Rules change again in the middle of the game

There are going to be times when you have to speak your truth without ambiguity to let the world know exactly where you stand.

That position has been taken by Barbados-based Caribbean economist Marla Dukharan who has been fearlessly calling out the European Union and the Organisation for Economic Cooperation and Development (OECD) for their ongoing and consistent attempts to dismantle the international financial centres in the Caribbean and other developing countries.

Industrialised countries have been so successful at labelling Caribbean nations as centres of money laundering that it has been taken as truth, even though the evidence clearly points to the cosmopolitan centres of the EU and North America as the proven domiciles of fraud and the laundering of criminal proceeds.

Dukharan accused the EU Council of weaponising its rules on tax avoidance and money laundering. She argued that the overarching motive was driven by a desire to “defend its own high-tax, high-public-spending form of government from competition from countries that opt for less of each”.

The noted economist also supported her stand by citing the glaring omissions from the EU blacklist of countries such as the United States of America, the United Kingdom, and Russia. These are all countries with proven challenges with money laundering. As a result, there was a credible argument that the EU was basically flexing its political and economic muscle to rein in less influential countries that were simply seeking to be competitive in the area of taxes and financial services.

One writer for the online publication Global Americans articulated a forthright position in the December 2020 edition following the blacklisting of Barbados and a number of other Caribbean countries: “In the Caribbean, the EU’s hardline approach was seen as unwarranted and hypocritical considering the track records of a number of European countries – including Cyprus, Estonia, and the Netherlands. Furthermore, the EU blacklist was viewed as more rigorous than the standards upheld by the Financial Action Task Force (FATF) – an intergovernmental organisation established in 1989 on the initiative of the G7 countries to develop policies to combat money laundering [and terrorist financing].”

The Mia Mottley administration was expectedly angered by the decision of the EU. It came a mere two years after the island made a substantial alteration to its tax rates in response to the contention that its two-tiered tax system gave an unfair advantage to international business companies.

After converging the tax rates for all companies at a maximum of 5.5 percent in response to the OECD’s Base Erosion and Profit Shifting Initiative, the Group of Seven (G7) nations are again on the attack, seeking a global minimum tax rate, which will effectively further undermine the competitiveness of financial centres like ours in Barbados and the region.

This week Prime Minister Mottley was again forced to contort the island’s tax system in order to protect the tax revenue base by raising the tax rate to nine percent to ensure compliance with another global financial rule.

The administration has conceded that some international companies may leave Barbados as a result of the higher tax rate as the cost-benefit is likely to be significantly eroded.

This is an outcome that has been by design – make it harder for banks and other companies to establish outside the borders of industrialised nations.

It has therefore reinforced the efforts of Barbados to have a seat at the table where these rules are being crafted so that our input is recognised.

As Professor Don Marshall, director of the Sir Arthur Lewis Institute of Social and Economic Studies (SALISES) at the Cave Hill Campus of the University of the West Indies asserted this week: “This routine habit of exclusion has to be called out and has to end if we are going to have truly global financial governance of flows of money.”