THERE IS SOMETHING distinctly familiar about the intriguing advice that Dr Daniel Mitchell, a senior fellow at the Cato Institute, a prominent conservative think tank in Washington, is offering to Barbados about the Panama Papers.
“The story of the Panama Papers is an excuse to go after all of the low-tax jurisdictions, especially those in the Caribbean, Barbados among them, even though Barbados hasn’t been mentioned in many of the stories flowing from the papers,” he said.
“As far as I know, there isn’t any connection with Barbados. Nevertheless, Barbados is going to be affected by the attacks on tax planning,” said Mitchell, an economist and expert in national and international fiscal policy.
“Barbados must be more aggressive in defending itself.”
In other words, Barbados can’t afford to sit still in the face of the looming onslaught.
The Cato Institute is a conservative institution and the truth is that Mitchell, a major economic thinker in the United States and a vigorous supporter of the role of low-tax jurisdictions in the world of international finance and tax planning, has been making precisely that point for more than a dozen years.
And he has done so in the Wall Street Journal, USA Today, Emory University Law Journal, Playboy, The Economist of London, the New York Times and on all the major television networks in North America for more than a dozen years.
You name the media house, and you will find his name and face on it.
Interestingly, the cache of 11.5 million documents hacked by intruders from the files of a well-known international law firm, Mossack Fonseca, in Panama, and published in well established publications in North America, Europe, Asia, the Caribbean and Latin America, has provided Mitchell with an opportunity to defend Caribbean nations and dependent territories that play a central role to the offshore financial services industry.
“I sometimes wonder if I was put on this planet to defend tax competition and tax havens,” he wrote recently. “I argue for fiscal sovereignty, good tax policy, and financial privacy to the denizens of Capitol Hill, both in writing and explaining to the kleptocrats that tax havens should be emulated, not persecuted.”
A thorn in the side of the Organisation for Economic Cooperation and Development (OECD) in Paris, the exclusive club of rich nations, Mitchell has consistently defended the right of Antigua, The Bahamas, Barbados, Belize, British Virgin Islands, Bermuda, Cayman Islands, Cook Islands and other offshore financial centres to be players in global tax planning.
He told BARBADOS BUSINESS AUTHORITY that the Panama Papers should be seen for what they are: “another chapter in the never-ending war by high-tax governments against tax competition”.
“The international bureaucracies are using the papers to undertake a new round of assaults on small jurisdictions in the Caribbean and elsewhere,” Mitchell complained.
What’s particularly striking about what has been disclosed so far is that large corporations, wealthy individuals and their law firms have not broken any domestic or international laws against tax evasion, investing or money laundering.
That’s certainly the case with investors in The Bahamas, Bermuda, Barbados and the rest of the Caribbean countries, whose names and activities have been listed in the avalanche of news stories about shell companies. The news organisations in Europe and North America would wish the rest of the world to believe otherwise.
“Almost everything contained in the Panama Papers has been completely legal. Yes, they were dodgy politicians and the only real story was that government officials sometimes lined their pockets but, beyond that, the basic story has simply been about internationally active investors establishing international structures which, of course, they should,” asserted the economist, who has been to Barbados and who has defended its business model that attracts foreign investors.
“The Panama Papers is really a non-story and there is nothing illegal about what the investors” and the jurisdictions have done, he added. “Politicians are trying to demonise tax avoidance in the hope of giving themselves more power to increase tax rates. That’s why Caribbean jurisdictions, including Barbados, need to be more aggressive in defending their sovereign right to have good tax policy.”
Undoubtedly, Barbados will come under increasing pressure to reduce the presence of international investors in its offshore sector. And the heat will come from the US, Canada, Britain, France, and other OECD members.
“There is no question that the small countries will be subject to new attacks, new blacklists and new sanctions because of all this. That’s what the high-tax nations and the international bureaucracies do. It is just like asking ‘why does a snake bite?’
“These high-tax governments want to shut down the Caribbean and they are just using this [Panama Papers] as an excuse,” insisted Mitchell, formerly of the Heritage Foundation. “It’s the same story we have been dealing with for the past 20 years, almost.”
He thinks the Caribbean should shift tactics and emphasise the “very valuable” role of tax haven when it comes to the allocation of capital, savings and investment.
Barbados and other countries should turn the tables on critics who unfairly link island nations, coastal states and others with financial evil – drug money laundering and tax evasion – but seldom pinpoint how legitimate businesses, especially major corporations, rich celebrities and wealthy individuals, use small states to generate additional profits, investments and jobs.
For its part, Barbados has been waging war to get itself deleted from tax haven lists by insisting it was a “low-tax jurisdiction” that abhors illegal financial dealings. That argument accurately describes the country but few people outside of Barbados accept that portrayal as being accurate.
