The House of Assembly passed the Beneficial Ownership Secure Search System (Amendment) (No.2) Act 2019 on Aug. 2, tweaking existing legislation in order to help ensure compliance with the European Union’s economic substance regulations and avoid a “blacklist” designation.

The bill sparked a discussion among HOA members about the status of the financial services industry in the Virgin Islands and whether it sufficiently benefits VI citizens.

The act requires that legal and corporate entities state whether or not they are carrying on what recent related legislation calls a “relevant activity,” and requires that those entities state the total amount of expenditure on that activity, and their expenditure in the Virgin Islands.

It also “ensures that a legal and corporate entity which carries on holding business only has to supply the limited information relevant to the reduced economic substance requirements for such a business.”

The law also “expands the scope of the disclosure required to overseas where a legal and corporate entity claims to be resident in another jurisdiction and its beneficial or legal owners are in an EU member state.”

BO system

The BOSSS, which has been operational since 2017, allows police abroad to access a searchable database of the owners of VI-registered companies, without making their names publicly available.

Premier Andrew Fahie said in the Aug. 1 sitting of the House of Assembly that implementing the amendment would require additional funding in this year’s budget to hire more than 30 new employees for the VI’s International Tax Authority.

During the HOA debate, several legislators claimed that the financial services industry doesn’t benefit local VI businesses and citizens enough.

“We’re not house boys and house girls to be happy with the crumbs that fell off the table or to be around rich people,” said Third District Representative Julian Fraser. “We deserve to be rich.”

He went on to say that the hundreds of thousands of international companies registered in the VI should pay more fees, which he said should go towards social services in the territory.

He also read out loud a recent Bloomberg article about the VI that described the contrast between “400,000 companies that hold $1.5 trillion in assets” with the “hens and roosters” on Main Street and “brightly painted wooden houses that host cheap beauty salons and clothing shops with names like Goodfellas.”

“You look at it as being condescending,” Mr. Fraser said. “It’s a fact. There’s nothing about this that’s not true.”

New taxes?

He proposed that the new regulations could serve as an opportunity to implement a new tax regime for the financial services industry, and suggested that the VI hire lobbyists based in Europe to advocate for the sector.

Opposition Leader Marlon Penn concurred with Mr. Fraser’s comments, and pointed out that the VI needs to invest in more communication infrastructure if it is going to comply with economic substance requirements.

“We’re asking companies to move their operations to the Virgin Islands,” he said. “We don’t have the capacity to even manage the local broadband market.”

He also called for more investment in human resources to train the VI workforce to participate in the financial services industry so as to rely less on foreign labour.

Mr. Penn went on to suggest creating a select committee on financial services to find ways to generate revenue from the industry.

“We have to figure out: Where do we fit in the grand scheme of things?” he said. “How can we, as being the incorporation of choice for the last 30 years, shift, pivot to the next point, ensure that we’re in the game, that we are part of the process, that our people are part of the process?”

‘Good to the BVI’ Education, Culture, Youth Affairs, Agriculture and Fisheries Minister Dr. Natalio “Sowande” Wheatley agreed that the VI has accepted a “subordinate role” in the financial services industry, but he called the Bloomberg article “damaging” and “nonsense.”

He said that the financial services industry has “been good to the BVI” and pointed out that some 60 percent of government revenue comes from the sector and that the VI has one of the highest per capita incomes in the region.

He acknowledged that the territory could improve its infrastructure and employment in the marine, tourism and construction industries, but said the VI has to “take some responsibility” for that, but also placed some of the blame on the United Kingdom for being “negligent in helping to guide the BVI along the path of sustainable development.”

He went on to say that the new regulations present a dangerous challenge to the future of the VI economy.

“We are at the precipice of a new reality in the BVI,” he said. “And I don’t think we’ve fully grasped it.”