As a regular visitor to Barbados, I am concerned with what I am reading in the mainstream media in Canada and Barbados and the blogs. Tourism is in the tank, and the Ministry is creating two new entities to replace BTA. So now there will be two layers of bureaucracy. That should really speed things up. The Minister heads a delegation to Miami to convince the cruise lines to send more ships. I may be wrong, but I think I read somewhere that Barbados pays the cruise lines to dock at Bridgetown port; and less than 20% of the passengers disembark and spend money in Bim.
The matter about which I write is the “Tax-Haven” issue. I see that the post Low Tax Haven Jurisdictions Under Scrutiny has slipped into the older posts and is generally out of view. I may be over-reacting to or over-concerned with the Tax-Haven issue; but I think the discussion is important and should be kept in the forefront, so the Barbados authorities can not simply bury their heads in the sand.
I am repeating myself in some of the following, but I think it warrants repeating. According to recent media reports in Canada, Canadians or non-resident Canadians have $53 billion invested in Barbados in 2011. Whether Barbados is in fact a “Tax-Haven” is open to debate. In Barbados it is referred to as Foreign Direct Investment; In Canada it is being referred to as “off-shore” investments.
BUhighlighted the plight of an 80 year old Canadian man on October 18, 2008 who alleged that he had been swindled by an offshore company based in Barbados. The Barbados based offshore company Bridge Management (Barbados) Incorporated reportedly received several million dollars from many Canadians who now seem to be fighting a losing battle to redeem investments. Some frustrated investors in Bridge Management Barbados Inc have since used the BU blog to exchange information and extend moral support during this time of great anguish.
In keeping with our promise to be transparent in how we operate, BU has taken the decision to apprise the BU family of an unfolding situation. Yesterday (4 January 2010) we received an email threatening legal action if we did not withdraw certain information from the blog referred to above. We have sought a legal position and BU’s position is our blog did not defame the person purporting to be Frank Mastrocola. However, out of an abundance of caution we have taken certain actions which are outlined in the document attached.
We ask the BU family to continue to be responsible when posting comments and continue to use BU as a vehicle for freedom of expression.
Coming out of the G20 summit in London this week Barbados would have derived great satisfaction when the OECD published late last night (02 April 2009) its revised Tax Haven List. The List is divided into four categories:
International wires are buzzing today with the news that US Security Exchange Commission (SEC) regulators have charged Antigua based Sir Allen Stanford of ‘massive, ongoing fraud’. The SEC has alleged that Sir Allen has been perpetuating fraudulent transactions through his Antigua based Stanford International Bank.
The Texan billionaire Allen Stanford has become a household name in the Caribbean despite the failure of Caribbean Star. The memory of his failed airline has been replaced in recent times with the very popular Stanford 20/20 cricket series.
Following on the news of the CLICO Affair should we conclude that the tumultuous global financial markets maybe starting to unload on the ‘quiet’ region of the Caribbean region?
Unlike the CLICO Affair which has direct implications for several economies across the Caribbean, the Stanford International Bank probe is restricted to the Antigua market. Some BU family members may challenge the fact that the Caribbean maybe tarred with the same brush given the tendency by outside markets to view the Caribbean region as one area.
Iraqi Government May Ban Blackwater Security Group
An incident that left eight Iraqi civilians dead has raised concerns about the private military contractor in Iraq.
By Dan Murphy from the September 18, 2007 edition
Cairo – The Iraqi government said it would suspend the license of Blackwater, probably the most famous among the armies of private security contractors working inside Iraq, after an incident in central Baghdad in which government officials alleged eight civilians were killed. The incident looks certain to rekindle the controversy of the wide role given to the contractors in the Iraq war, with critics saying that they operate outside the sorts of legal oversight and codes of conduct that restrict the behavior of soldiers in war zones.
Looks like Blackwater finally rubbed the Iraqis the wrong way. This is a classic case of how a group of people supported by a government can truly believe they can act outside the law. Good lessons which we can learn from this story.
Private security men from Blackwater in a helicopter over Baghdad. Photograph: Antonio Scorza/AFP/Getty images
On Thursday, 02 August 2007, BU wrote a piece entitled “The Re-emergence Of Russia As A Global Player And Its Alliance With China ~ What Are The Implications For Barbados?”There is no doubtthat there is a need for our politicians to understand how the policy of super powers can impact small and insignificant countries like Barbados in the context of world foreign policy. A regular BU contributor sent us an interesting article. (Thanks a lot!) For those of us who have a keen interest in world affairs, the war or invasion of Iraq depending on your view point would have been featured. We are sure some of you have had many discussions about the merits and demerits of the US led action.
What we know several years later is the script has not played-out the way President George Bush and his Cabinet had planned. Today, we have an Iraq which is engulfed in a civil war, there is a government which has been “elected” by the Iraqi people, but more ominous is the inability of Iraq to protect itself without the help of the USA. Pundits all believe that the pretense by Rumsfeld and Bush to go to war with Iraq was all about gaining control of one of the world’s major oil supplies and less about Saddam Hussien being a sponsor of world terrorism. Since the destruction of Iraq, the country has had to be rebuilt, and we now have the interesting development of a war torn country which continues to be very unstable, but at the same time many Western contractors have been encouraged to work at premium rate, to supply many services to the country. This opportunity to work for good pay in Iraq has seen many Westerners risking their lifes on a daily basis.
A very topical issue in Barbados in recent years has been whether Barbados needs to develop a land use policy. Very closely associated with this issue is the concern some Barbadians have shown about the character of foreign investment coming into the country, but more importantly the ease with which foreign investors have acquired land in Barbados. The main argument against the current trend is that Barbados is an island of 166 square miles and to sell significant portions of land to non Barbadians is a policy which has led to inflated land prices and will lead to social fall-out in the not too distant future as Barbadians wake-up to the realization that owing land isn’t a reality any longer. Some may say that Barbados with no significant natural resources cannot afford to be “picky” about where the foreign investment comes from and more importantly how does the government satisfy the legitimate concerns of Barbadians?
We do not envy government on this one!
Interested in Barbados Hotel Sector
Arab News – 21/08/2007
(MENAFN – Arab News) RIYADH, 21 August 2007 – Prince Alwaleed bin Talal, chairman of Kingdom Holding Company (KHC), visited Bridgetown, capital of Barbados, on Aug. 11, 2007, and met with the Acting Prime Minister Mia Amor Mottley. Bilateral relations between Saudi Arabia and Barbados, including a number of social and economic issues between the two countries were discussed during the meeting. Mottley commended Alwaleed on his humanitarian efforts and his role in helping economic development around the world.Alwaleed also held meeting with Tourism Minister Noel Lynch which revolved around investment opportunities in the tourism sector in Barbados.
The Saudi prince’s current investments in Barbados are in the hotel sector through Fairmont Royal Pavilion resort, which has been described as “The Jewel in the Crown of Barbados” and Four Seasons hotel that is under construction and expected to open in three years.
Situated just east of the Caribbean Sea, Barbados is an independent island nation in the western Atlantic Ocean and lies in the southern Caribbean region. The economy of Barbados had been dependent on sugarcane cultivation and related activities, but in recent years it has diversified into the manufacturing and tourism sectors.
How many Barbadians are aware that the Saudi Arabians have investments in the Fairmont Royal Pavillion and Four Seasons Project in Barbados? A recent meeting with Prince Alwaleed held in Barbados with Deputy Prime Minister Mia Mottley and Minister of Tourism Barney Lynch suggests that the Barbados government is courting this most unlikely source of foreign investment. We must take our hat off to Prime Minister Arthur, he is demonstrating that he is not afraid to play in the big leagues!
Eastmond Adds Her Say On Proposed BS&T Merger Web Posted – Sat Jun 30 2007
By Stacia Browne
Commanding more than 40 per cent of the market and consolidation are the primary concerns of Senator Lynette Eastmond and one of her lead agencies, the Fair Trading Commission, in their assessment of the race for local conglomerate BS&T. Speaking at a press briefing yesterday, the Minister of Commerce, Consumer Affairs and Business Development stated that the issues which fall to the regulation of Government have to do with the proper regulation of the market.
Each and every time BU read or listen to Senator Eastmond of late we struggle to keep our hope alive that she is the right person to run such an important ministry. BU wonders if a person with an established track record in business would not do a better job. We of course mean nothing personal towards the lady. She is easy on the eye, articulate and one could easily see why in a country where there is a dearth of local knowledge about consumerism and commerce willing to enter politics, why she would hold-on to her job.
The latest “foolish” statement is the assertion that because the Fair Trading Commission has performed some ratio analysis which points to the proposed merged entity of Neal & Massy, BS&TT not owning more than 40% in any of the business sectors they currently operate, the deal would have no effect on the economy of Barbados. On that basis she is has given her blessings to deal! When BU read this news it reinforced in our minds why the business sector in Barbados has been so passive under this Barbados Labour Party government. BU yet again wishes to reiterate that we have no problem with foreign investment flowing into Barbados. In a free market world if we have to manage a mixed economy it is inevitable that any government of Barbados must formulate a strategy to encourage the right mix of investment that will strengthen our business sector to be able to compete. More importantly is the need to shift to export oriented enterprises that will allow small and vulnerable economies like Barbados to support the high standard of living we currently enjoy.
Selling our finite land resource and building condominiums is not a sustainable solution!
Globalization, a widely used term, can be referred to as the increasing interconnectedness and geographical scale of economic, social, and political interaction. Globalization includes actions to reduce and/or remove barriers to international trade, while promoting new technologies and allowing technologies to be marketed globally. It also involves both national and international policy measures to support expanded transport investments.
(Capineri and Leinbach, 2003; Janelle and Beuthe, 1997)
BU does not intend to bore our readers with all the technical lingo of how globalization and the collateral issues should be defined. We are simply seeking to address issues which resonate with the Barbadian and Caribbean publics. The dominance of Trinidad in the economy of Barbados is already a reality; although the current proposed mergers are being promoted on the basis that as a CARICOM people we need to leverage the resources to combat the onslaught of globalization, Barbadians, like the Bahamians are not convinced that we are headed in the right direction. The sad reality is that globalization by its design will change the traditional way countries have to interact; national boundaries will become blurred. It is this dynamic that will prove to be a challenge for developing countries like Barbados. We continue to look to Professor Howard and other economist out there to address in a more practical way the issue of how small countries like Barbados should chart its path in a global economy.
It has all the ingredients of a John Le Carre thriller.
Corruption, extortion, conspiracy, a company chief executive pleading guilty to bribing state legislators, another employee appointed to oversee the firm’s project in Barbados committing suicide, one Senator being investigated by the FBI and others being pressured to resign. At least 7 persons have so far been charged with serious criminal offences in connection with a corporation called VECO.
Haven, I’m in Haven,
And I pay no taxes so I can compete,
Liberal Loopholes make it such a simple feat.
Trickling down to my Barbados Tax Retreat.Haven, I’m in Haven.
Please excuse me if it sounds like my conceit.
Some pay taxes but for me they’re obsolete.
Trickling down to my Barbados Tax Retreat.
Well I love to have fine health care, And good pavement on my street. But it doesn’t thrill me half as much, As the taxes I can beat.The Waiters wait on tables, And the farmers grow their wheat And the losers pay their taxes, While I live on easy street.
Haven, I’m in Haven.
You stay home and pay your taxes, don’t you cheat.
But come visit, drinks are on me, no receipt,
Trickling down to my Barbados Tax Retreat.
Haven, I’m in Haven. And I love to gaze upon my balance sheet. It’s so sweet to be the Corporate Elite, Trickling down to my Barbados Tax Retreat.
A boast of the current administration is the growth of the offshore sector and specifically the International Business Companies (IBC’s). BU did a Google and the Barbados.org website informs that there are approximately 1000 IBC’s operating in Barbados. People in the sector readily admit that the majority of the IBCs and Captive Insurance companies originate from Canada because of the generous double taxation treaty arrangement which has been in position for some years now. It is known that Barbados has enjoyed a healthy relationship with Canada since the days of the late Canadian Prime Minister Pierre Trudeau. The bad news is that Barbados as a tax haven or nest to Canadian companies- whatever we chose to call it days maybe numbered.
Today the Canadian Press reported the Finance Minister Flaherty as saying the following:
“But Finance Minister Jim Flaherty remained adamant Monday that he won’t buckle under to demands that he permit Canadian businesses to continue to deduct interest charges on foreign investments in both Canada and abroad through the use of any low-tax third country, or tax haven. They will be allowed the deduction in just one jurisdiction.”
The good news is that Canadian companies operating in foreign markets and specifically Barbados have been given five years to stop the practice commonly known as “double dipping”. Of course Senator Eastmond and her government will take comfort in the fact that five years is a long time in politics and policies can change if a another person were to take up the office of finance minister in Canada. Although Barbadians must be grateful for the grace period, it provides little comfort in the shadow of what the OECD attempted to do to small offshore jurisdictions like Barbados a couple years ago.
BU derives little comfort in highlighting the fickle nature of the offshore sector and how with the stroke of a pen the sector in domiciles like Barbados can be decimated. Mia Mottley last year touted the news that Barbados had signed tax treaties with India and the Netherlands but our best investigation has not indicated any significant activity originating from the two jurisdictions that would fill the void left if Canadian companies were to leave in mass. Senator Eastmond may respond that although the “double dipping” is a very attractive incentive there are other benefits that should encourage Canadian companies to set-up or to remain in Barbados. At BU we prefer to operate using worst case scenario planning, that way Barbados operates from a win-win position. It is a strategy that the Barbados CWC 2007 organizers should have adopted when we consider how the exit of India and Pakistan struck the organizers for six.
It is not our intention to paint a picture of doom and gloom but unfortunately we have to call it like we see it. So often in our small island we have given lip service to the Singaporean model of development, but lack the commitment to implement similar policies which have worked for the Singaporeans. For example, in Singapore it is mandatory that as a prerequisite for any IBC establishing operations the local cadre of management must be trained by the expatriates in the first 2-3 years of start-up. So that long before the tax holidays expire the companies can easily continue to operate with local management. In Barbados it appears that IBCs are given generous tax benefits but appear not to be obligated to transfer skills to local management. Under this arrangement many of the companies leave when tax holiday expire and leave a shell behind with workers scrambling to re-establish themselves in the market. We are also concerned that when BU attempted to solicit information from the BIDC and the Ministry of Commerce about the criteria around how IBCs have been given tax holidays, we were told it is private business. Why should this information be kept private? After all a tax holiday using the principle of opportunity cost represents lost of revenue to the tax payers of Barbados.
Perhaps Senator Eastmond who has shown the inclination to respond to comments on the blogs can enlightened the BU readership.