The British Virgin Islands has become more of a domicile of choice for corporate clients looking to achieve an efficient cross-border structuring than for stashing private wealth, according to new research by Capital Economics, the international consultancy.
The research, carried out on behalf of the BVI government, found that assets held on the island on behalf of offshore companies currently total around US$1.5trn, more than twice what had been estimated to be there seven years ago.
It also found that more than 140 listed companies in London, New York, Hong Kong and elsewhere use BVI business companies “to manage their cross border activities”, a summary of the findings noted.
The report – said by BVI Finance to be the first of its kind – also reveals that more than US$15bn of tax revenues are generated annually for governments around the world, via investment mediated by the BVI and the resulting economic activity.
The UK (US$3.9bn), the EU excluding UK (US$4.2bn) and China and Hong Kong (US$2.1bn) are the largest beneficiaries of this tax generation, according to the Capital Economics report.
According to a BVI Finance spokesperson, the research had been commissioned by the BVI government, “together with the private sector on-island”, in order to “evaluate the economic, fiscal and financial impact of the BVI and its investment vehicles in the global economy”.
Other key findings:
- With a per capita gross domestic product of roughly US$32,000, BVI is among the most prosperous countries in the Caribbean and Latin American region.
- Tourism accounts for one in four jobs in the BVI, while the international business and finance centre accounts for one in ten jobs; half of the BVI’s economic output derives from these two sectors.
- BVI’s international business and finance centre employs 2,200 people directly, and supports a further 3,000 jobs, generating “US$330m of gross value added, and [accounting] for three-fifths of government revenues”.
- More than two-thirds of all jobs in the BVI’s financial centre “are held by BVI islanders and ‘Belongers'”, a legal residential status that people who live there can apply for if they meet certain qualifications.
- Through its direct employment, trade, and facilitation of cross-border business, the BVI “supports jobs, prosperity and government revenues worldwide”, including supporting around 12,000 US jobs “through its imports”. The investment mediated by BVI supports “around 2.2 million jobs worldwide, with China, including Hong Kong, accounting for nearly two-fifths of them”, and Europe for one-fifth.
The publication of the research comes a little more than a year after revelations contained in the so-called Panama Papers were released globally by some 107 media organisations in 78 countries around the world shone a spotlight on the use of certain offshore centres for hiding assets.
As reported, the Panama Papers consisted of more than 11 million documents taken from the Panama office of the Mossack Fonseca law firm, and purveyed to a New York-based investigative journalism organisation.
The Capital Economics researchers say that BVI is not, as the summary of their findings puts it, “some supposed tax haven”, as it “has no banking secrecy rules, and compares well against many other jurisdictions on international standards for transparency, tax information exchange, anti-money laundering, and measures to combat the financing of terrorism”.
“BVI is ‘tax neutral’ and is not a centre for corporate profit shifting,” it adds.
“Just because a company is incorporated in BVI does not stop it being liable for full taxation in other jurisdictions.
“The territory has responded quickly and constructively to international developments seeking to improve transparency and clamp down on criminality, including tax evasion.”
Nevertheless, in an article on the Capital Economics research findings in Wednesday’s Financial Times, Alex Cobham a director of the UK-based anti-tax evasion campaign organisation, Tax Justice Network, was quoted as saying that the BVI should “follow the emerging international standard by establishing a public register of the ultimate beneficial owners of all BVI companies and trusts” if it wanted to “stop being known as a tax haven”.
Links to a summary of the Capital Economics report’s additional findings, as well as to a pdf of the full, 137-page report, Creating Value: The BVI’s Global Contribution, may be found by clicking here.
BVI’s Global Contribution