Tuesday, May 10, 2016

Bajan 'Wild Coot' Tees Off On U.S.Economic Hegemony in Caribbean

Columnist Harry Russell signs on in The Barbados NATION as 'Wild Coot' and the moniker is spot on, as he spares no one from his critiques in his Monday columns. In one, 'Whither the Caribbean',  that appeared soon after we arrived (April 11, p.8) he not only castigated the culture of corruption  exposed with the "Panama papers" - but also waylaid encroaching U.S.  financial hegemony and imperialism in the Caribbean.

Above all, he insisted the island state must show the world that its offshore banking and related businesses are totally above board and legitimate. This in the midst of North American media potshots about "tax havens" as well as financial alliances (e.g. OECD) spreading slander that the nation is merely a repository for offshore hidden assets.  Among the smearing culprits I myself have pointed to is former French PM  Nicholas Sarkozy who several years back (at an OECD confab) complained about "offshore banking outlaws" in the region. Most of the island nations with offshore banking went apoplectic at the scurrilous lies, given that this was one of the few financial pillars that remained, after the loss of tourist dollars and the downsizing of the sugar cane industry.

But Sarkozy is only one of the most vocal recent Neoliberals to inveigh against Barbados' interests and the Caribbean especially after most of its banana industry was torpedoed back in 1998 - thanks to Bill Clinton spurring a WTO verdict (forcing the EU to accept U.S. bananas,  as opposed to Caribbean) and the "rum wars" which erupted in 2012 (see my May 20, 2012 post). The banana decision was particularly galling as it demonstrated Clinton's obeisance to United Fruit, one of the biggest corporations on the planet.

Enter the Wild Coot and his own observations (ibid.):

"Now I am sure all those calling for the closure of tax havens know full well that the Caribbean has had to lean on tax havens for survival the last 30 or 40 years.

This is how it developed: first there was an attack in Europe and the United States, and the sugar industry that had been a captive market there was brought down to dwindling proportions.  Then there was the American destruction of the banana industry that humbled St. Lucia, St. Vincent, Grenada and Jamaica as the Americans funded entities (under United Fruit) in Bolivia and Ecuador.

The advice that countries got was to build seaports so that the tourist industry could fill the breach.  However, mega-ships offer everything that could be purchased in port at more attractive prices. People come ashore, but to look around and enjoy the beaches.

We had improved our offshore industry far and wide offering a low tax regime and trained labor force, good governance and low crime ...now this."

He didn't spare Obama either (ibid.):

"But the attack does not stop there. President Obama, as if he is king of the world, has proclaimed FATCA. This law requires banks in some countries (including Barbados) to declare to their tax authorities the tax liability of Americans doing business there. Failure to do so will incur heavy penalties for the Revenue authorities and the particular bank. On top of that, the corresponding bank in the U.S. incurs a heavy fine. The result of this is that banks in the Caribbean have to beef up with due diligence officers for fear of failing tests when correspondent banks visit."

Russell here is referring to Obama's proposal of FATCA (Foreign Account Tax Compliance Act) as part of the 2010 HIRE Act (P.L. 111- 147).

It was then passed by congress in March, 2010 and signed into law by Obama. It seems clear that Russell is unaware the law was advanced in order to get more revenue at a point in time Obama wasn't sure how to pay for the huge $897b  Stimulus to the economy (passed in 2009)  in the wake of the financial crisis. (Under the American Recovery and Reinvestment Act of 2009).

Russell did mention that "banks had to be rescued by the Obama administration" but then tied it to elements of Dodd-Frank (banks required to have more capital on their balance sheets) than to the 2010 HIRE  Act.  But this is an understandable oversight, even for a guy that worked 25 years in offshore banking in Bim.

What is most ironic is that the U.S. itself has since become one of the most significant tax havens in the world - especially South Dakota- as described in a recent piece in The Financial Times, e.g.


Moreover, as the FT notes, SD has "guaranteed secrecy for family trusts".  In fact, Sioux Falls, SD has "become a magnet for the ultra wealthy who set up trusts to protect their fortunes from taxes and future ex-spouses". Further, assets held in SD trusts "have grown from $32.6 b in 2006 to $226 b in 2014."  As the FT put it, "after years of threatening Swiss and other foreign banks, the U.S stands accused of providing similar services for the rest of the world"

Maybe FATCA scrutiny needs to extend to these U.S. locations as well and with the same rigorous rules as Caribbean (and other)  nations must adopt.

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