Editorial: Whither Jamaica’s plan for offshore services?
When Eric Crawford last made the economic case for Jamaica's aggressive entry into the offshore financial services business, he dangled the prospect of the island raking in a cool J$47 billion a year for being little more than a filing-cabinet residence for foreign firms.
"If the Government could collect US$500 each from 750,000 companies, how far could that go in solving our fiscal problems?" was the rhetorical question of the Jamaica International Financial Services Authority at a 2014 economic conference in Kingston. "It is possible. I am convinced, and many of us are convinced."
At that rate, the earning only from merely being a registry for offshore companies - and not counting the value of any other services Jamaicans could provide to the owners of these entities - would be US$375 million, or approximately the Jamaican-dollar amount mentioned before. To put that into some perspective, it would be roughly equivalent to the tax on profit the Government expects to collect from firms this fiscal year; or 58 per cent of what it projects individuals will surrender from their incomes; 27 per cent more than the expected take from basic customs duties; more than 50 per cent above what Jamaicans will pay in education tax; or 90 times more than what the country collected in the last financial year in bauxite levies.
Mr Crawford based his optimism on what has been accomplished by other offshore centres, in particularly Bermuda. But that was before the emergence of the Panama Papers and the backlash against offshore repositories and tax havens, including Bermuda, that has sent many world leaders to shore up their tax-evasion regimes. Even hitherto legitimate tax-avoidance arrangements are under scrutiny, helped by the fact that several world leaders have been caught among the people who park their assets in opaque companies in offshore tax shelters.
In Britain, for instance, David Cameron, the prime minister, who benefited from equity in a Panama-based investment company his father established in the 1980s, is under pressure to insist on reform and greater transparency in its overseas territories involved in the offshore business - Bermuda, the Cayman Islands, the British Virgin Islands, the Turks and Caicos Islands, Jersey, Guernsey, and Gibraltar.
Against this backdrop, it would be timely, we believe, for Prime Minister Andrew Holness to clarify his Government's thinking on how Jamaica will now proceed in establishing itself as an offshore centre - a process that began during his party's previous administration - or even if it continues to see it as feasible option.
classic tax haven
Mr Crawford thinks it is. In the wake of the Panama Papers scandal - which revealed how the rich and powerful were able, almost on an industrial scale, to circumvent the tax authorities in their home countries - he insisted that Jamaica would not be the classic tax haven. The island, Mr Crawford argued, has a strong regulatory regime and was compliant with international standards and procedures.
But there are several bits of legislation, specifically relevant to the establishment, registration and management of offshore firms, which are yet to reach Parliament. They, in the new paradigm, may require rethinking. Moreover, if the rules of the game are changed, what new competitive strategy Jamaica will bring to what may now be an open, well-lit field?