Diplomat warns region to be prepared for OECD “blacklisting”


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Sir Ronald Sanders

(CMC) – The Antigua and Barbuda’s Ambassador to the United States, Sir Ronald Sanders is warning Caribbean Community (CARICOM) countries to be prepared to be blacklisted by the Organisation for Economic Cooperation and Development (OECD) over their citizenship by investment (CBI) and resident by investment (RBI) schemes.

Sir Sanders, who is also his country’s top diplomat at the Organisation of American states (OAS), says initial reports this week suggesting that the OECD had blacklisted eight CARICOM countries over the schemes, were wrong.

“The OECD has not ‘blacklisted’ these countries – at least not yet. But the stage has been set for punitive action, unless there is a proactive and unified response by all these countries,” he said in a commentary released on the website of the sub-regional Organisation of Eastern Caribbean States (OECS) of which Antigua and Barbuda is a member.

“Essentially what the OECD said in its latest resistance to any form of tax competition is: CBI/RBI schemes can be misused to evade tax legitimately due to their countries of tax residence by the beneficiaries of these schemes.”

The Bahamas, Barbados and St. Lucia have already spoken out against the OECD position.

The OECD said Tuesday that the Residence and citizenship by investment (CBI/RBI) schemes, often referred to as golden passports or visas, “can create the potential for misuse as tools to hide assets held abroad from reporting under the OECD/G20 Common Reporting Standard (CRS).

“In particular, Identity Cards, residence permits and other documentation obtained through CBI/RBI schemes can potentially be abused to misrepresent an individual’s jurisdiction(s) of tax residence and to endanger the proper operation of the CRS due diligence procedures,” it said.

The OECD said therefore and as part of its work to preserve the integrity of the CRS, it is publishing the results of its analysis of over 100 CBI/RBI schemes offered by CRS-committed jurisdictions, identifying those schemes that potentially pose a high-risk to the integrity of CRS.

It said that potentially high-risk CBI/RBI schemes are those that give access to a low personal tax rate on income from foreign financial assets and do not require an individual to spend a significant amount of time in the jurisdiction offering the scheme.

“Such schemes are currently operated by Antigua and Barbuda, The Bahamas, Bahrain, Barbados, Colombia, Cyprus, Dominica, Grenada, Malaysia, Malta, Mauritius, Monaco, Montserrat, Panama, Qatar, Saint Kitts and Nevis, Saint Lucia, Seychelles, Turks and Caicos Islands, United Arab Emirates and Vanuatu.

“Together with the results of the analysis, the OECD is also publishing practical guidance that will enable financial institutions to identify and prevent cases of CRS avoidance through the use of such schemes,” the OECD said, noting “in particular, where there are doubts regarding the tax residence(s) of a CBI/RBI user, the OECD has recommended further questions that a financial institution may raise with the account holder,” the Paris –based organisation said.

Sir Ronald said that in its statement, the OECD makes no distinction between CBI and RBI schemes, contrary to announcements from one Caribbean minister that suggest a differentiation.

“In other words, the eight CARICOM countries are all in this together, along with 12 other jurisdictions that have been named specifically,” he wrote, noting that “no explanation is given for the omission of …nine EU states from the concerns over CBI/RBI programmes, and none is given for not including the EB-5 programme of the United States or the Quebec Immigrant Investor Programme in Canada.

“These omissions apart, at least the EU admits that all of its member-states “have various incentives in place to attract foreign investment from non-EU nationals” and that “most of them have CBI or RBI schemes (so-called ‘golden passports’ and ‘golden visas’), characterised by the provision of access to residency in exchange for specified investments”.

Sir Ronald notes now, the EU and the OECD, in which the EU plays an influential role, have decided that CBI/RBI programmes pose risks for “corruption, money laundering and tax evasion”.

“This bold claim is made even though the countries identified in the OECD October 17 statement have in place strong anti-money laundering regimes, tax information exchange agreements and mutual legal assistance treaties, and are implementing both the US Foreign Account Tax Compliance Act (FATCA) and the OECD’s Common Reporting Standards (CRS).

“FACTA and the CRS require jurisdictions to exchange automatically financial information of foreign persons and companies to other countries in which they are liable for tax.

“The new OECD claim is that “identity cards and other documentation obtained through CBI/RBI schemes can potentially be misused abuse (sic) to misrepresent an individual’s jurisdiction(s) of tax residence and to endanger the proper operation of the CRS due diligence procedures”.

“Of course, this claim can be settled easily by a requirement for all jurisdictions, everywhere in the world, to necessitate that account holders or controlling persons declare any residence rights they have in each jurisdiction in which they have it. In this way, submissions would be made to all the jurisdictions of residence of account holders and controlling persons, thus stopping any misrepresentation.”

But Sir Ronald said that is not the only new claim now being made by the OECD.

He said the OECD also asserts that “high-risk” CBI/RBI programmes are those which “give a tax payer access to a low personal income tax rate of less than 10 per cent on offshore financial assets and do not require significant physical presence of at least 90 days in the jurisdiction offering the CBI/RBI scheme”. “This latter situation, which the OECD clearly wants terminated, would materially affect CBI/RBI programmes in CARICOM jurisdictions. It effectively dictates what tax rates should be and the conditions, which in their sovereign right the CBI/RBI jurisdictions have set.

“Given all this, if the CARICOM jurisdictions are to save their CBI/RBI programmes from decimation, they should form an alliance with the other 12 named jurisdictions to fashion a joint response before the OECD moves to its next step which, undoubtedly, will be a blacklist that calls for sanctions against them.

“None of their interests will be served by any jurisdiction that chooses to enter an individual agreement with the OECD, setting a precedent that all the others will be obliged to follow,’ Sir Sanders said.

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