Wehby

As a continuation to my February contribution, 'Prospects for Jamaica as an International Financial Centre', I would like to cover some recent developments in the industry, as well as how those developments will affect Jamaica's International Financial Services Centre (IFSC) project.

At the recent G20 Summit, several of the world's leading economies, including the United States and the United Kingdom, committed themselves to block 'abuse' by tax havens to the extent that it facilitates tax evasion. Primarily, these countries want other jurisdictions to implement measures to make information available to tax authorities in other jurisdictions.

Below is a list of the requirements for a jurisdiction to be considered as having met the OECD standards:

Exchange of information on request where it is "foreseeably relevant" to the administration and enforcement of the domestic laws of the treaty partner.

No restrictions on exchange caused by bank secrecy or domestic tax interest requirements.

Availability of reliable information and powers to obtain it.

Respect for taxpayers' rights.

Strict confidentiality of information exchanged.

The OECD has defined a 'tax haven' not as a jurisdiction that has a competitive tax rate, but as a jurisdiction that refuses to provide information to foreign tax authorities.

TRANSPARENCY IN JAMAICA

I wish to make one thing clear: it was never the intention of the IFSC project to establish Jamaica as a 'tax haven'. On the contrary, Jamaica has 13 Double Tax Treaties, which include Exchange of Information Agreements within them. Among our treaty partners are the US, UK, CARICOM and China. As we move forward with the project, we will have to review these agreements to see how they can assist our competitive advantage. It is also a matter of priority for Jamaica to expand its tax treaty network.

Our advantage will be bolstered by the fact that our regulatory framework is already strong and continues to be strengthened by virtue of our membership on certain regional and international regulatory bodies, including the Caribbean Financial Action Task Force (CFATF). Jamaica was, in fact, a founding member of the CFATF - an organisation of 30 Caribbean states that have agreed to implement common countermeasures to address the problem of criminal money laundering. Canada, The Netherlands, France, the UK, and the US are all 'Cooperating and Supporting Nations'. Because of our early role and commitment to the CFATF, Jamaica has unbreakable obligations to adhere to its principles. Therefore, Jamaica's thrust into the IFC business will not be dependent on secrecy laws.

What do these recent developments mean for us?

We are viewing this evolution of the IFC industry as an opportunity to position Jamaica on the cutting edge of the market. While it is likely that traditional IFC businesses will change, perhaps dramatically, there will undoubtedly be a continued demand for services offered by offshore centres, particularly those that are compliant with global standards.

As a new entrant into the market, we plan to frame our products and services around the needs of those who use international financial services while maintaining the accepted standards of transparency. Our focus will be on the provision of high value financial services, international ship registration and aircraft registration, thereby leveraging several substantial assets that Jamaica has to offer.

In fact, the plans announced by the Obama administration may actually complement the approach that has been taken to the development of the Jamaica IFSC. The US wishes to remove loopholes that allow for the deferral of tax on 'passive income' (essentially dividends, interest, royalties etc.), which means that businesses seeking to gain from tax benefits on their overseas profits will need to put more 'substance' into their offshore operations. Jamaica, with its numerable assets, is ideally suited to take advantage of such an opportunity.

These assets include the largest cadre of highly trained English-speaking professionals in the Caribbean (lawyers, accountants, bankers, corporate secretaries, etc.), sophisticated telecommunications infrastructure, a robust financial system which exceeds the standards of many developed jurisdictions, the same time zone as the East Coast of the United States, the capacity to host a large number of visitors in convention hotel facilities, and a large hotel room-count of over 26,000. The vision of the IFSC is that multinationals and domestic enterprises would find these attributes attractive.

NOT ALL ABOUT TAX

Certainly, for the IFSC to be successful, we will have to offer products and services that are tax-efficient. However, our attractiveness and subsequent performance as a market player will require much more than our tax regime. A realisation of this dream will depend on the support from the Government, the regulators, the Opposition and the private sector.

We have the opportunity to create jobs, diversify the Jamaican economy, and further develop Jamaica as a business destination. We have allowed this opportunity to pass us by previously, but we shall not let it pass us again.

Senator Don Wehby is minister (without portfolio) in the Ministry of Finance and the Public Service. Feedback may be sent to columns@gleanerjm.com.