PHILADELPHIA — At a January 2008 United States presidential debate in New Hampshire, then-Senator Barack Obama let the world know his position on offshore financial centres when he referred to the business going on in the Cayman Islands as the “biggest tax scam on record.”
Over his nearly eight years as president, Mr. Obama would continue to be critical of offshore financial jurisdictions that he and others contend help corporations and wealthy individuals lower their tax bills.
In 2010, the president signed into law the Foreign Account Tax Compliance Act — which requires foreign financial institutions to report to the US Internal Revenue Service about accounts held by US taxpayers — and he would again thrust the Cayman Islands into the international spotlight in 2012 when his campaign accused his Republican opponent, Mitt Romney, of having investments in that jurisdiction.
Even during his last year in office, Mr. Obama has continued to take steps to curb tax avoidance: The US Treasury Department implemented new rules in May that require US financial institutions to know the beneficial owners of companies that make use of their services, and that require certain foreign-owned companies to obtain IRS tax identification numbers.
Conventions
However, with a new president set to take the Oval Office in January, the issues of offshore finance and tax avoidance have taken a backseat in the campaigns of Republican nominee Donald Trump and Democratic nominee Hillary Clinton.
Indeed, offshore finance is not mentioned in the 2016 Republican Party platform, and US Virgin Islands Republican Party Executive Director Dennis Lennox said the issue was not mentioned during the platform committee meetings.
The Democratic Party’s platform does state that it will “seek to close offshore tax havens,” but party leaders have not offered specific policy proposals in either the platform or during this week’s Democratic National Convention.
As with the Republican platform committee meetings, USVI Democratic delegate Donna Christensen said issues surrounding offshore finance weren’t a major topic of discussion during Democratic platform deliberations.
“They talked more about companies going overseas,” she said.
Lack of interest?
A lack of knowledge and interest in the issue could be why it hasn’t been discussed on the campaign trail.
Of the dozens of supporters and officials from both parties this reporter interviewed over the last two weeks, few seemed to recognise the term “tax haven” — none recognised the VI’s preferred label, “financial services jurisdiction” — and fewer had thoughts on what stance the US should take towards them.
“I mean, it is legal?” responded former US Army lieutenant Michael Flynn — who was reportedly on Mr. Trump’s shortlist for vice presidential candidates before he chose Indiana Governor Mike Pence — when this reporter asked him whether he supports US entities utilising offshore financial services. “If you’re breaking the law, and if you don’t follow the law, then you’re a lawbreaker. And if there’s people doing that, then that’s a problem.”
Another Republican official, former presidential candidate Dr. Ben Carson, responded that the US should be reforming its own tax code rather than worrying about other jurisdictions.
“We should have tax policies that don’t require people to use tax havens,” he said.
Protestors
Some of those who did have strong views on offshore financial centres advocated for their abolition.
Sitting with a group of fellow self-described socialists sporting signs with slogans like “[expletive] capitalism” outside of the RNC in Cleveland last Thursday, Toledo resident Jack Slater said offshore financial jurisdictions allow corporations to run roughshod over national laws.
“The way capitalism is set up, corporations have no borders,” he said. “They can just pick and choose location and go wherever they please.”
But rather than proposing any policy for the candidates’ consideration, Mr. Slater said the solution is to abolish capitalism altogether.
“We should say we don’t need this stupid monetary system that keeps us divided,” he said. “Until we dismantle capitalism and set up a more just society, we’re going to have to deal with this.”
Ms. Christensen said she is glad that the issue of offshore finance hasn’t been in the forefront of this election cycle: When it is, she said, the USVI is often painted with the same brush as its sister territory to the east.
“The tax haven issue is something I always keep my eye on,” she said. “We’ve fallen into the same category: We were on some of the [Organisation for Economic Cooperation and Development’s] lists of unfavourable tax havens. It’s a ticklish issue for us.”
This article originally appeared in the July 28, 2016 edition.
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