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St Vincent and the Grenadines calls for united CARICOM approach to EU demands

Monday, December 31, 2018

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KINGSTOWN, St Vincent (CMC) – St Vincent and the Grenadines is calling for a Caribbean Community (CARICOM) response to the move by the European Union regarding the establishment of international businesses in the region.

“It appears as though some have surrendered or are inclined to surrender. Others have compromised and accommodated but without any or much resistance. It is not too late for coordinated creative resistance on a broad range of issues where our interest and those of the European Union do not coincide,” Prime Minister Dr Ralph Gonsalves has said.

“Europe must not take the small states and the Caribbean for granted but our actions must speak louder than our words,” he told the Parliament during the debate on the International Business Companies (Amendment and Consolidated) (Amendment) Bill, 2018.

Gonsalves has described the move as “extra territorial legislation” by the EU.

Last week, Grenada, which is among several countries blacklisted by the European Union in 2017 as having harmful tax legislation based on EU claims that their citizens use these pieces of legislation to avoid paying taxes, repealed several pieces of legislation required for establishing international business there.

“The International Companies Act in its present construct gives incentives to foreign entities that are not domicile in Grenada and Mr Speaker it has been deem to be unfair and lacks transparency by the EU intergovernmental code of conduct group on taxation,” said Grenada's Legal Affairs Minister Kindra Maturine-Stewart as she piloted the motion to repeal the legislation.

She told legislators that in 2017 Grenada was among a group of 90 countries that the EU selected to be screened against tax transparency, harmful tax practices and base erosion profit shifting.

Maturine-Stewart said the new EU guidelines prohibit new measures that will provide for international companies to benefit but not domiciled in the state.

Apart from the International Companies Act, the government is also moving to repeal the International Insurance Act, the International Trusts Bill and the Offshore Banking Act. Grenadian legislators have termed the EU move as “imperialism is alive and well”.

St Kitts and Nevis and Barbados are reported to be crafting a path with some creative resistance, Gonsalves said.

“And I hear the language of the minister responsible for international financial services in the St. Kitts and Nevis government; in some respects, strong language. Maybe not as robust as what I am issuing here, but, nevertheless, strong language.”

He said Barbados is reshaping its tax landscape to keep the business of the international financing services because that is lucrative for them.

Gonsalves said in the case of St Vincent and the Grenadines, “we are taking, in a sense, a step backward to take two forward because there is going to be a complete review of the company law system and to look at the question of territorial taxation but that is on that front, but I am also calling for compromise, accommodation and resistance — creative resistance — on a wider range of issues beyond this matter itself.”

Gonsalves said it may well be that CARICOM did not address the matter in as coordinated a manner it should have because it is not of great moment to Jamaica, Haiti, Trinidad or Guyana.

“This affects us in the OECS — some countries more than others — and very much the British Virgin Islands which got its niche when they had the problem in Panama and they took advantage to establish 4000,000 companies or that kind of number you are talking about here. That is the bread and butter of the BVI (British Virgin Islands),” he said.

Opposition Leader, Dr Godwin Friday, said that while the prime minister hadspoken about creative resistance, the extant battle with the EU ought to be taken up at the CARICOM level.

“If Barbados is basically reducing its company taxes to zero or one per cent to comply so that the offshore sector can effectively be harmonised with its domestic legislation, that's a measure that they are supposedly calculating whether they would lose or gain more, based on that measure that they are adopting.

“In St. Vincent, we've gone the opposite way. We say we are going to harmonise the tax rate, IBCs or business companies, whether local companies, at 30 per cent. What are we offering to attract those persons who would invest in IBCs? If we are saying essentially we have the same things, they can invest, they could do business locally, local people can invest in them, what is the difference in the name between a local company and a business company?” Friday said.

He said that the EU wants a company to have a substantial presence in the place where you say you are located.

“We are not dealing with that bill now but we are going to be dealing with it in the New Year. And, over time, the combination of these two factors, may well spell doom for the industry.”

Friday said that lawmakers owe it to citizens here to explain to the people what the offshore sector is and its current status and that more companies were probably struck off the register in the last three or four years than have come on.

“Is Grenada the new model for the OECS?” Friday said, referring to Grenada's exit from the sector.

“The prime minister (Gonsalves) said he is not giving up, he is going to have creative resistance but he doesn't seem to have much support from the rest of the OECS and CARICOM. And this is not just a David and Goliath fight. We may have a much longer struggle on our hands and the outcome if far from determined.

“I hope we can find some way, Mr Speaker, to continue to meetthe conditions that are imposed upon us… I am all for being creative and fighting back. We have to be smart, but, more importantly, we need a coordinated approach. I am sorry to see that in CARICOM that is not happening. I hope we do not do the same when it comes to the citizenship by investment programme, that we believe this country should engage in,” Friday said.


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