By Lorna Smith, Interim Executive Director, BVI Finance
THINK you know about the British Virgin Islands (BVI)? Tax haven; secrecy jurisdiction; a faraway place serving no purpose or value to those other than the super-rich – I have heard them all before. And yet, they are all wrong.
Let me first address the issue of tax and the purported myth that the BVI is a tax haven.
The BVI is a tax neutral jurisdiction. This means that whilst the BVI applies taxes on residents and domestic businesses for activity that takes place in the jurisdiction, authorities do not charge local taxes on transactions conducted or assets held in the BVI that relate to economic activity elsewhere.
But let me be clear. This does not reduce, mitigate or in any way change the tax liability in other jurisdictions. For example, a business operating in the UK but which is incorporated in the BVI is still liable to pay taxes on its UK activity to HMRC.
Turning to secrecy, people lazily assume and criticise us for our supposed opaqueness. The reality is that the BVI is transparent. I could list all the initiatives that support this, such as the BVI’s full support and membership of the OECD’s Global Forum on Tax and Exchange of Information and the fact we have no banking secrecy rules, but without context these can distract us from an important principle – the principle of the right to privacy.
And please do not mistake privacy for secrecy. We share all necessary information, including beneficial ownership, on the individuals and businesses that use our offshore services with relevant competent authorities, including those in the UK.
Another way of looking at it is to ask yourself whether you would want to share details of your financial transactions with the world, or whether you deem this to be private?
Furthermore, contrary to what many are led to believe, the BVI fully supports initiatives to improve international standards on governance and regulation. For example, the BVI was an early adopter of the OECD’s Common Reporting Standard (CRS) and is currently rolling out an innovative cloud based technology platform, known as the Beneficial Ownership Secure Search System (BOSSs), which allows competent authorities to access beneficial ownership on BVI business companies. This information is then available to relevant authorities, including HMRC in the UK.
This is all good, but you might still be asking what is the purpose of the BVI and what value does it bring globally and to the general population?
Simply put, the BVI has developed a world renowned international business and finance centre that helps facilitate cross-border trade and investment.
As a result, according to a recent study by Capital Economics, a leading economics consultancy, the BVI mediates over US$1.5 trillion of investment globally (US$169 billion in the UK), supports two million jobs globally (150,000 in the UK) and contributes over US$15bn in tax annually to governments around the world, including US$3.9bn the UK.
This represents real trade, real business activity and real investment that has tangible benefits to people the world over. Major international development banks which use BVI business companies to fund vital projects, such as the World Bank’s International Finance Corporation, can vouch for this too.
So next time you hear one of the usual myths about the BVI, I urge you to pause and consider: is this fact or fiction?
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