The pressure weighing over the financial services industry in the British Virgin Islands, amid tighter regulation such as economic substance requirements, has caused a $30m drop in revenues for the government.
Although the government claims this slowdown was expected, the jurisdiction was still forced to delay several projects due to lack of funds.
Addressing the House of Assembly during the budget debate on December 13, premier and minister for Finance Andrew Fahie said: "This year, financial services — it is sad to say — dropped off by roughly $30m because they are coming under a lot of pressure."
This year, financial services dropped off by roughly $30m because they are coming under a lot of pressure"
He added: "They [government ministers] were sometimes wondering when they see me sit down and they ask me: ‘what happen? Is something wrong?' I tell them ‘no' because certain burdens you have to carry for a little while before you share it. Some you don't share at all," the Premier said.
"As a matter of fact, the minister for Health [Carvin Malone] was asking me, ‘I need more money'. I tell him ‘wait'. He telling me ‘wait on what?' But I couldn't tell him," Fahie further explained according to local media.
The BVI has overhauled many of its financial regulations to avoid being blacklisted by the EU and other international organisations. Earlier this year it introduced new economic substance rules.
As mandated by the EU, the law requires offshore financial services companies registered in the BVI to set up physical, appropriately-staffed office spaces in the territory, if they are to continue doing business with/through the BVI.
It also implemented a raft of amendments to the Beneficial Ownership Secure Search system (BOSSs) Act and increased funding and staff to its International Tax Authority (ITA) as it deals with more requests for information relating to taxes, including the area of economic substance.
The financial services sector was projected to see boom this year following the changes according to director of International Business Neil Smith. According to Smith, while the 400,000 plus registered companies in that sector would be reduced, the number of persons involved in the sector would likely triple on the ground.
However, the figures now show the opposite.