Tax transparency and publicly accessible registers
In her article on the challenges facing public trust in our global tax system, in which specific criticism is levelled at the UK’s Crown Dependencies and Overseas Territories, Dame Margaret Hodge conflates two distinct issues – tax transparency and publicly accessible registers of company beneficial ownership.
To be clear about how these issues are distinct, I will discuss each in turn, and demonstrate how the British Virgin Islands is at the forefront of a global mission to improve transparency, while maintaining a principled objection to the adoption of a public register of beneficial ownership until they become a global standard.
Firstly, the BVI is a tax transparent jurisdiction. One which has responded quickly and constructively to the international movement towards greater transparency and the reduction of crime related to tax evasion.
While the BVI maintains tax neutrality, it has a long track record of being an early adopter of new standards aimed at increasing tax transparency. The BVI was one of the first jurisdictions in the world to sign up to the OECD’s Common Reporting Standard (CRS) for the automatic exchange of tax information, and now exchanges such information with 97 jurisdictions under the agreement.
Compliance with the CRS reflects the BVI’s long term adherence to global standards. For example, in 2002 the BVI signed up to the OECD principles of transparency, accountability and information exchange on tax matters. Plus, we have 28 tax information exchange agreements in place, and have signed up to both the UK and US Foreign Account Tax Compliance Act (FATCA).
With regard to anti-money laundering (AML), in 1999 the BVI was one of the first jurisdictions to introduce AML legislation through its Guidance Notes for the Prevention of Money Laundering. Since that time, we have implemented comprehensive AML laws and adopted stringent rules on Know-Your-Customer due diligence consistent with the recommendations of the Financial Action Task Force.
Through its modern, flexible and efficient company legislation, stable government and respected financial regulation, the BVI has become one of the world’s largest centres for the incorporation of businesses – especially those created to facilitate cross-border trade and investment. As such, the jurisdiction is popular with companies, institutions and private individuals across a range of circumstances including holding companies for assets; family, trust and succession planning; investment businesses; and corporate group structuring.
Tax neutrality in the jurisdiction simply means that taxes are not levied on transactions conducted or assets held in the BVI that relate to economic activity that takes place elsewhere. However, this approach does not in any way limit or reduce the tax liability in other jurisdictions.
Recognizing this, the European Union has not placed the BVI on any blacklist on matters relating to tax and to ensure that this remains the case, the BVI is implementing new Economic Substance Requirements in line with EU requirements.
This commitment to transparency puts the BVI in line with jurisdictions including the UK and United States, and is vital in creating trust in the jurisdiction as a financial centre committed to the reduction of tax evasion and other financial crime.
Publicly accessible registers of company beneficial ownership
A distinct issue to that of tax is the matter of publicly accessible registers of company beneficial ownership. On this, the BVI has always held a consistent and evidence-based position – i.e. it will allow company beneficial ownership to become publicly accessible when this is a global standard. Until that is the case, we believe that to make such information publicly accessible would breach the right to privacy and have no discernible impact on fighting crime.
In contrast, the Financial Action Task Force (FATF), the global regulator in this area, does not require a public register, but that beneficial ownership information is accessible by law enforcement and/or other competent authorities and is verified. The BVI not only meets these requirements but has an enhanced system in place where all necessary information is immediately and directly accessible to BVI competent authorities. In addition, BVI’s Know-Your-Customer requirements ensure verification of beneficial ownership information and source of funds before a company can be incorporated in the jurisdiction.
The BVI has invested millions of dollars in its state-of-the-art Beneficial Ownership Secure Search system (BOSSs), a technologically advanced system enabling the sharing of information between law enforcement authorities in the BVI, the UK and with global partners within just 24 hours, placing the jurisdiction at the forefront of innovation and enforcement in this space. Indeed, it was this system which led to the UK being able to issue its first successful Unexplained Wealth Order.
BOSSs is trusted by global law enforcement authorities, who value it for both its accuracy and efficiency. All information is verified by corporate service providers who are licensed and overseen by the BVI’s independent regulator. In contrast, the UK’s public company register is based on unverified information, allowing for easy abuse and flagrant inaccuracies.
Actions rather than words
Any characterization of the BVI’s financial services industry as being ‘untrustworthy’ is misplaced and inaccurate. As Dame Margaret says, trust must be earned by actions rather than words, and through its early adoption of international standards and close working with law enforcement authorities around the world, our regulatory agencies continue to innovate and introduce stringent measures to thwart financial crime. We do so not only to meet international standards, but also because we believe that good regulation is good for business.
The views and opinions expressed herein are those of the authors and do not necessarily represent the views and opinions of KPMG International or any KPMG member firm.
1. See Tax and Trust, 14 August 2019
Elise Donovan is the chief executive officer of BVI Finance and brings to the role wide-ranging work experience in Asia, North America, the Caribbean and Africa. Elise has played a major role in expanding and deepening the BVI’s financial services footprint in cities around world, specifically in the Asia Pacific region, through strategic relationship building, conducting forums and seminars on...