Barbados Prime Minister Owen Arthur has hit back at the Financial Stability Forum's infamous listing of offshore jurisdictions, calling them 'institutional imperialists' and 'tyrannical'.
Arthur says they should look to London and New York if they want to control money-laundering and find the sources of instability.
The Financial Stability Forum, an offshoot of the G7, which indeed has no legal standing in the world at large, does seem to have over-reached itself, and Arthur's hard-hitting remarks will find echoes in many other jurisdictions in days to come.
Here are extracts from the Prime Minister's speech:
"Transactions involving the provision and trade of financial services have emerged as the fastest growing, largest, and most widely distributed aspects of global economic activity.
"Indeed, countries such as Barbados have been encouraged to create an environment that can conduce the development of such business activities, using tax concessions and other enabling provisions to create competitive niches for ourselves.
"However, the effort by countries such as Barbados to develop themselves as locations for the conduct of international financial and general business activity is now under a grave threat by institutions of the developed world which are seeking to stigmatise such efforts as being either improperly supervised and regulated or depending on the use of harmful tax practices, whatever that means.
"Indeed, in 1999, the Financial Stability Forum asked a Working Group to consider the implications of Offshore Financial Centres for global financial stability and to draft up a list, grouping such centres in different classes, depending on the calibre of their legal and supervisory systems and processes.
"Not to be outdone, the OECD through its Fiscal Affairs Committee has been preparing a report on Harmful Tax Competition and has been threatening to publish a list of so-called tax havens.
"Yesterday, the Financial Stability Forum published a list of three groups of financial centres in which Barbados is listed as a Group 2 country along with Bermuda, Malta, Gibraltar, Monaco. All other Caribbean financial service economies are listed as Group 3.
"The OECD has, for its part, written draft letters, intended to be signed by Presidents and Prime Ministers in which commitments are to be given to a Mr. Johnson, the Chairman of its Fiscal Affairs Committee, that such countries will "eliminate any harmful aspects of their tax regimes" as prescribed by the OECD Report and commit to refrain from introducing any new regime that could constitute a harmful tax practice under the OECD Report.
"The signing of such letters is the enticement to ensure that a country would not find itself on the list of havens.
"In developing Barbados as an exporter of services, the Government of Barbados has been scrupulous in ensuring that Barbados should not be a tax haven, and should be a place where only reputable legitimate and well supervised business is undertaken. We have entered exchange of information agreements with other countries in the world. Where necessary, we have sought to bring about a convergence in regulatory and supervisory practices as they apply to our offshore and similar onshore financial activity. "We have nothing to hide, and in some areas of our international financial sector, our growth has been slow precisely because we have been very discriminatory in the business we have sought to attract.
"The fact that Barbados has been ranked more favourably by the Financial Stability Forum than other countries in the region and most in the world, does not prevent us from seeing this initiative for what it is.
"Institutions in the developed world, that have no authority under any Treaty, Convention, Agreement or legal instrument known in International Law, are simply attempting to bend the course of developing in countries, such as ours, to their will by the use of crude threats and stigmas. "It is nothing more than a form of Institutional Imperialism.
"All countries that are members of the WTO have subscribed to the General Agreement on Trade in Services. This is the only agreement that has a standing in international law that binds us on the matter of the trade in services.
"Should there be any issue concerning our trade in services, Barbados is prepared to have those issues resolved in a multilateral forum in which we are bound by either Treaty, Convention, Agreement or some other Legal Instrument known to the law.
"It would however be to accept the thin edge of a very dangerous wedge for us to acknowledge that institutions such as the OECD or the Financial Stability Forum can dictate to sovereign States, and impose punitive conditions upon them at their whim and fancy.
"The disturbing thing in all of this is the nature of high-handed actions and the dubious nature of the criteria and the justifications which are being advanced for this threatening behaviour.
"If the developed world wishes seriously to confront the problems associated with money laundering, they should begin in London and New York. "Last week, the British Government applauded itself for giving a grant to a company to build a factory to create 2000 new jobs. Grants of this nature presumably are reputable tax concessions, used by developing countries to achieve similar purposes are now to be outlawed if these institutions referred to have their way.
"In the final analysis, this initiative by the OECD and the FSF if allowed to stand could dangerously lead to the assumption by these institutions of the powers to tell sovereign States if and how to tax. "The power to tax is a sovereign right that cannot be compromised, and certainly cannot be yielded to institutions which have no standing in law to determine the tax policy of countries.
"Indeed, I seem to recall that the American Revolution was inspired by the very point - that taxation without representation is tyranny. "Barbados is interested in carrying on its international business as a low tax Jurisdiction which will enter double taxation and exchange of information agreements with other countries. We will encourage in our midst only reputable business, will strengthen and upgrade and modernize all of our regulatory and supervisory systems and procedures in line with best international practice.
"We do not need the OECD nor the FF to give us instructions in these matters. Neither will we prostrate nor prostitute ourselves before these institutions merely for the sake of the love of the line of least resistance.
"In a global village, multilateral solutions to problems in appropriate multilateral institutions opened to all and in which the rules are known and clearly established is the way that we must all follow. "The test now is whether this spirit of multilateralism will be allowed to thrive for the benefit of mankind in the new Global Society. "These are exciting times. The challenges we face are sharp and testing. But we will not stop; we must find a way through.
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