TAX HAVENS AND
THE CARIBBEAN: A SUNNY PLACE
FOR SHADY PEOPLE?
Anthony D.J. Gafoor
Trinidad & Tobago
5th IATJ Conference, Washington, 2014
1
TAX HAVENS: DEFINITION
• The term “tax avoidance” can be found as early as the
1850s and the term “tax haven” has been widely used
since the 1950s (Palan, Murphy and Chavagneux, Tax
Havens: How Globalization Really Works, 2010)
• “In truth, the term tax haven is a bit of a misnomer
because these places offer an escape not just from taxes
but from many other rules and regulations too....The
common feature of tax havens is that they offer secrecy.”
(Shaxson, Treasure Islands: Uncovering the damage of
offshore banking and tax havens, 2014)
• “A tax haven is simply a country that allows you to reduce
the amount of tax you pay.” (Hadnum, The World’s Best
Tax Havens, 2013)
2
5th IATJ Conference, Washington, 2014
CARIBBEAN – WORLD’S MAIN OFFSHORE
FINANCIAL CENTERS
• Due to the colonial experience, the Caribbean has
multiple identities – Spanish, French, English,
Dutch.
• The focus here is in the Anglo Caribbean
• The Caribbean islands are among the world's main
offshore financial centers.
• More than 1m offshore companies are registered
in the British Virgin Islands alone, even though the
total population is just 30,000.
5th IATJ Conference, Washington, 2014
3
MANY CARIBBEANS
5th IATJ Conference, Washington, 2014
4
THREE TYPES OF TAX HAVENS
• Hadnum identifies three main types:
Nil tax havens
Foreign Source Exempt
Havens
Low-Tax Havens
5th IATJ Conference, Washington, 2014
5
NIL TAX HAVENS
• No income/corporate tax; capital
gains tax; inheritance tax)
• In the Caribbean, these include
the Cayman Islands; St. Kitts and
Nevis; The Bahamas; Bermuda;
The Turks and Caicos Islands; and
Anguilla
5th IATJ Conference, Washington, 2014
6
FOREIGN SOURCE EXEMPT HAVENS
• Taxes are levied only on locally derived
income; foreign income is exempt
provided no local business activity is
involved
• No Caribbean countries appear to fall
into this category; the closest example
would be Panama which is geographically
part of Central America though with a
strong Caribbean connection
5th IATJ Conference, Washington, 2014
7
LOW TAX HAVENS
• Low-Tax Havens: (residents’ worldwide
income is taxed but some countries offer tax
advantages in special circumstances such as
the ability to avoid capital gains tax; use of
double taxation treaties also result in a lower
tax bill)
• This includes the majority of the other
Commonwealth Caribbean jurisdictions such
as Trinidad & Tobago; Barbados; and Jamaica
among others)
5th IATJ Conference, Washington, 2014
8
CARIBBEAN CONTEXT
• Issues of morality and ethics frequently
surface in relation to tax havens in the
Caribbean because of capital flight by
corrupt administrators and governments
• In the Caribbean, tax havens are frequently
associated with tax evasion and corrupt
leaders
• This has given rise to debate as to whether
the Caribbean is a shady place of sunny
people or a sunny place for shady people
5th IATJ Conference, Washington, 2014
9
CARIBBEAN CONTEXT
• Of the 28 world best tax havens, approx. 9
are located in the Caribbean region
• These are: Anguilla; Bahamas; Barbados;
Belize; Bermuda; British Virgin Islands;
Cayman Islands; St. Kitts and Nevis; and the
Turks and Caicos Islands
(Source: Hadnum, 2013, The World’s Best Tax
Havens)
5th IATJ Conference, Washington, 2014
10
CARIBBEAN CONTEXT
• Anguilla (no income tax; inheritance or estate
tax; capital gains tax; gift tax; or corporation
tax)
• Bahamas (no income tax; corporation tax;
capital gains tax or inheritance tax) (but there
are other taxes such as stamp duty and
property taxes)
• Barbados (no CGT or IHT and gift tax; but
there is income tax and VAT (17.5%);
corporation tax (25%)
5th IATJ Conference, Washington, 2014
11
CARIBBEAN CONTEXT
• Belize (No CGT or IHT but income is taxed at
25%)
• British Virgin Islands (no CGT; income tax;
corporation tax; inheritance tax or sales tax)
(but there is payroll tax of 14% and social
security tax of 8½% only if working there)
• Cayman Islands (no income tax; corporation
tax; CGT or IHT or estate tax)
5th IATJ Conference, Washington, 2014
12
CARIBBEAN CONTEXT
• St. Kitts and Nevis (no personal income
tax bit corporation tax is 35% though
offshore companies are exempt; there is
also 10% withholding tax; no CGT)
• Turks and Caicos Islands (no income tax;
CGT or IHT) (there is stamp duty and the
recent imposition of VAT)
5th IATJ Conference, Washington, 2014
13
CONCLUSIONS
• No universally accepted definition of a tax haven
• Most countries offer some fiscal incentive - referred
to as Preferential Tax Regimes (PTRs)
• No clear dividing line between PTRs; tax havens and
offshore financial centers
• The traditional secrecy rules have been greatly
impacted upon by exchange of information
provisions and FATCA with particular reference to
US private and corporate citizens operating within
the Caribbean
5th IATJ Conference, Washington, 2014
14