The British Virgin Islands is nearly always included on lists of tax havens. That’s because of its secrecy and how that attracts criminals looking to hide their funds. Recently, the British island territory announced that it will publish a public register of company owners. Most tax haven critics see this as a move towards transparency.
Some Background on Its Tax Haven Status
Before looking at the new public company ownership register, consider the tax haven history of the British Virgin Islands. The territory has a proven history of attracting tax evaders, drug traffickers, and corrupt politicians. The island territory has received numerous criticisms in regard to its tax haven status. These include exposés by the International Consortium of Investigative Journalists (ICIJ).
Historically, the British Virgin Islands has specialized in facilitating company formation. The territory encouraged people from other countries to create new companies. To do so, the law protected the company’s management and ownership details. This strategy improved the finances in the territory but also led to it becoming a tax haven. It also earned the territory the reputation of an extremely high risk of money laundering.
Ava Lee is a Global Witness anti-corruption campaign leader. She pointed out to the ICIJ that the British Virgin Islands almost always come up in any exposé about illegal finances. She additionally cited the recent FinCEN leak. Specifically, she brought up the figures of the times when American banks brought up money laundering suspicions. Twenty percent or more of those instances involved the British Virgin Islands. Additionally, the territory had registration for half of the companies named in the Panama Papers.
The Current Lack of Transparency
One of the big problems tax haven critics point out in the British Virgin Islands is the inability to see who owns a company. Even journalists, lawyers, and the public do not have access to this information. This is important for tracing money and assets in the case of disputes. Examples include divorce or checking whether any money- or tax-related laws were broken.
The ability to get that information is currently only available to law enforcement and other countries. Furthermore, they must make an official request to receive it. Importantly, even when these entities request the ownership information, it is not quickly given. It can be a time-consuming process and involve long delays. Additionally, not all countries can make these official requests.
Steps Towards Transparency
In September, British Virgin Islands Minister of Finance and Premier Andrew Fahie spoke to the House of Assembly. He said that the government would be working on creating a public register showing beneficial ownership of companies. Fahie indicated that these efforts would be in collaboration with the British government. This makes sense as the island is a British territory.
According to Fahie, progress will follow the global best practices and standards. Ideally, the register would follow the latest European Union guidelines for anti-money-laundering.
He did clarify that this was “subject to reservations.” Specifically, Fahie indicated requirements for the register to move forward. It will need to meet those international best practices and standards. He also indicated that the efforts will follow a “deliverable” timeline, not a rushed or delayed one.
After that initial announcement, Liz Sugg tweeted that people could expect the public register by 2023. He is the UK minister responsible for the country’s overseas territories, including the British Virgin Islands.
What Experts Say
Those who have been critical of tax havens in the past, such as the international anti-corruption NGO Global Witness, welcome the announcement. Ava Lee, the group’s anti-corruption campaign leader, notes that the move is a positive step, but experts will have to look at the finer details of the announcement.
Lee lauded the British Virgin Islands’ government for its announcement and commitment. Lee also encouraged the territory to follow its set timeline and deliver on its promise. She also encouraged other overseas territories to follow suit.
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