Caribbean Nations Squawk At US Plans To Crack Down On Tax Havens
By Martin Vaughan, Of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- Caribbean nations say they will be the economic
victims of U.S. President Barack Obama's proposals to collect more taxes on the
offshore transactions of U.S. individuals and corporations.
Caribbean countries have spent decades building up a financial industry to
serve companies and individuals from the U.S. and Europe, touting low tax rates,
a friendly regulatory environment and proximity to the U.S. financial markets.
On Wednesday, Caribbean ambassadors at a Washington event criticized Obama's
proposals as well as legislation from Sen. Carl Levin, D-Mich., aimed at making
it harder for U.S. individuals to hide assets offshore.
They also criticized proposals from Obama that would tax more of companies'
foreign profits. Many companies use subsidiaries in low-tax jurisdictions in the
Caribbean to help manage their foreign income.
"This legislation proposes to name, shame and otherwise take punitive action
towards countries that are believed to be participating in tax evasion, without
regard to the level of compliance," said Cornelius Smith, ambassador to the U.S.
from the Bahamas.
The Caribbean officials said their tourism sector could take a hit from
legislation aimed at taxing offshore activity. U.S. executives and holders of
offshore accounts make regular visits to meet with island lawyers and
accountants - and play golf, dine and shop when they do.
"The offshore sector feeds the tourism sector, and the tourism sector feeds
the offshore sector," said John Beale, ambassador to the U.S. from Barbados.
The diplomats spoke at an event sponsored by the Inter-American Dialogue, a
Washington think tank.
Bahamian officials lodged specific objections about aspects of Levin's bill
that would publish a list of tax-haven jurisdictions, introduce sanctions from
the Patriot Act for tax evasion, and treat offshore corporations as U.S.
entities if their managers reside in the U.S.
A common theme from opponents of Democratic proposals on tax havens is that
the offshore activities of U.S. businesses aren't illegal, and in some cases
were designed by Congress to help companies lower their tax burden.
In terms of tax evasion by individual U.S. taxpayers, many of the countries
have information exchange agreements with the IRS and many have made efforts to
comply with OECD guidelines for financial transparency.
In a separate interview, Anthony Travers, Chairman of the Cayman Islands
Financial Services Association, said proposals to curb offshore activities that
are now legal will drive foreign capital away from the U.S. market.
Travers defended another practice targeted by Levin's legislation and the
White House budget proposal in which U.S. banks strip U.S. dividend tax from
investments in U.S. equities, for the benefit of offshore hedge funds.
"It's absolutely legitimately, profitably and morally not taxable," Travers
said. "The price you pay for [ending is] is that maybe there's a stock on the
Shanghai exchange that the hedge fund would invest in instead."
Travers also said the portrayal by U.S. politicians of offshore structures
abetting tax evasion is ill-informed and over-simplified. "Sen. Levin's approach
seems to be to say, if it doesn't have heavy machinery and 5,000 employees under
one roof, it must be a tax scam," he said.
-By Martin Vaughan, Dow Jones Newswires; 202-862-9244; martin.vaughan@
dowjones.com
(END) Dow Jones Newswires
05-27-091240ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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