Ministry of Finance
STATEMENT BY PREMIER AND MINISTER OF FINANCE DR. THE HONOURABLE D. ORLANDO SMITH, OBE DURING THE EIGHTH SITTING OF THE FIRST SESSION OF THE THIRD HOUSE OF ASSEMBLY OF THE VIRGIN ISLANDS
Monday, April 18, 2016
BVI Financial Services - THE VALUE OF THE BVI TO THE GLOBAL ECONOMY
Madam Speaker, I have just updated this Honourable House with where we are in strengthening our Financial Services structure. Now I would like to put things into a different perspective focusing more on the value of the BVI to the global economy.
Madam Speaker, no doubt that earlier this month, the world was shocked by the release of the so-called Panama Papers.
The leak of over 11 million documents from the law firm Mossack Fonseca has raised troubling questions for people and governments the world over.
For the BVI the most important is the role of offshore jurisdictions in the international finance system and the position of the BVI itself
The ongoing investigation by the BVI Financial services Commission is not a reaction to a scandal – but is fundamental to how we run – and how we have always run - our financial centre – with an unwavering commitment to transparency, integrity and proper regulation.
Now, more than ever, these values are essential to the future of our financial services industry and the broader global financial system of which it is a part.
Because today, that system is under dire threat.
Many in the global media and in countries around the world have rushed to draw false conclusions from the revelations in the Panama Papers.
These critics have built an unsubstantiated argument that indicts not just the corrupt individuals and institutions implicated in the leaked papers – but the entire global financial system and, in particular, offshore jurisdictions including the BVI.
It is true that in the Panama Papers examples have surfaced of the law firm Mossack Fonseca establishing corporations in the BVI for potentially illegitimate purposes.
The BVI does not now and never has claimed that our entire financial services system is 100% free of illegal activity. No financial system in the world has ever or could ever make such a claim. It is an impossible, unreasonable and unattainable standard.
But, I stand here today before you and before the eyes of the international community and say with unwavering confidence: The BVI’s financial system is well-regulated; it is well run; it is founded on a basis of integrity; and, we of the BVI are fiercely proud of our industry because we know the role it plays not just in our own prosperity, but in the progress and growth of the entire world.
Those who today seek to smear the good name of the BVI and offshore jurisdictions generally must themselves be transparent about their real motivations and true message.
Many of these critics are not simply offended by the allegations raised in the Panama Papers. Rather, they seek to sow doubt about the value of our modern, interconnected global economy.
They fundamentally believe that the process of globalisation which has resulted in a totally interconnected market place, unhampered by time zones and national boundaries and which has transformed the world over the past three decades, has on the balance been a bad thing for humanity.
They see the free flow of capital across borders as a threat to things they hold dear.
And so they wish to turn back the clock. They wish to lessen the interconnection of nations. They wish to stem the flow of capital from one part of the world to another. They wish to slow the pace of global investment.
I do not stand here to judge these critics. They are entitled to their own opinion and I trust that their intentions are good.
But I am here to say in the clearest possible terms – we could not disagree with them more.
Globalisation has been by far the greatest driver of human progress ever unleashed.
Over the past decades, billions of human beings in every corner of the planet – including in our Caribbean region and right here in the BVI – have been lifted from grinding poverty and given opportunities that previous generations could only have dreamed of.
Thanks to this movement, the blessings of infrastructure, health care, education and a high quality of life are no longer the special privilege of those lucky few born in the United States, or in Europe or in the small number of other wealthy nations.
Today, those basic needs are being met for more people in more places than at any time in history and it is all thanks to our interconnectedness.
The fact that today capital that sits in New York, and London, and Tokyo, and Frankfurt, and Dubai and other financial centres around the globe can be pooled and put to use to build a factory in Uganda; or a bridge in Bolivia; or start a business in Indonesia – that has unleashed progress for people the world over.
Jurisdictions like the BVI have been fundamental to that powerful surge.
Without offshore jurisdictions, global capital would struggle to be put to good use outside of national borders.
If capital from multiple nations is to come together for a common purpose, it must be able to incorporate.
And that place of incorporation typically cannot be the nation of origin of any one of the investing parties – after all, many of the other investors from other countries may never sleep easy knowing that their money was being held in a country whose laws they may not know, whose politicians they may not trust, and whose regulators they cannot rely upon.
Jurisdictions like the BVI have risen up over the past decades precisely because we solve that problem.
We create a neutral space where capital from all over the world can come together and be deployed for a common purpose.
Whether an investor sits in Russia or America or Europe or Asia – they know that if they put their money into an investment project incorporated in the BVI – then they have recourse to well-run courts that uphold the British common law;
They know that their corporation will sit under the oversight of the Financial Services Commission in a jurisdiction that has been named among the best regulated in the word, a jurisdiction which conforms to the absolute highest global standards;
They know that while they will pay all appropriate taxes in their home nations and in the nations where they ultimately invest their capital, they will not have to pay a double-tax for simply holding their assets through BVI structures
These benefits are profound. In 2013 alone, BVI companies facilitated the investment of 82.5 billion US dollars into emerging market economies.
It is no exaggeration to say that in virtually every corner of the world today there are businesses being run, profits being generated, people being employed and local taxes being paid by companies that are domiciled in the BVI.
And it is also no exaggeration to say that many of those investments would simply never have been possible had a jurisdiction like the BVI not existed that could make the polling of resources possible and efficient.
And so I say to the critics who have risen up in the wake of the Panama Papers – think carefully about what you wish for.
Yes, we all agree that global corruption is a cancer that must be fought.
But heaven help us if we throw the baby out with the bathwater.
If we begin to sever the ties that bind nation to nation and make global investment possible, it is not the rich and the powerful and corrupt who will suffer.
The rich and the powerful and the corrupt rarely suffer. They find their ways to do their business.
It will be the poor and the striving who are hurt. It will be the workers whose jobs will be destroyed or never created. It will be the local government whose drive to develop infrastructure will falter. It will be the communities who will lose out on badly needed wealth creation.
Those would be the victims of a de-globalised world.
Here in the BVI, we will not be shamed into silence on this point.
We know perfectly well that while we may not be perfect in the management of our financial services system – we absolutely adhere to standards that any nation – including the wealthiest and most developed nations on Earth – would be proud of.
- Intermediaries in the BVI are bound by professional obligation to maintain adequate, accurate and current information regarding the beneficial ownership of any BVI company and to disclose to the Government of the Virgin Islands as required. The 2014 Global Shell Games report found that 94% of BVI service providers are compliant with regulations that compel them to refuse to establish companies without proper documentation, as compared to just 6% of providers in the US state of Delaware and just 45% of providers in the United Kingdom.
- As well as strict Anti-Money Laundering rules, due diligence policies, Know Your Client protocols and domestic laws, the BVI’s financial regulators are recognised members of the International Organization of Securities Commissions, which is the global standard setter for the securities sector.
- The BVI was one of the first jurisdictions in the world to implement the OECD’s (Organisation for Economic Co-operation and Development) Common Reporting Standard for the automatic exchange of tax information.
- The BVI has tax transparency agreements with over 100 developed countries including Tax Information Exchange Agreements with 27 countries and multilateral agreements providing for tax cooperation with 76 countries, under the OECD’s Convention on Mutual Administrative Assistance in Tax Matters.
- The BVI is ranked by the non-governmental organisation (NGO) Tax Justice Network as more compliant in tracking corporate beneficial ownership than half of the G8 countries - ahead of the United States, the United Kingdom, Germany and Japan.
- The Financial Action Task Force (FATF) ranks the BVI as more compliant with international regulatory standards than the United States (US) and UK
- And the BVI has inter-governmental agreements with the US and UK to comply with US Foreign Account Tax Compliance Act (FATCA), and UK International Tax Compliance to provide data on financial accounts held by their residents to the United Kingdom
And let me be clear – the BVI was not dragged kicking and screaming to these reforms. We embraced them. Indeed, we led on them.
To the extent that we have had moments of contention between us and various international bodies as well as other national governments – it has been over legitimate disagreements about the substance of proposed regulation.
It is neither our duty nor our right to simply go along with every proposal emanating out of London, or Washington, or Brussels or elsewhere.
Those capitals have their own interests and perspectives – and we have ours.
When they advocate for certain proposals, sometimes they are driven by a well-intentioned desire to strengthen the regulation of the financial system.
Sometimes they are driven by their own special interests who seek to advantage themselves at the expense of others.
And in other cases – and this may be increasingly the case in the wake of the Panama Papers – these governments are simply responding to the pressure of the press and the public.
Our job here in the BVI is to stand up for proper international regulation, to stand up for the global rule of law, and to stand up for globalisation as the transformative driver of human progress which it is.
Ladies and gentlemen, let me conclude with this thought.
We all live today in deeply uncertain times.
Around the world, we witness growing problems like climate change, health epidemics and pollution and wonder what the future holds for humanity.
And everywhere we see evidence of income inequality between the rich and the poor and we question whether justice will ever come to this world.
I have no answers to these questions.
But I do know this – the voices that we hear today louder than ever calling for nations to turn inward, to cut themselves off from the world, to shun those who are not like them – they are wrong and they stand on the wrong side of history.
The problems of our world will not be solved by people severing the ties that bind.
We will not uplift the poor by destroying the ability of investors to create wealth.
And we will not stamp out corruption by destroying offshore jurisdictions like the BVI that make the global flow of capital safer, better regulated and more efficient.
My fellow BVIslanders and my fellow citizens of the world – on all these issues there is but one direction we must go: forward.
We must work together, not tear each other apart. We must unite in common cause to create a global economy and global community in which opportunity, prosperity and dignity are broadly shared and where corruption, terror and criminality are rooted out.
Only together will we create that better and more just world we all seek.
This era is a true test of our collective resolve.
We will either let scandals like the Panama Papers, or the economic crisis frighten us into a global retreat – or we will use them as inspiration to do even more to create a global environment that promotes legitimate investment and deeper human connections.
Here in the BVI we will stand and we will fight on the side of progress.
That has been our way for decades. That is the foundation of our economy and our society. Those are the values we champion.
And with the likeminded and the kindred spirits of the world we will move forward together to realise our shared vision of a better tomorrow.