Dr. Sir Ronald Sanders former Caribbean diplomat
The financial services sector of Caribbean jurisdictions, and other parts of the developing world, have been under continuous assault by the European Union (EU) and the Organization for Economic Cooperation and Development (OECD) since the mid-1990s.
This assault will peak again in a month’s time when financial institutions are expected to comply with the Common Reporting Standard (CRS) which demand that these institutions report on the assets of foreigners to the tax authorities of their country of origin.
The majority of the institutions will fail to do so for many reasons that will be explained later in this commentary. But there will be consequences as the member states of the OECD and EU use their superior power to black list jurisdictions, thereby increasing their exposure to loss of correspondent banking relationships with global banks; increasing the cost of banking transactions and, hence, the cost of doing business; and limiting access to the global financial and trading system.
The whole point of the CRS, devised by the OECD and wholeheartedly embraced by the EU (a few of whose members are also powerful members of the OECD), is to stop competition in tax matters.
These two organizations, largely driven by rich countries of the world, expound the virtues of competition, including by tying aid and investment arrangements to competition in recipient developing nations from companies in their countries. But, while they demand market access on the basis of competition from their companies with far greater access to financial and other resources that eliminate local firms, they are vehemently opposed to competition in tax.
In this regard, these two bodies which, while multi-national in membership, are not international in representation or in authority, impose their rules on the rest of the world.
Consequently, over the last three decades, the financial services of Caribbean jurisdictions have steadily declined, losing revenues and costing jobs.
When the OECD first raised its head on this issue in the late 1990s, Caribbean jurisdictions devised a regional response. A team led by Owen Arthur, then Prime Minister of Barbados, me representing Antigua and Barbuda and with the talents of then Barbados Attorney-General Sir David Simmons and Lynette Eastmond (now head of her own political party in Barbados), mounted a spirited response to what the OECD at the time described as ‘harmful tax competition’.
That initiative halted the OECD juggernaut for a time, but it never altered its objectives which, in plain language, was to stop jurisdictions in the Caribbean and elsewhere from competing with OECD countries on tax. They took the view that ‘low tax’ or ‘no tax’ jurisdictions posed a threat to their own comparatively high-tax countries. Instead of lowering their own tax structures to compete, they opted to eliminate the competitors.
The initial unity of Caribbean jurisdictions quickly dissipated as the rich countries first used their age-old technique of divide and rule, coercing one country after another to agree to imposed rules or be black listed. In the end, governments – having failed to act in concert – lined-up to sign-up, proclaiming their surrender as victory. “See, we aren’t tax havens; we follow international rules”.
Forget the fact that the rules weren’t and aren’t international, the proclamations of victory were empty. Every surrender deprived Caribbean jurisdictions of a place in the global international financial services sector; cost the loss of jobs; and severely dented revenues.
The question of what choice did they have is valid. But the answers are different. One answer is that Caribbean jurisdictions have no choice but to surrender because they have no leverage with OECD and EU countries. So, better that each surrender to ward off greater punishment. 
Another answer is to eschew individual responses and bargain with the OECD and the EU collectively at a high political level. The latter answer was tried once and sacrificed on the short-term goal of national escape. In the end, all were trapped one at a time. Thereafter, Caribbean technicians struggled valiantly in the so-called OECD Global Forum, and in CARIFORUM encounters with the EU, where they were subjected to the same “acquiesce or else” policies.
But, there is every good reason for the Caribbean to reignite high-level political engagement with the EU and the OECD, given that, in any bargaining, they can make political judgements and decisions that technicians cannot.
Two big deadlines are now facing the Caribbean: the OECD and EU requirement for reporting under the CRS by September, and the EU threat to blacklist at least four Caribbean countries that they consider to be non-compliant with anti-money laundering and counter terrorism financing requirements of the International Co-operation Review Group (ICRG) of the Financial Action Task Force (FATF).
Neither deadline will be met.
The OECD and EU demands relate to what they call “Base Erosion and Profit Shifting” (BEPS) which is designed to punish jurisdictions that compete in tax, thereby in their view, depriving them of tax revenues.
Caribbean banks particularly will have to report to more than 100 countries – a costly and, at the moment, almost impossible exercise. Amongst these 100 countries are a majority with which Caribbean countries have little or no trading or financial relationships.
Overseeing this automatic process is an OECD, body called the Forum on Harmful Tax Practices (FHTP) with whose injunctions the Caribbean is expected to comply or else.
Against this background, it is welcome news that at last July’s CARICOM Heads of Government meeting it was decided that a high-level task force should intervene with the EU to avoid blacklisting of some of its member states. The task force will be led by Antigua and Barbuda’s Prime Minister, Gaston Browne, and will include the Prime Ministers of Barbados, St Kitts-Nevis, St Lucia and the Minister of Finance of Jamaica.
The limiting of the task force to engage with only the EU and with a focus solely on the FATF-ICRG process, mentioned earlier, should be expanded to include the OECD at the highest level. The OECD’s CRS and BEPS requirements pose immediate and urgent dangers to the region.
The Caribbean taskforce should also seek advocacy alliances with countries in Africa and the Pacific which are also being targeted by the OECD-EU axis, and with some countries in Europe who are unhappy with EU policies that adversely affect them. In this regard, the involvement of the African, Caribbean and Pacific Group, which is a direct interlocutor with the EU, would be helpful.
The least Caribbean countries can request is a delay by the OECD and the EU in the implementation of the current BEPS, CRS and FATF-ICRG deadlines; the taskforce should also have a practical plan that it can lay-out.
What bargaining leverage the Caribbean will have with the EU and the OECD is a burning question. But whatever it is, it will have to be based on a lock-step, unified and determined approach by every Caribbean country. It is not a time for disunity.
(The writer is Antigua and Barbuda’s Ambassador to the United States and the OAS. The views expressed are his own)
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