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BEHIND THE HEADLINES: Tax havens or not?


TONY BEST

BEHIND THE HEADLINES: Tax havens or not?

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Barbados may protest loudly that it isn’t a tax haven and the Organisation for Economic Cooperation and Development (OECD), the rich nations’ club based in Paris, seems to agree but two United States tax watchdogs think otherwise.
The US Public Interest Research Group (PIRG) and Citizens for Tax Justice (CTJ) have placed Barbados on their list of the “two dozen most obvious corporate tax havens” in the world for US firms seeking to avoid paying their fair share of taxes to Washington.
In a widely publicised new report, the PIRG and CTJ in Washington complained that six Caribbean islands dominate the list of countries classified as leading tax havens. They are Bermuda, the Cayman Islands, the British Virgin Islands (BVI), the Bahamas, the Netherlands Antilles and Barbados in that order. Outside of the region, the other countries pinpointed as tax haven leaders were Luxembourg, Ireland, Netherlands, Cyprus, Singapore and Switzerland.
“These 12 countries have either zero tax rates or provide loopholes that allow corporate profits to go largely untaxed in many circumstances,” according to a statement issued by the two organisations. To compile the list, the report’s authors analysed data released by the US Internal Revenue Service, on offshore subsidiaries of US Corporations.
“The data demonstrate, in an indirect way, that these companies are not playing by the same rules as the rest of us taxpayers,” the watchdogs stated.
The figures indicate that the US subsidiaries in the Caribbean earned more than US$167 billion in profits in 2010 and the offshore entities in Bermuda recorded profits of US$94 billion. Next was the Cayman Islands, where the US subsidiaries reported earnings of US$51 billion. The BVI recorded US corporate profits of US$10 billion, the same as the Bahamas, while the Netherlands Antilles had a mere U$1 billion.
The Caribbean six and other countries earned their places on the global list because they had the highest reported profits as a share of their total output pf goods and services.
For instance, Bermuda with a population of less than 70 000, recorded profits that were 1 643 per cent of GDP.
Second in line were the Cayman Islands and its 56 000 souls with 1 600 per cent share of GDP; and the BVI 1 102 per cent.
Lower down the list was the Bahamas with 123 per cent and Barbados and the Netherland Antilles, each with four per cent.
If you are taken in by the figures, then you may support the 19th observation of Benjamin Disraeli, a former British Prime Minister who was quoted as saying “there are three kinds of lies: lies, damned lies and statistics,” an observation often linked to Mark Twain, the American literary icon.
Actually, the person who gave birth to that immortal line was Leonard Henry Courtney, First Baron Courtney, a former President of the Royal Society of Statisticians between 1897-99.
Interestingly, some of the best-known US multinationals, including General Electric, Microsoft, Pfizer, Merck, Apple, IBM. Johnson & Johnson, Exxon Mobil, Citigroup, Google and Hewlett-Packard, have subsidiaries in the Caribbean and elsewhere.
In all, 372 of America’s Fortune 500 companies, the firms with the highest profits, have subsidiaries in “tax havens.” Going behind the figures, what emerges is an unbelievable picture of US corporate profits amounting to US$ 873 611 per person in Bermuda, the Cayman Islands and BVI.
But Barbadians shouldn’t feel slighted by the two watchdog bodies. Barbados remains the domicile of choice for Canadians. The capital stock held in Barbados alone by Canadians, according to the Canadian Agency, surpassed CAN$60 billion.
That was more than any other country except the US. But other Caribbean financial centers weren’t attracting chump change either Bermuda had accumulated CAN$10. 6 billion in Canadian investment, The Bahamas CAN$14.5 billion in 2010, the Cayman islands CAN$30.6 billion in 2012.
Dennis Hewlett, executive director of Canadians for Tax Fairness, a national organisation fighting against tax avoidance by Canadians, described Barbados as the “most attractive and leading country for Canadian investment overseas in tax havens or in countries with low tax rates.”
 A note of caution. These vast sums don’t remain in Barbados and other places in the Caribbean. The money is just channelled through them enroute to Russia, Germany, the United Kingdom, the United States, France, China, Italy and other rich lands, say international tax experts.
Actually, these watchdogs are using the large sums of money and are labelling the Caribbean islands as tax havens to suggest they are engaged in illegal activity, meaning tax evasion, in order to force a crackdown on the Caribbean domiciles by American  and Canadian lawmakers.
 

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