International Financial Centres: Tax Scams or Good Competition
International Financial Centres (IFCs) have been under great skepticism for quite some time. They have been branded by governments of large nations as offshore tax havens and are largely demonized and attacked. Why? Well offshore tax havens have been accused of being home to everyone from thieves concealing laundered money, and companies evading taxation, to husbands hiding assets from their wives. President Obama even stated in a 2008 address that the fact that over 12000 businesses claimed that Ugland House in the Cayman Islands was their corporate home, meant that Ugland House was either the biggest building in the world or the biggest tax scam in the world. I find it strange though that he sees nothing wrong with a building in Delaware which is legal home to over 200,000 corporate businesses. What is the difference between the two buildings other than the fact that the one in Delaware must be way bigger? One is in the United States and the other, the Caribbean.
This then makes one wonder why IFCs are really being targeted. The truth? Governments of larger nations depend on income tax as a vital source of funding for their erroneous budgets. Business owners who wish to maximize profit can choose to set up subsidiaries offshore where income tax is more relaxed; or in Anguilla’s case, nonexistent; to be the legal domicile of their business entity. What happens when this is done? Revenue is earned and in some cases invested offshore into the jurisdiction of the IFC. This would mean that the jurisdiction where the IFC is located would be the main beneficiary of the businesses’ income. Provided that a business is properly set up in the offshore jurisdiction, is operating on the grounds of transparency, and possesses both substance and economic purpose, nothing is wrong with that business benefitting from the tax rates within that jurisdiction. This is known as tax avoidance which is 100% legal and is not to be confused with tax evasion. It also provides a well needed boost for these developing economies.
“Tax havens” such as Anguilla, Barbados, B.V.I and Cayman which impose accommodation tax and import tax as opposed to corporate tax have done nothing wrong. They recognize that not taxing income not only attracts business to their shores and drives persons to generate profit. After all, who wouldn’t rather giving up freezing cold winters in the US, UK, or Canada to spend sunny days at shoal bay, or have dinner at one of Anguilla’s many fine restaurants while visiting their offshore subsidiary? That in itself is a plus for Anguilla!
How else could all of this benefit Anguilla? Let’s look at Canadian foreign direct investment within the region thus far. Barbados has made $60 Billion; Cayman – $30 Billion; Bermuda – $11 Billion; B.V.I. – $2 Billion; while we have yet to make one.
It is glaringly obvious that we are way behind but all is not lost. These other jurisdictions have simply taken advantage of the opportunity presented to them; one which has been presented and continually presents itself to Anguilla. Well, what are we waiting for? With the G20 recently placing greater emphasis on International Financial Centres, and the increasing global cry for financial transparency, It’s time for Anguilla to not only join the race, but to get ahead and raise the bar in the financial market.
Reputational Capital
Reputational capital, a concept strange to most. What is it? And why is it relevant to you? It is high time that we begin to understand this vital principle that is the lifeline of commercial success.
Reputational capital is the measure of the value you have promised and delivered consistently.
For any business the aim is to convince others to invest in the services and products that YOU offer. To attract customers or better yet, loyal customers, many companies invest considerable sums of money in marketing strategies.
Do we ever wonder why 93% of marketers use social media? It is because it facilitates discussion; and we live by the mantra that “we are who people say we are”
Business decisions are made based on what we know about a particular product or serve. Hence, it is safe to say that the significance of reputation is tantamount to financial capital. It operates as either a magnet or repellent for the target market.
We have numerous examples of the monumental impact that a high reputation capital can have and conversely the devastating effects of low reputational capital.
Take for instance the Anguillan Flex Eye Company; who has, because of their reputation, managed to get large international businesses to invest. In contrary, research the devastating effects on the BVI’s reputational capital because of its secretive practices with the Chinese.
What you should recognize is that you do not improve your reputation by being secretive. In fact, as human beings we are very skeptical of secretive businesses, because it gives the perception of things hidden. Note the word ‘perception’ for that is exactly what reputational capital connotes. If a company is secretive in its affairs then the perception is that of dishonest, illegality and simply that it is not worth the time, energy or money.
On the other hand, transparency allows existing customers and potential customers to make informed decisions regarding businesses. This instills a sense of trust.
You see, secrecy is no longer efficiency, rather it has proved to be inefficient; transparency how is the path to efficiency.
The world is drastically changing, and so is the way that customers wish to do business. So, build your reputational capital by investing your time, effort and resource; give your customers what they want- quality service, transparency and a reason to choose you rather than your competitors
Trust is the new currency of the new economy! – I am Nisha Dupuis and I intend to become an international economics advisor and reputational capital will be the foundation of my practice.
Investment Capital for Property Management
If I told you that Anguilla already has legislation to permit the same type of “JOBS Act,” job creation and investment capital activity that the USA has been trying to get into place since the legislation was announced in September, 2011!
Would you believe me?
$60B is already flowing to Barbados, $30B to Cayman and $11B to Bermuda and I am going to show you how we are going to get a large share of that money flowing to Anguilla under the same legitimate, transparent business structures and treaties that Anguilla also has with foreign capital sources.
My focus will be on investment capital for property development!
There are three concepts that are crucial to the subject of investment capital for property development:
1. Treaties
2. Corporate structure:
3. The business must be “active” and not “passive.”
Point one: Treaties; these are formal agreements between two countries where they encourage trade and investment. Let’s take our treaties with Canada and Holland for example.
Profits from capital invested in Anguilla from either country pays no tax in Anguilla and are exempt from tax when it is returned to the Canadian or Dutch sources.
Point two: Corporate structure. The corporate structure must follow disciplined business guidelines and be “transparent,” “substantial” and have real “economic purpose”
It is 28% better for Canadian parent owners to own a property in Anguilla through an Anguillian subsidiary than to own a similar property in Canada just because there is no corporate income tax in Anguilla.
Point three; the business must be “active” and not “passive” and the scale in Anguilla must be at least a multiple unit villa, an operating restaurant, office complex, retail store, etc.
Estimates suggest that for medium to large corporate investors… say a 20 unit villa complex; the amount of spending done on an annual basis by the Anguillian subsidiary may be in the order of US$150,000 to US$200,000 dollars. This revenue to our country compares to an estimate of under US$3000 per year of expenditures from an average tourist visit.
But we must develop strong investor sources, be disciplined and develop fresh thinking on capital and business structure if we intend on getting our share of the billion dollar market.
I am an entrepreneur and I am setting about to find investors from a variety of treaty friendly countries such as Canada, Holland, the USA and Spain to draw investment capital into well planned property developments in Anguilla.
My name is T’arah Niles and I urge you to participate with me in building this capital market for Anguilla and participating in the rewards.
Thank you!
