With the legislative aid of the “International Tax Authority Act, 2016” the BVI has taken a proactive step to ensure that unfortunate blacklistings of the past, such as the highly regrettable French one of 2013 does not reoccur.
The thorny situation of the BVI being added to list of uncooperative jurisdictions occurred in late August, 2013 when France blacklisted the BVI along with Bermuda and Jersey.
Even more troubling was the fact that the blacklisting came with a withholding tax of 75% on transactions that involved payments to the territory and the extra scrutinizing of French companies’ subsidiaries or French nationals who do business in the BVI.
Now, after a steep fight to erase the Territory’s name from the list Government is making good on a promise that was made during the removal process to ensure that the BVI is not deemed uncooperative in the future. This intention is being bolstered with the Tax Authority Legislation that was debated in the House of Assembly on 14 March.
Presenter of the Bill Premier and Minister for Finance, Dr. the Hon. D. Orlando Smith recalled the 2013 blacklisting and the fight government had to endure to remove the BVI from France’s list of uncooperative jurisdictions and also noted that the situation was compounded by the Territory’s subsequent receipt of a low rating from the Organisation for Economic Cooperation and Development (OECD).
“Madame Speaker a few years ago this country got into a bit of hot water, so to say, with the French and with the OECD, because we were not responding timely for request for information as we should have been responding based on the tax information agreement that we have with many countries. It took us a little while to get out of that trouble Madame Speaker,” Hon. Smith recalled.
The Premier said that as a means of cooperating with tax information agreements an ad hoc entity – The International Tax Authority (ITA) – was created to deal with the requests, which were being mostly dealt with, at that time, by the Ministry of Finance.
“Madame Speaker after the establishment of the ITA it took a little while but we eventually got out of that and were able to be removed from the French blacklist and also have a good standing with the OECD. When this happened…it did cause a bit of concern. Quite a considerable bit of concern within the industry, and consequently to the BVI Government.”
In stressing the importance of ITA, Premier Smith said that it behooves the Territory to maintain its reputation as a well-regulated financial center in order to remain at the level it currently operates. In fact, Hon. Smith said that since the appropriate steps were taken to create ITA the BVI has witnessed more and more requests for information: “After we got going and got things corrected we now are seeing more and more requests coming from the different bodies,” the Premier said.
About the Legislation
“In its wider context it is something that is probably long overdue,” Deputy Premier and Minister for Natural Resources and Labour, Dr. the Hon. Kedrick Pickering said in summing up the International Tax Authority Act. He explained that the Bill in its truest form gives functionality to pieces of legislations that were previously enacted in the House of Assembly, and stressed that there is nothing onerous about the Bill. Hon. Pickering further noted that the Bill creates a more surgically cohesive approach to financial services as it relates to the prevention of blacklisting in reference to information exchange; he disclosed that the Territory has been accused of being tardy with its international request response in the past:
“This Bill seeks to put an entity together called the International Tax Authority that will be responsible for helping to ensure that we live up to our obligations in this particular space, in this arena so that when information is requested it doesn’t get lost from one Department, from one agency to a next. Sometimes we miss critical deadlines and that is what gets us into trouble. Sometimes we are not on top of things in a way that we should be; so to ensure that our international reputation continues to be above board…this is another of those mechanisms that we are putting in place to show the world that we are serious about the business that we are in and that we can compete and will continue to compete,” Hon. Pickering added.
Similarly, Minister for Health and Social Development, Hon. Ronnie Skelton stressed that the ITA will ensure that the Territory meets its information exchange mandate with promptness: “Going on to the world stage there are certain things required of us and we must be able to respond timely. We cannot afford for international requests to us to be bogged down in bureaucracy, and inefficiencies so to speak.”
He said that the present Tax Authority as it is made up is doing a fantastic job in getting the requests to the various authorities around the world as quickly as possible, but Hon. Skelton explained that government sees the setting up of the Authority as a necessary statutory entity.
The Board of the International Tax Authority will be chaired by the Financial Secretary, and includes the Attorney General, and the Managing Director of the Financial Services Commission, the Director of the Tax Authority, and the Director of the Financial Investigation Agency.