On October 30-31, the 2nd CARIFORUM International Financial Services Conference took place in Antigua and Barbuda at the Sandals Grande Resort. The two-day conference examined the emerging framework of governance of international finance and new non tax business models to guide the future of Caribbean financial centres in an increasingly competitive international environment. Just over a hundred experts and practitioners in the fields of financial services and international businesses attended the conference, including government ministers from across the region. The conference was hosted by Caribbean Export Development Agency (Caribbean Export) funded by the European Union under the 10th European Development Fund (EDF) in collaboration with CARICOM Secretariat, the Government of Antigua and Barbuda and the Financial Services Regulatory Commission of Antigua and Barbuda
The conference was chaired largely by Professor Avinash Persaud Chairman of Intelligence Capital and London Business School.
In the 1980’s Caribbean countries sought to develop new initiatives to ensure their survival, and they looked to the financial services sector. It was regarded as a viable option for spurring employment and development in the region and despite pressures from the international community and being labeled tax havens, the Caribbean, particularly the Bahamas and the Cayman Islands, developed a robust sector.
Hon. Baldwin Spencer, Prime Minister of Antigua and Barbuda said there continues to be “repeated demands that the region should be treated on a level playing field with financial centres in the industrialised economies using the principles of natural justice”.
In the past, Washington has complained of its wealthy citizens utilising the industry in the Caribbean and other jurisdictions to reduce their tax burden, has itself introduced a range of changes to its financial regulatory environment that regional stakeholders fear, could also undermine the viability of financial services sector within the region, for example, the Foreign Account Tax Compliance Act (FATCA).
Pamela-Coke Hamilton, Executive Director of Caribbean Export reminded delegates that the Foreign Account Tax Compliance Act (FATCA) will require US tax authorities to levy thirty (30) percent withholding tax on so call foreign financial institutions and non-financial foreign institutions where new reporting requirements have not been met. “We have been advised that this Act will require changes to IT (information technology) infrastructure in the region, changes to the legal framework governing financial services and could result in possible loss of correspondent banking relationships.
The Paris-based Organisation for Economic Cooperation and Development (OECD) has been pushing the European agenda on restricting, and in some cases, outlawing financial services in the Caribbean, threatening on occasions to blacklist countries that have failed to comply with some of its stringent policies. But the newly appointed Head of the Delegation of the European Union to Barbados and the Eastern Caribbean, Mikael Barfod, has defended the OECD position, insisting that it is aimed at tackling tax fraud and harmful tax practices.
“In today’s environment with the international financial crisis, the international taxation cooperation between governments and between tax administrations has gained in importance,” he said, noting that since 2009, there has been “major progress” in these areas.
He acknowledges that while Caribbean countries have made the effort to sign a “sufficient amount” of Tax Information Exchange Agreements (TIEA) in order to be fully accepted by the OECD, “there is more to be done in many states and the governance standards defined internationally by G20 and OECD are changing”.
Professor Persaud, responded to say that the sector “is really quite significant” to the economies of the Caribbean accounting for as much as 50 per cent of gross domestic product (GDP) for islands like Barbados and Antigua and Barbuda. “They represent a major part of tax revenues. Over the past ten (10) years they have come under tremendous pressure by the larger economies,” like London, Zurich, New York because they are under fiscal pressure themselves with little or no tax revenues and now wanting to compete with the small Caribbean financial centres.
A final draft of a Financial Services Agreement that if approved by mid2013, will create a single financial space with common legislation, regulations, administrative procedures and practices and will also provide for cross border supervision and harmonisation of standards has been developed. The proposed legislation will also facilitate information sharing and enhanced cooperation geared towards ensuring the safety and soundness of the financial services sector.