British Virgin Islands are a 'shining example of a well-regulated, transparent jurisdiction'
Former FCO Minister for the Overseas Territories Sir Henry Bellingham writes in support of the British Virgin Islands Government and financial corporations which he witnessed first hand from 2010 - 2012.
The British Virgin Islands has come under an unprecedented and disproportionate attack following revelations contained in the so-called Panama Papers.
I should first of all declare an interest as the Chairman of the All Party Parliamentary Group on the British Virgin Islands. I was also the FCO Minister for the Overseas Territories during the first part of the Coalition Government. It was in this capacity that I had the chance to visit the BVI, and work alongside their Government to bring the BVIs financial regulatory regime up to the highest possible standard.
The erroneous impression given of the territory is a world away from the true picture. It obscures the fact that the BVI plays a vital role in providing a convenient, safe and private – but not secret – place to conduct business. Crucially BVI offers a solid regulatory regime within a strict legal framework on which international corporations and individuals can depend. Law in the Overseas Territories, of which BVI is just one of 14, is based on English common law.
There are perfectly legitimate reasons for international companies to choose to operate in offshore territories. Two corporations from different countries may need to find a convenient neutral place to conduct their affairs while enjoying legal protections ranked among the strongest in the world, for example.
An observer might be forgiven for not realising that this efficient and important hub for international trade and investment is subject to review by international standard setters, including the International Monetary Fund.
The same observer might also be surprised to learn that BVI was ranked in the top tier of jurisdictions in the Financial Stability Board’s evaluation of adherence to regulatory standards on international cooperation and information exchange.
Tax considerations are important. But not the simplistic notion that companies flock to BVI to dodge their tax bills. Rather companies merely avoid double-taxation, having already paid taxes legally due in their home jurisdictions.
As far as tax is concerned, BVI has been an early adopter of the common reporting standard on the automatic exchange of tax information and has automatic exchange agreements with the UK and United States. It even enjoys the same rating by the OECD’s Global Forum on tax transparency as countries including Germany and the UK.
It has also been suggested that British Territories should levy the same taxes as the UK. This is at best misguided. Governments set tax rates to generate sufficient revenue to provide public services. The Westminster Parliament jealously guards its sovereignty over the tax structure and tax rates in the UK. Why should the position be different for the democratically elected BVI Parliament? As the Prime Minister has made clear, it is not appropriate to refer to BVI and other British Territories as ‘tax havens’.
Even the word ‘offshore’ has become emotive, attached as it so often is to allegations of corruption or tax evasion. Offshore simply means another other territory outside one’s home market. In Britain’s case, that means anywhere outside the mainland. France and Germany are clearly offshore, for example.
An analysis of the position on the transparency of company ownership might also take some by surprise. Get into the technical detail and you will find that BVI has a stricter definition of ‘beneficial owner’ than the UK or the latest European Union Anti-Money Laundering Directive. You will also find that sharing beneficial ownership information with law enforcement authorities in other jurisdictions is not a new departure for BVI. It is also important to note further to the recent joint statement by the BVI Premier, the Honourable Orlando Smith, and the UK Government regarding the sharing of information with key law enforcement agencies there will now be an unprecedented level of cooperation. It is perfectly obvious that if the BVI opted to go for full public beneficial ownership disclosure, much of this business would simply head elsewhere – and thus the UK would lose access to vital knowledge.
Can BVI claim that criminals never seek to use the Territory for nefarious purposes? The answer is no. Pose the same question about London, New York or any other financial centre and the answer would also be no. The fight against the criminals must continue.
Efforts to tackle financial crime have become more complex in today’s highly globalised and networked world. This is why the arrangement with the UK to speed-up the process for exchange information between law enforcement authorities recognises this fact.
As countries assemble for the Anti-Corruption Summit in London today, BVI will again be at the centre of the debate on transparency and business based in offshore territories.
Far from being the villain of the piece here, BVI can be held up as a shining example of a well-regulated, transparent and co-operative jurisdiction, a model even for others.
Sir Henry Bellingham is the Conservative MP for North West Norfolk