Caribbean nations under attack

Caribbean nations believe they will be the principal financial victims of President Barack Obama’s proposals to collect more taxes on the offshore transactions of American individuals and companies.

Caribbean countries have spent decades building up a financial industry to serve companies and individuals from the United States and Europe. They offer low tax rates, a straightforward regulatory environment and proximity to American financial markets.

During May Caribbean ambassadors at a Washington event criticised Obama’s proposals, as well as legislation from Senator Carl Levin designed to make it harder for American individuals to conceal assets offshore.

They also criticised proposals from the President 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.

A spokesperson for the Caribbean nations said their tourism sector could suffer as a consequence of the legislation aimed at taxing offshore activity. North American business people and holders of offshore accounts make regular visits to meet with island lawyers and accountants. They subsequently often take a holiday, obviously spending money in hotels and restaurants.

“The offshore sector feeds the tourism sector, and the tourism sector feeds the offshore sector,” said John Beale, ambassador to the US from Barbados.

A frequently cited argument from opponents of Democratic proposals on tax havens is that the offshore activities of north American businesses are not illegal. Indeed, in some cases they were specifically designed by Congress to help companies lower their tax burden.

Editor’s comment: One of the often overlooked side effects of Obama’s hostility to the offshore industry.

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