do with whether or not transshipment brought significant revenues to the Government of Anguilla, and; has nothing to do with whether or not there are grounds to appeal the EU Court decision. What really matters to many of those persons involved in this debate is that there is the feeling that someone made “a lot of money” and most importantly it was not them! May be I am late with my epiphany --- some of my readers may have already arrived at that conclusion!
Victor F. Banks
Sachasses Estate
November 9, 2010
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“Nothing in the world is more dangerous than sincere ignorance and conscientious stupidity” – MLK.