December 7, 2000, Thursday
Caribbean tax havens call tax reforms
an unfair demand by 1st World
By Gregg Fields and Mimi Whitefield
MIAMI -- Leaders of Caribbean tax havens blasted the United States and other industrialized countries Wednesday, saying their efforts to force financial reforms on the region are
nothing more than an attempt by rich countries to keep capital out of countries that desperately need it.
"We find ourselves effectively recolonized," said Michael Alberga, an attorney in the Cayman Islands, one of the leading offshore financial centers.
The issue of offshore financial centers is one of the most polarizing topics being debated at this week's Miami Conference on the Caribbean and Latin America being held at the
Intercontinental Hotel in downtown Miami.
It's a particularly contentious topic because the Organization for Economic Cooperation and Development, comprised largely of developed countries in North America and Europe, has
compiled a list of unfair tax havens in the Caribbean and Europe, contending their banking secrecy laws can foster money laundering, fraud and tax evasion.
But leaders from these Caribbean offshore centers countered Wednesday _ in particularly sharp terms _ that the OECD's moves are simply a heavy-handed attempt by developing
countries to keep money from flowing to the Caribbean.
If Caribbean countries agree to the OECD's reforms "we risk the economic enslavement of our future generations," Alberga said.
Still, for all the rhetoric in Miami, countries like the Cayman Islands have sent lawyers to negotiate with the OECD to see what measures would need to be enacted to remove their
names from the black list.
Although the Caribbean Basin is relatively free of major crises at the moment, the tax haven issue threatens to drive a wedge between the United States and its neighbors.
U.S. regulators have long been concerned that Caribbean banking and tax havens are favored destinations for tax evaders and narco-traffickers looking to launder money.
Thousands of Americans are believed to evade taxes by registering money in Caribbean banks and failing to report the interest earned to the Internal Revenue Service, even though
the money is taxable under U.S. laws.
Additional concern stems from the large amount of financial crime coming from Russia since the breakup of the Soviet Union, and large amounts of tax evasion in Europe, depriving
countries like Germany of needed tax revenue.
In a seminar on the issue, Grace Perez-Navarro, an OECD official, said it is criminal activity, not competition, that her organization is trying to squelch.
"The program is not about undermining tax competition," she said. However, secretive banking practices "are the sorts of things that facilitate tax evasion and other
Beyond the OECD initiatives, the United States has induced further outrage by recently going after the records of American Express and MasterCard's Caribbean account holders.
Credit cards that draw on Caribbean accounts have been a tool for some Americans who seek easy access to their money while parking it in tax havens.
However, some officials claimed that their favorable tax laws and banking secrecy are simply effective tools for small countries trying to compete for capital in a global
"We believe, fundamentally, the issue is to prevent capital from going from one side to another," said Keith Mitchell, prime minister of Grenada. "They just feel
nothing should come offshore. I don't know how they expect us to survive."
Mitchell added: "We totally are against money laundering ... especially in connection with drug activities, which I abhor completely."
Mitchell insisted that Caribbean cooperation must be reciprocated.
"Our cooperation with the international community on trade and other globalization matters needs to be reciprocated in forms of economic cooperation and support,"
Mitchell said in his keynote address.
Although offshore banking havens have long been a fixture in the Caribbean, several factors have converged to make them a front-burner issue in hemispheric affairs.
For one thing, the 1990s' stock market boom produced substantial wealth, and regulators suspect the amount of money moving offshore has soared.
Secondly, the rise of the Internet and electronic banking has made it easier to transfer assets to offshore accounts.
Finally, Caribbean countries are desperately trying to diversify and enrich their economies. The relative dearth of land, natural resources and large labor pools makes financial
services one of their more lucrative options.
"You cannot in one breath talk about poverty reduction, and in the other say, 'But you can't do this,"' said Derek Taylor, chief minister of the Turks and Caicos Islands,
where financial services are the third-largest employer.
Others at the conference were disturbed by what they considered the lopsided nature of the conflict. The implicit threat from the OECD countries is that, should their proposed
reforms not be enacted, the tax havens risk severing invaluable economic ties to the industrialized nations, such as the right for their banks to conduct business with U.S. and European institutions.
"The dialogue is that of a wolf and sheep deciding what to have for lunch," said Daniel Mitchell, a senior fellow at the Heritage Foundation, a U.S. think tank.
(Herald Business Writer Jane Bussey contributed to this report.)