O'Neal Clarifies Income Tax Abolition Plans

by Amanda Banks, Tax-News.com, London

24 September 2002

Speaking earlier this month, Chief Minister and Minister of Finance for the British Virgin Islands, the Honourable Ralph T. O'Neal confirmed that the government is seriously considering the abolition of both personal and corporate income tax on the Islands.

Speaking at the 13th sitting of the Legislative Council, the Chief Minister made reference to the Organisation for Economic Cooperation and Development's 1998 report, entitled 'Harmful Tax Competition: An Emerging Global Issue'.

Although he explained that no pressure had been brought to bear on the BVI government to impose a zero rate of income tax, as it stands, the jurisdiction's current tax regime could come under fire for 'ring-fencing' certain tax advantages; one of the criteria laid out by the OECD for defining 'harmful preferental tax regimes'.

The BVI Island Sun, reporting last week on the meeting, quoted the Minister as observing that resident tax payers (i.e. local companies) are excluded from receiving the tax benefits afforded to International Business Companies (IBCs) located on the Islands, and IBCs are denied access to the domestic market, two of the principle characteristics of ring-fencing as laid out by the OECD.

He went on to explain that mindful of this, the BVI authorities are considering a pre-emptive move to a zero income tax regime in order to avoid incurring the multilateral organisation's wrath:

'This in common parlance translates to the abolition of income tax, that is, a zero obligation with respect to both personal and corporate income tax,' he explained to the Legislative Council.

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