He is not pushing for the position of spokesman for the advocacy group that intends lobbing Caribbean Community (CARICOM) governments on the need, not only to place the sector among the agenda items for their annual summits, but to address the issue with a united voice.
“We speak with so many voices and because the level of development in the region is so uneven we cannot dispel some of the misconceptions that people have of the sector and that can only come with a strong united voice.
“In terms of how we work it out, as regards who the principal voice would be and how the mechanics would be worked out that is something we expect will emerge from the paper that is to be presented by Professor Avinash Persaud,” the chairman of the London Business School,” Lovell told the Caribbean Media Corporation (CMC).
Professor Persaud has already said that Caribbean countries cannot afford to abandon the sector because it contributes significantly to their gross domestic product (GDP).
He said that the international community has been engaged in a one-sided attack on the Caribbean and other small developing countries in a bid to force them to do away with their financial services that they regard as tax havens.
“They are trying to establish a set of global rules which they decide themselves and then impose on us and then they judge whether we are fitting with those rules or not. It is really ad hoc and it is really designed to close down the international financial centres coming from the Caribbean,” Professor Persaud added.
When in the 1980’s Caribbean countries sought to develop new initiatives to ensure their survival, they looked to the financial services sector.
It was regarded as a viable option for spurring employment and development in the region and despite pressures from the international community and being labelled tax havens, the Caribbean, particularly The Bahamas and the Cayman Islands, developed a robust sector.
Now, two years after the inaugural meeting that examined the resilience, but challenged financial services sector, delegates to the second Caribbean Forum (CARIFORUM) conference on the International Financial Services Sector in the Caribbean Region, have been told not much has changed.
Host Prime Minister, Baldwin Spencer, said there continues to be “repeated demands that the region should be treated on a level playing field with financial centres in the industrialised economies using the principles of natural justice”.
He said that even as the Caribbean has on many occasions indicated its committed to developing financial services in a “responsible manner and investing in their good supervision and regulation” it is the developed countries that have dropped the “regulatory ball” with a telling effect on the rest of the world.
“We in the Caribbean are deeply concerned that the very countries that appear to have made the greatest regulatory and supervisory mistakes that have cost the whole world trillions of dollars, are using an unlevel playing field, to close off legitimate options,” he added.
The Paris-based Organisation for Economic Cooperation and Development (OECD) has been pushing the European agenda on restricting, and in some cases, outlawing financial services in the Caribbean, threatening on occasions to blacklist countries that have failed to comply with some of its stringent policies.
But the newly appointed Head of the Delegation of the European Union to Barbados and the Eastern Caribbean, Mikael Barfod, has defended the OECD position, insisting that it is aimed at tackling tax fraud and harmful tax practices.
“In today’s environment with the international financial crisis, the international taxation cooperation between governments and between tax administrations has gained in importance,” he said, noting that since 2009, there has been “major progress” in these areas.
He acknowledges that while Caribbean countries have made the effort to sign a “sufficient amount” of Tax Information Exchange Agreements (TIEA) in order to be fully accepted by the OECD, “there is more to be done in many states and the governance standards defined internationally by G20 and OECD are changing”.
Professor Persaud, an international expert on the financial services sector, said the sector “is really quite significant” to the economies of the Caribbean accounting for as much as 50 per cent of gross domestic product (GDP) for islands like Barbados and Antigua and Barbuda.
“They represent a major part of tax revenues. Over the past 10 years they have come under tremendous pressure by the larger economies,” like London, Zurich, New York because they are under fiscal pressure themselves with little or no tax revenues and now wanting to compete with the small Caribbean financial centres.
“Ivan Ogando Lora, the director general of CARIFORUM that groups the 15-member Caribbean Community (CARICOM) bloc and the Dominican Republic, said recent recommendations by the Financial Action Task Force (FATF) regarding international standards for combating money laundering and the financing of terrorism, will also now pose new problems for the region.
“Compliance to international standards now seems to be the order of the day and Caribbean jurisdictions have been making strides in this regard,” he said, noting however, despite the efforts, the Caribbean countries “continue to attract negative attention.
“Indiscriminate negative characterization brings the good reputation of these jurisdictions into question and has the potential to harm their efforts to mobilise resources from the international financial community to support their development efforts,” the Dominican Republic born national told the meeting that ended on Wedenesday.
CARICOM countries have already developed a final draft of a Financial Services Agreement that if approved by mid 2013, will create a single financial space with common legislation, regulations, administrative procedures and practices and will also provide for cross border supervision and harmonisation of standards.
The proposed legislation will also facilitate information sharing and enhanced cooperation geared towards ensuring the safety and soundness of the financial services sector.
Washington, which has complained in the past of its wealthy citizens using the Caribbean to hide from paying taxes, has itself introduced a range of changes to its financial regulatory environment that regional stakeholders fear, could also undermine the financial services sector within CARIFORUM.
The meeting, which ended Wednesday, was told that for example, the Foreign Account Tax Compliance Act (FATCA) would require US tax authorities levying a 30 per cent withholding tax on both foreign and non financial foreign institutions where new reporting requirements have not been met.
“We have been advised that this Act will require changes to information technology infrastructure in the region, changes to the legal framework governing financial services and could result in possible loss of correspondent banking relationships,” said Pamela Coke-Hamilton, the chief executive director of the Barbados-based Caribbean Export Development Agency, a CARIFORUM implementing agency.
The new reporting requirements will affect traditional financial institutions such as retail and commercial banks and will also impact investment banks, securities and brokerage firms as well as private banks and wealth management firms that do business in the United States.
Another problem for the region is that any institution doing business with US individuals and entities would have to immediately adopt procedures, processes and systems necessary for FATCA compliance.
CMC/pr/2012