But something happened on the way to tax haven status: Caribbean governments have accumulated massive debts they are struggling to repay. Without the taxes most governments use to pay for the costs of running public works projects or social programs, the bills have added up. With little in the way of economic expansion – The United Nations forecasts 1.6 percent growth this year for the Caribbean – governments are turning to other means.
“It is a well established fact [that] … any government has but one fundamental way to … have the resources available to fulfill its obligations to its citizens… and that is to raise taxes or fees,” D. Orlando Smith, minister of finance in the British Virgin Islands (BVI), said in a Nov. 15 budget presentation.
But industry analysts and tax specialists believe new fees and taxes will bring in needed money for government coffers while doing little harm to the business community.
'The need to raise revenue'
In the BVI, Mr. Smith proposed an increase in trade license fees, which businesses are required to purchase to operate there, and to base work permit fees on salary levels, meaning higher-paid workers, many coming from large companies with multimillion dollar payrolls, would pay more. His counterpart in the Cayman Islands has proposed an increase in registration fees for hedge funds. And in the Bahamas, the government is considering a sales or value added tax as well as a broad-based corporate tax for the first time.