Francoise Hendy from Invest Barbados examines how despite the current financial downturn there is still a demand from high net worth investors for Barbadian services.
Supporting a very modest population of almost 300,000 Barbados - a Caribbean island state – has been a favourite holiday stop of the world's High Net Worth Individuals (HNWI) and their families for decades. Like many countries blessed with sun, sea and sand, Barbados' top money earner is tourism; making up almost sixty per cent of the country's GDP.
Countless brochures, testimonials, adverts coupled with the island’ very high percentage of repeat visitors illustrates the stability and continued sustainable development of this important services export. As you might expect as a former British colony but still a member of the Commonwealth the traditional market for Barbados’ long-stay visitors has been from the UK. However, with seasonal direct flights available from European hubs in Germany Sweden, Holland, and France the demographic of Barbados’ tourists has over the last few years taken on a decidedly continental flavour.
The country’s comprehensive social agenda which has focussed on providing a high standard of living for its people - the GDP per capita is US13, 300.00 - and its continued emphasis on free education, medical care and other indices of developed-country status economies has meant that Barbados has always been pitched at the uppermost end of the tourism market.
Indeed, this explains why the Concorde chose Barbados as one of only four destinations that it flew to, with New York, London and Paris being the others. Indeed, regular sightings of the household names from the world of sport, business, entertainment, politics and British royal Family has secured Barbados’ reputation as part of the international circuit of wealthy, influential holiday-makers and a place where people aspire to travel at some time in their life.
Successive governments have however understood the fact that for a high end tourism product to be a catalyst for progressive inclusive economic development its policies must allow for the appropriate integration of the tourist with the Barbadian public.
For instance there are no private beaches, clubs are areas which are inaccessible to the public and reserved only for the wealthy although by their nature Barbadians are highly protective of their own privacy and that of those that visit their shores. Indeed many a paparazzi’s subject has remarked with astonishment at their ability to go about their business on the island without constant bombardment by international or local photographers anxious to sell their images to the highest bidder.
In fact so concerned is the country about the right to a person’s privacy, when Tiger Woods got married in Barbados photographers were arrested and charged when they tried to use their standard tactics to obtain photos of the couple as they exchanged vows.
The balance that has been maintained in the society has been deliberately cultivated and its dividend has been a country which has gained international recognition for its economic, social and political stability - evidenced demographically by the island’s large middle-class.
Barbados' tourism product is not just an amalgam of its natural and man-made architecture. Indeed many places can lay claim to the same geological features of a tropical clime punctuated with history’s mark; but none can boost of the very unique characteristics of a place once famously described as the ‘brightest jewel in the Queen’s Crown’.
The reality is that the super-rich rarely switch off when on holiday. Indeed most getaways are planned with business in mind. For that reason you will find that countries like Barbados are sought after destinations because of the 'fleet street' effect that obtains there. This is the familiar phenomena that occurs in other HNWI ‘watering-holes’ such as the French Riviera, Monaco and more recently Hangzhou.
Predictably perhaps as these holiday-makers are often keen to secure a second home in Barbados which expresses their desire to establish a level of permanent attachment to the county. Such an acquisition also turns out to be a sound business proposition which assists in the management of their wealth- sometimes across generations.
With a landmass of a mere 266sq miles Barbados is not by a very long way the place with the lion’s share of HNWIs--in fact it neither desires this nor needs such numbers. The creation of a HNWI 'in tax residence' is generally the culmination of a number of trips to Barbados which gives rise to an increasing desire to formulate a response to the several 'push' factors that have conspired to create the 21st century version of European tax exiles 'in waiting'.
These factors though many are in response to the increasing cost of the persistent global economic recession; the anti- tax avoidance, asset protection lobby and the spiralling cost of state-supported welfarism illustrated by moves to impose ‘Robin Hood’ inspired tax laws, and the systematic pursuit of assets held abroad even in cases where the location of such assets are not secret. Indeed, to a greater or lesser extent rules have largely been replicated in London, France, Portugal and Spain.
Barbados' response to this new market for its international business and financial services sector as has been the case with others keen to welcome the wealthy to their shores seize has not been the promulgation of a hastily put together HNWI 'regime. Though not as high profile a place as Switzerland for self-created ‘tax exiles’ Barbados has long been home to a number of ultra-rich celebrities who have deliberately sought and acquired tax residence in Barbados in some cases to better manage their assets but also to manage and run their global enterprises from a modern internationally ‘plugged-in’ economy.
It is not so much that Barbados is a ‘closely-guarded’ secret but the country has been deliberately selective in who it chooses to accept as a resident and invariably looks at the nature of the HNWI’s ties to the country; the appropriateness of his antecedents, and his ability to continue to maintain himself and his family on the island.
This unique path to ‘tax residence’ has often been likened to the maturation of a mutually beneficial relationship based on the 'soft' elements of a country, its professionals and its stability which differentiate countries who seek to welcome any HNWI based on the size of his portfolio of assets. Indeed it is precisely because of the nature of the relationship that often exists before someone seeks to establish tax residence in Barbados that the country has never offered ‘economic citizenship’ evidenced by the ‘purchase’ of a Barbados passport’.
Instead what the government has done in response to increasing interest amongst HNWIs about qualifying for ‘tax residency’ especially over the last three years is to clarify and make more accessible the detail of the legal, regulatory and administrative requirements. This has been buttressed by a deliberate sensitization programmes in the UK and Europe targeting mostly those professionals who have already expressed interest on their clients’ behalf to pursue such an option with the appropriate HNWIs.
To apply for ‘Tax Residence’ the HNWI is required to:
Ian Fleming's most enduring fictional character, James Bond, made famous the phrase “shaken; not stirred”; in reference to his preferred method of preparing his favourite cocktail.
Since its first appearance in the book ‘Diamonds are Forever’, opinion has been divided about whether there is a difference between a ‘shaken’ martini and one that is ‘stirred’. Many claim that the mix of gin and dry vermouth when shaken is much more pleasant to the palate and this action releases more anti-oxidants from the spirits.
In any event, whatever the subject-matter, it has always been the connoisseur who is able to discern subtle differences not readily apparent to others which despite obvious similitudes provide important value-added. In like manner although Barbados’ HNWI regime shares elements common to others, its grounding in a real nexus to the country, an over-arching concern to attract the ‘right’ kind of HNWIs and the tested expertise of its professionals in the area of wealth management and asset preservation are some of the Barbados’ distinguishing marks which continue to appeal to discriminating HNWIs.
Françoise Hendy is an international treaty negotiator and attorney-at-law specialising in international economic law and foreign investment law. Schooled at the University of London and in the Caribbean, she was appointed Barbados’ chief tax and investment treaty negotiator in 2003 and since then Françoise has led a multi-disciplinary team that has concluded over 20 tax treaties and several investment agreements. Currently based in London at the Barbados High Commission, Françoise continues to negotiate treaties while lending her considerable experience and expertise to the government in the policy and regulatory issues affecting Offshore Business and Financial Centres gained during her eight years as Director of International Business and Financial Services in the Barbados Ministry of International Business and International Transport.