BVI Gets Mixed Reviews From Tjn Report


By Mellica McPherson-Ganda

The model of the BVI financial services sector was described as “evil” by the Tax Justice Network (TJN) in a November report. The report which lists the Territory on TJN’s Financial Secrecy Index described the local financial services industry as “lax, flexible, ask-no-questions, see-no-evil company incorporation regime

However, it appears the tables have turned as a new ranking by one the Territory’s harshest critic –Tax Justice Network not only lists the BVI on its Financial Secrecy Index; but also France which blacklisted the BVI, the mother country United Kingdom and the United States are all prominently featured.

The Index which Tax Justice Network published on 2 November, ranks jurisdictions according to their secrecy, and the scale of their offshore financial activities. The organization noted that the ranking is politically neutral and is a tool for understanding global financial secrecy, tax havens or secrecy jurisdictions, and illicit financial flows or capital flight.

On the index, the Territory is listed as number 21– with UK Overseas Territory Cayman Islands at number five, USA at number three, and UK at 15. Although on the Index the BVI is at the 21, TJN in its Narrative Report ranks the Territory at 24.

Under the heading “British Virgin Islands: history of a Caribbean tax haven” TJN explained why the Territory was on the list “The British Virgin Islands (BVI) is ranked at 24th position in the 2015 Financial Index. It has a relatively high secrecy score of 60, though it accounts for only a small share of the global market for offshore financial services. Yet its relatively low ranking in our index seriously understates its true importance in the world of offshore secrecy, as this report explains.”

“The secrecy here comes most importantly from the BVI’s lax, flexible, ask-no-questions, see-no-evil company incorporation regime, which allows owners of companies to hide behind ‘nominees’ to achieve strong secrecy , and to set up companies quickly and at low cost. This supposed ‘efficiency’ of incorporation has translated into carte blanche for BVI companies to hide and facilitate all manner of crimes and abuses, worldwide. This tiny state where financial services directly make up around half of government revenue is a quintessential example of a jurisdiction captured by offshore financial services, with almost no local dissent against offshore finance.”

In the Report TJN explains why it and other similar organizations continue to refer to the Territory as a tax haven: “BVI has almost no taxes: no effective income tax, no capital gains tax, no inheritance taxes, no gift taxes, sales taxes or even value added taxes. It raises income mainly through payroll taxes, land taxes and various fees. This is a classic ‘tax haven’ pattern of creaming small amounts each time from a large numbers of transactions, and relying on locals to pay the bills.”

Under the sub-heading “Scandal after scandal but the ‘captured state endures,” the document cited examples such as the 2014 information leaks, and the ICIJ reports to support its claims of secrecy: “Given this history and wide range of potentially abusive facilities offered out of the BVI, it is hardly surprising that the islands have been linked to scandal after scandal,” the report noted.

While the TJN agreed that the Territory has made cooperative moves, and was given great reviews for accenting to reporting mechanisms like FATCA, it did dismiss the praises by stating: “Yet alongside these broadly positive moves the BVI has been involved in several retrograde steps too.”

The Report further suggests that BVI is not very compliant: “First, the BVI has a long record of noncompliance with its own laws, and of putting up hurdles in the way of information exchange, as various examples in this report attest. Obtaining information often requires hefty work in BVI courts, and the BVI has tended to respond favourably only when the country requesting information is powerful, and when relatively small fry clients are involved.”