City A.M -- No man is an island: a statement that rings as true now as it did the day it was written, hundreds of years ago.
We live in a connected world – a world in which our global economy is powered by cross-border activity and international trade.
There are numerous players in this vast interconnected network, all of whom play their own role in supporting the economy. We in the British Virgin Islands (BVI) promote economic growth by providing a reliable platform to facilitate international trade across the world.
A report by independent economics consultancy Capital Economics found that the BVI mediates over $1.5 trillion of cross-border investment flows worldwide. But despite our substantial influence, we are often attacked by critics who do not understand the essential role the BVI plays. It is our job to dispel the myths, and help people understand how we are integral in enabling cross-border trade and investment.
Let’s start with the tax issue.
The BVI is a tax neutral territory, but this does not mean we are a centre for corporate profit shifting. Though we employ a zero rate of tax on corporate profits, businesses incorporated in the region are still liable for full taxation in other jurisdictions. For example, investors in funds located in the BVI will pay relevant taxes where they are domiciled, and the funds themselves will attract taxes where the assets are located. It is just that BVI itself charges no additional tax on the fund.
Tax neutrality simply ensures that any cross-border transactions mediated via the BVI are not at risk of double taxation – a key factor when promoting international investment. While we have often been labelled as a “tax haven” by critics, Capital Economics found that the BVI actually contributes over $15bn in tax annually to governments across the globe.
Then there are the criticisms about transparency. There are no banking secrecy rules within the BVI, and, unlike other international finance centres, we have a relatively small banking sector which is focused on serving domestic customers. But while the BVI in no way supports or permits banking secrecy, we believe that there is a clear difference between maintaining financial privacy and facilitating purposefully opaque company structures.
The BVI willingly shares data on the individuals and businesses that use our offshore services with relevant competent authorities, and we were an early adopter of the OECD’s Common Reporting Standard for the automatic exchange of tax information. However, the BVI also supports the right to maintain a certain level of privacy for those using the jurisdiction as a base for perfectly legitimate activity. We are firm on the difference between privacy and transparency in such cases.
Despite all of the criticism and allegations over the years, the reality is that the BVI is a sound and reliable centre which has worked harder than many bigger nations to meet international requirements. We were listed as “largely compliant”, along with the UK and the US, by the OECD Global Forum on Tax Transparency and Exchange of Information, and compare well against our peers on international standards for transparency and tax information exchange.
The jurisdiction also joined the UK earlier this year in making a political commitment to support the development of a new global system for the exchange of beneficial ownership information, and we are involved in other global initiatives seeking to clamp down on tax evasion.
Realistically, if the BVI’s international business and finance centre ceased to exist tomorrow, global investment would not cease to occur altogether. However, it would take place either at a higher cost or through jurisdictions with poor track records on transparency, tax information exchange, anti-money laundering, and combating the financing of terrorism.
Where the BVI offers real value is through our role as a reliable, responsible platform offering expert support to facilitate significant cross-border trade and investment – without which the global economy would certainly feel the effects.