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The Council of the European Union recently deemed the Caribbean countries of Antigua, Barbuda, and Belize as “non-cooperative” on requests for tax information, governance inquiries, and transparency. They joined Panama and Anguilla, the Bahamas, Trinidad and Tobago, and the Turks and Caicos Islands on the EU’s list.
The British Virgin Islands territory and Costa Rica, on the other hand, reported Reuters, were removed from the list.
The moves reflected how the Caribbean is home to many options for wealthy folks who want to evade tax collectors, as well as how it has become the focus of law enforcement and others who want to catch the tax cheats who use the islands to conceal their money.
In a story on how governments and international regulators are cracking down on individuals and companies that hide their money in the Caribbean, the Economist described the British Virgin Islands as a “luminous speck” in the sea, that for 40 years has “made a chunk of its living selling foreigners brass-plate companies – shells that exist largely on paper, without real staff or offices.”
The British magazine noted that fees on shell companies have funded as much as two-thirds of the British overseas territory’s budget and made the islands “famous” in the business world as a low-tax jurisdiction for corporate headquarters. Crime, fraud, and money laundering flourished.
Recently, however, leaders from the United Kingdom held a meeting in the islands to showcase their success at cracking down on financial crime. As the St. Kitts & Nevis Observer explained, they discussed drug cartels laundering money, importers using false invoices to evade customs, the use of shell companies to transfer illicit funds into the US, large cash transactions, and suspicious international wires were among the tricks that government agencies and financial institutions needed to spot.
Similarly, in the Bahamas, officials told the Caribbean Media Corporation that they were implementing new technologies and other reforms to improve their transparency with European governments.
As Foreign Policy wrote, the Bahamas were where Sam Bankman-Fried established FTX, the largest cryptocurrency exchange to ever collapse, a failure that investigators are now picking through. Bankman-Fried is awaiting sentencing after being convicted of seven counts of fraud in early November.
Other countries might be doubling down on their arguably questionable business models, however.
The Cayman Islands, another so-called British overseas territory, plans on opening an office in Singapore to market its offshore wealth services to “Asia’s hedge funds and wealthy families,” reported the Financial Times. The islands aren’t rolling out the red carpet, an investment manager told the newspaper. They were building a runway for private jets.
The Cayman Islands, which have no corporate income tax, have already become a clearinghouse for money invested in China, the New York Times reported.
An opinion writer in the Guardian noted the irony of wealthy European and American people facilitating and patronizing these tax havens over the years before their governments sought to curtail them.
Perhaps. But ultimately the tax man almost always wins.