TAX HAVENS AND THE CARIBBEAN: A SUNNY PLACE FOR SHADY PEOPLE? Anthony D.J. Gafoor Trinidad & Tobago...
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Transcript of TAX HAVENS AND THE CARIBBEAN: A SUNNY PLACE FOR SHADY PEOPLE? Anthony D.J. Gafoor Trinidad & Tobago...
5th IATJ Conference, Washington, 2014 1
TAX HAVENS AND THE CARIBBEAN: A SUNNY PLACE
FOR SHADY PEOPLE?
Anthony D.J. GafoorTrinidad & Tobago
2
TAX HAVENS: DEFINITION• The term “tax avoidance” can be found as early as the
1850s and the term “tax haven” has been widely used since the 1950s (Palan, Murphy and Chavagneux, Tax Havens: How Globalization Really Works, 2010)
• “In truth, the term tax haven is a bit of a misnomer because these places offer an escape not just from taxes but from many other rules and regulations too....The common feature of tax havens is that they offer secrecy.” (Shaxson, Treasure Islands: Uncovering the damage of offshore banking and tax havens, 2014)
• “A tax haven is simply a country that allows you to reduce the amount of tax you pay.” (Hadnum, The World’s Best Tax Havens, 2013)
5th IATJ Conference, Washington, 2014
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CARIBBEAN – WORLD’S MAIN OFFSHORE FINANCIAL CENTERS
• Due to the colonial experience, the Caribbean has multiple identities – Spanish, French, English, Dutch.
• The focus here is in the Anglo Caribbean• The Caribbean islands are among the world's
main offshore financial centers. • More than 1m offshore companies are registered
in the British Virgin Islands alone, even though the total population is just 30,000.
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MANY CARIBBEANS
5th IATJ Conference, Washington, 2014 5
THREE TYPES OF TAX HAVENS• Hadnum identifies three main types:
Nil tax havens Foreign Source Exempt Havens
Low-Tax Havens
5th IATJ Conference, Washington, 2014 6
NIL TAX HAVENS• No income/corporate tax; capital
gains tax; inheritance tax)• In the Caribbean, these include
the Cayman Islands; St. Kitts and Nevis; The Bahamas; Bermuda; The Turks and Caicos Islands; and Anguilla
5th IATJ Conference, Washington, 2014 7
FOREIGN SOURCE EXEMPT HAVENS• Taxes are levied only on locally derived
income; foreign income is exempt provided no local business activity is involved• No Caribbean countries appear to fall
into this category; the closest example would be Panama which is geographically part of Central America though with a strong Caribbean connection
5th IATJ Conference, Washington, 2014 8
LOW TAX HAVENS• Low-Tax Havens: (residents’ worldwide
income is taxed but some countries offer tax advantages in special circumstances such as the ability to avoid capital gains tax; use of double taxation treaties also result in a lower tax bill)
• This includes the majority of the other Commonwealth Caribbean jurisdictions such as Trinidad & Tobago; Barbados; and Jamaica among others)
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CARIBBEAN CONTEXT• Issues of morality and ethics frequently surface
in relation to tax havens in the Caribbean because of capital flight by corrupt administrators and governments• In the Caribbean, tax havens are frequently
associated with tax evasion and corrupt leaders• This has given rise to debate as to whether the
Caribbean is a shady place of sunny people or a sunny place for shady people
5th IATJ Conference, Washington, 2014 10
CARIBBEAN CONTEXT• Of the 28 world best tax havens, approx. 9
are located in the Caribbean region• These are: Anguilla; Bahamas; Barbados;
Belize; Bermuda; British Virgin Islands; Cayman Islands; St. Kitts and Nevis; and the Turks and Caicos Islands
(Source: Hadnum, 2013, The World’s Best Tax Havens)
5th IATJ Conference, Washington, 2014 11
CARIBBEAN CONTEXT• Anguilla (no income tax; inheritance or estate
tax; capital gains tax; gift tax; or corporation tax)
• Bahamas (no income tax; corporation tax; capital gains tax or inheritance tax) (but there are other taxes such as stamp duty and property taxes)
• Barbados (no CGT or IHT and gift tax; but there is income tax and VAT (17.5%); corporation tax (25%)
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CARIBBEAN CONTEXT• Belize (No CGT or IHT but income is taxed at
25%)• British Virgin Islands (no CGT; income tax;
corporation tax; inheritance tax or sales tax) (but there is payroll tax of 14% and social security tax of 8½% only if working there)
• Cayman Islands (no income tax; corporation tax; CGT or IHT or estate tax)
5th IATJ Conference, Washington, 2014 13
CARIBBEAN CONTEXT• St. Kitts and Nevis (no personal income
tax bit corporation tax is 35% though offshore companies are exempt; there is also 10% withholding tax; no CGT)• Turks and Caicos Islands (no income tax;
CGT or IHT) (there is stamp duty and the recent imposition of VAT)
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CONCLUSIONS• No universally accepted definition of a tax haven• Most countries offer some fiscal incentive - referred
to as Preferential Tax Regimes (PTRs)• No clear dividing line between PTRs; tax havens and
offshore financial centers• The traditional secrecy rules have been greatly
impacted upon by exchange of information provisions and FATCA with particular reference to US private and corporate citizens operating within the Caribbean