Category Archives: OECD

Caribbean Citizenship/Residence by Investment Programmes among those deemed “high risk” by OECD

Alicia Nicholls

UPDATED: The OECD has indicated that the list is not a blacklist.

A new threat to Caribbean countries’ citizenship and residency by investment programmes (CBI/RBI programmes) has emerged. Today the Paris-based think tank, the Organisation for Economic Cooperation and Development (OECD) published a ‘black list’ of sorts of CBI and RBI programmes that “potentially pose a high-risk to the integrity of the Common Reporting Standard”.

What are CBI/RBI programmes?

Citizenship by investment programmes and residence by investment programmes provide citizenship (in the case of the former) or residency (in the case of the latter) to an investor (and often his or her dependents) in exchange for that investor making a significant investment in the host country, subject to that jurisdiction’s eligibility criteria.

St. Kitts & Nevis operates the oldest CBI programme in the world. As part of their efforts to diversify and attract much needed foreign direct investment, four other Caribbean countries (Antigua & Barbuda, Dominica Grenada and St. Lucia) have since adopted their own programmes.  The British Overseas Territory of Anguilla has also recently established an RBI programme. Outside of the Caribbean, there is now an ever-growing list of CBI or RBI programmes operated across the world.

OECD’s examination of CBI/RBI programmes

Earlier this year, the OECD announced that it would be examining the prevention of abuse of these programmes to circumvent the Common Reporting Standard (CRS).

Nicknamed Global FATCA because it was inspired by the US’ Foreign Account Tax Compliance Act (FATCA), the CRS is an information standard approved by the OECD Council in 2014 for the automatic exchange of information among tax authorities. CRS jurisdictions are required to obtain certain financial account information from their financial institutions and automatically share this information with other CRS jurisdictions on an annual basis.

The OECD has argued that CBI/RBI programmes are a risk to the CRS because they can be misused by persons to hide their assets offshore and because the documentation (such as ID cards) obtained through these programmes could be used to misrepresent an individual’s jurisdiction of tax residence.

The OECD used two vague criteria to determine whether a CBI/RBI programme was high risk to the CRS: (1) it gives access to a lower personal income tax rate on offshore financial assets and (2) it does not require an individual to spend a significant amount of time in the host jurisdiction.

Out of the 100 CBI/RBI programmes the OECD analysed, programmes from the following twenty-one jurisdictions were identified as high risk: Antigua & Barbuda, The Bahamas, Bahrain, Barbados, Colombia, Cyprus, Dominica, Grenada, Malaysia, Malta, Mauritius, Monaco, Montserrat, Panama, Qatar, Saint Kitts & Nevis, St. Lucia, Seychelles, Turks and Caicos, United Arab Emirates and Vanautu.

Caribbean Programmes Identified as ‘High Risk’

The following Caribbean CBI and RBI programmes were identified:

OECDCaribbeanCBIRBI

As a result, the OECD requires that financial institutions “take the outcome of the OECD’s analysis of high-risk CBI/RBI schemes into account when performing their CRS due diligence obligations”.

Why is this development of concern to the Caribbean?

This development is of concern to Caribbean countries which operate these programmes for several reasons. Firstly, it adds to the reputational backlash which Caribbean CBI  programmes have been facing, with implications for these programmes’ attractiveness to investors.  Caribbean CBI programmes are already facing competition not only inter se, but with other programmes around the world, including those in Europe which offer the prospect of free movement within the EU.

Secondly, this seeming blacklist, which is based on vague criteria, casts an unfair shadow on those countries which operate these programmes and may affect their attractiveness as jurisdictions for international business. Moreover, those countries which operate only RBI programmes , which have much less reputational risk, have also been painted with the same brush.

Thirdly, a reduction in CIP revenues would have an adverse economic impact on those countries which have come to depend on these revenues for their macroeconomic stability.

The results of the OECD’s analysis may be found here.

Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

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OECD describes global trade growth as “exceptionally weak”

Alicia Nicholls

In its Interim Economic Outlook released yesterday September 21, 2016, the Organisation for Economic Cooperation and Development (OECD) has again expressed concern about the slowdown in global trade growth, echoing similar sentiments made by the International Monetary Fund (IMF) and the World Trade Organisation (WTO). Describing global trade growth as “exceptionally weak”, the report notes that the volume of global trade fell in Q1 2016 and remains subdued despite some recovery in Q2.

The OECD noted that weak trade growth was as a result of not only cyclical and structural factors but also “some backtracking” on the opening of global markets to trade in goods and services. Noting that trade is an important driver of productivity growth, the organisation warned that this deceleration could undermine productivity growth and living standards in future years. These issues are further explored in an OECD Economic Policy Paper entitled “Cardiac Arrest or Dizzy Spell: Why is World Trade so weak and what can Policy do about it?” which was also released that same day.

The OECD report has reiterated the need for policy action to boost trade, including avoiding trade protectionist measures, reducing unnecessary trade costs and removing impediments and distortions for cross border investment. Recognising that support for globalisation in advanced economies has weakened, the report also suggests that policies be implemented to ensure that the benefits of trade and investment are widely shared.

This low trade growth is also affecting global GDP growth. The OECD warned that the world economy remains in a “low-growth” trap and projects global GDP growth to remain flat at only  3% in 2016, with only a modest improvement in 2017.

The full press release may be obtained here.

Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.