Home' Trinidad and Tobago Guardian : November 19th 2015 Contents By the very criteria set in the
United States (US) by the
Multistate Tax Commission
(MTC), several states in the
US are "tax havens". But, they
have not been named in the
legislation passed by the legislatures of Oregon,
Montana and others.
Among the MTC criteria for determining a
tax haven is that a jurisdiction "during the
tax year in question, has no or nominal effective
tax on the relevant income." On that basis,
there are nine states in the US that are tax
havens. They are: Alaska, Florida, Nevada,
South Dakota, Texas, Washington and
Wyoming where there is no personal income
tax, and New Hampshire and Tennessee which
also have no taxes on wages; only interest
income and dividends are taxed.
There has been no labelling of these US
states, although small jurisdictions in the
Caribbean and Pacific have been openly brand-
ed as tax havens because they have no or low
tax for their international financial services
sector. This underscores a double standard
and unfairness that small countries are forced
to endure to their detriment in the international
Interestingly, while individual US states and
the District of Columbia have adopted "tax
haven" criteria in laws that harm Caribbean
and Pacific countries, at least two Republicans,
hopeful of being elected US President, have
made it clear that, if elected, they would
streamline the US tax code and lower tax rates.
Senators Ted Cruz of Texas and Rand Paul of
Kentucky both said they would scrap the cur-
rent tax code and replace it with a uniform
tax on consumption.
An intriguing idea was floated by Senator
Cruz. He proposed abolishing the Internal
Revenue Service altogether. It will be interesting
to see if he returns to it, and how much traction
No country tries to dictate to the US Federal
Government or to any of its 50 constituent
states the level of taxation they set. Setting
taxes is their right, as it is the right of every
competent jurisdiction as I have pointed out
before in previous columns. Therefore, juris-
dictions everywhere in the world have an equal
right to object when any other jurisdiction
tries to force them into setting taxes that are
not in their interest.
The problem for small jurisdictions is that
they have few options for objections to such
coercion and even fewer for resisting it. But,
the worst decision would be not to object and
not to resist. No wrong anywhere in the world
and at any time in history has been corrected
by inaction. However difficult it may be to do
so, wrongs have to be confronted at many
levels and through every possible avenue.
At the root of the problem that small
Caribbean and Pacific countries face in coun-
tering the false and harmful label of "tax
havens" that has been applied to them, is that
none of them have diplomatic or any other
relations directly with the individual states of
the US that have so branded them. Further,
they have no tax agreements of any kind with
the individual US states.
Both their diplomatic relations and tax
agreements are quite properly with the federal
government of the US, represented in this
instance, by the US Department of State and
the Department of the Treasury.
When Caribbean and Pacific jurisdictions
signed Tax Information Agreements (TIEAs)---
and in some cases double taxation agree-
ments---with the US, they did so in good faith
and with the understanding that the US federal
government acted on behalf of all its con-
In this regard, the jurisdictions that have
been wrongly and harmfully labelled as tax
havens are entitled to expect the US Federal
Government to act in defence and in preser-
vation of legally binding treaties that it signed
on behalf of the US as a nation state.
The preposterous alternative---really beyond
contemplation---is that the US Federal Gov-
ernment does not act in international matters
for its individual states. In this regard, the US
State and Treasury Departments should be
telling the individual state governments that
Caribbean and Pacific countries have signed
TIEAs with the US and that no request for
tax information has ever been denied.
They should also be telling them that the
Global Forum of the Organisation of Economic
Cooperation and Development (OECD) have
found Caribbean and Pacific countries no less
compliant in tax requirements than the US as
whole and more compliant than several states
of the US.
And, as for the level of taxation applied by
countries, the US Federal Government should
also advise individual states of the US that,
just as they fought tooth and nail to maintain
authority over their own levels of tax to the
point where the nine states named earlier have
no personal income tax, so it is the right of
other jurisdictions to set their own tax rates
at what ever pitch they regard as competi-
Caribbean and Pacific states should make
this case at all levels in direct discussion with
the US Federal Government, in the media in
their own countries and in the US, and in
international and multilateral bodies such as
the United Nations, the Organisation of Amer-
ican States and the Global Forum of the OECD.
To correct the wrong, action is required.
There is a further point to consider in this
tax competition debate. Those in the US and
the European Union countries who are com-
plaining about low and no tax jurisdictions
want the benefits of globalisation and com-
pletely free entry into the markets of other
states, but they refuse to address the conse-
quences of their out-dated tax policies and
practices which belong only in a protectionist
There is need for change in this imposed
order in the world s long-term interest. Pro-
tectionism should not be undesirable and
unpalatable except when it suits the power-
(The writer is the Ambassador for
Antigua and Barbuda to the United States.
He is a candidate for the post of Common-
BUSINESS GUARDIAN www.guardian.co.tt NOVEMBER 19 • 2015
Tax-havens, the need for action
When Chico Max decided to mount an
exhibition of photographs of recent
immigrants to Brazil, he had a harder
time finding subjects than he expect-
ed. That is because only 600,000 of
the 204 million people living in the
country are foreign-born.
The small pool of potential sitters surprised Max. Nearly
everyone in Brazil is descended from immigrants or African
slaves---only the United States has a bigger non-indigenous
population. The country s president is the daughter of a Bul-
garian, and the vice president has a road named after him in
Lebanon. All of Max s grandparents came from Portugal
between the two world wars.
As the title of his show this month in São Paulo proclaimed,
"We are all immigrants."
Nonetheless, Brazil s foreign-born population peaked at 7.3
per cent of the total at the start of the 20th century and has
been dwindling ever since. It is now a fifth of Latin America s
low average and a fraction of that in melting pots like the
That is a problem. Brazil needs millions of well-qualified
workers, but its mediocre schools are not providing them.
Without more immigration, analysts warn, Brazil faces a "skills
Some of the reasons for which migrants shun Brazil are
obvious. It is not a rich country, and is now facing a deep
recession. Its language, Portuguese, is not widely spoken else-
where. Yet Argentina, with a fifth of Brazil s population and
an equally troubled economy, attracts more than double the
number of newcomers---about 280,000 people a year, mostly
poor laborers from other Spanish-speaking countries. They
easily could master enough Portuguese to work in Brazil,
although they would not solve the skills shortage.
They do not come because Brazil needlessly puts up additional
roadblocks. Its legislation on immigration is "anachronistic,"
admits Beto Vasconcelos, who handles the issue at the Justice
Ministry in Brasília. The main law dealing with immigration,
enacted by the generals who ruled from 1964 to 1985, treats
foreigners as a menace to national security and to Brazilian
workers. It bars non-Brazilians from taking part in political
rallies, owning stakes in newspapers or participating actively
in trade unions.
It also imposes cumbersome conditions on foreign workers.
Securing a work permit can take months and cost thousands
of dollars in legal and administrative fees. Most work visas
are tied to an employer, so changing a job requires starting
the application process from scratch. Brazil s enlightened
refugee law, by contrast, grants asylum-seekers a work permit
within a week of arrival, free of charge.
The more qualified the immigrant, the more devilish the
bureaucracy. A graduate student who wants to join a university s
faculty must reapply for a different type of visa---from abroad.
A professional will typically wait a year for his or her credentials
to be recognized, and a yes is not assured. Few universities
offer courses in a language other than Portuguese. Add to
that the absence of Brazilian universities at the top of global
rankings, and it is small wonder that the country hosts only
14,000 foreign students, though beaches and an easy-going
culture are a draw.
In the 19th and early 20th centuries, Brazil encouraged
immigrants from Europe and Japan, partly from a racist
impulse to avoid further "blackening" of the population.
Today Brazil, unlike Chile, does not market itself to prospective
Even when the economy is shrinking and unemployment
is rising, this unfriendliness to foreign talent has a big cost.
Manpower, a human-resources consultancy, recently found
that 61 per cent of Brazilian employers are having trouble
filling job vacancies.
Among 42 countries, only geriatric Japan, poorer Peru and
tiny Hong Kong had more acute skills shortages. In an annual
ranking of 62 countries by their ability to develop and attract
talent, put together by IMD, a business school, Brazil fell to
57th place this year, from 52nd place. It scored especially
poorly for security, quality of life and education.
Brazil may now be reopening a bit. The National Immigration
Council, part of the federal government, recently has made
it easier for students to apply for summer jobs and for some
types of professional to obtain work permits for their spouses.
However, the council s decisions apply to few people, lack
the force of law and create a confusing patchwork, said Ana
Paula Dias Marques, a lawyer specialising in migration.
Since 2009 Congress has been sitting on draft legislation
that would update the old law. In July 2015 the Senate passed
a sensible version which gives statutory backing to many of
the council s rulings. Nonetheless, it risks being bogged down
in the dysfunctional lower house.
Alarmingly, recession, corruption and political deadlock
may be pushing brainy people out of the country. Its diaspora
is tiny: Only 1.8 million Brazilians, 0.9 per cent of the pop-
ulation, live abroad, the smallest share among all countries
of the Americas. It may be growing, however. The consulate
in Miami, the most popular destination for Brazil s wealthy
and worldly, is busier than ever.
Between 2008 and 2013, when economic times were still
good, the trickle of immigration into Brazil became a rivulet:
Annual arrivals doubled to 128,000. The newcomers, mainly
from Bolivia, Haiti, Senegal and other poverty-stricken coun-
tries, provided Max with his subjects. Immigrants bring cultural
diversity and a go-getting attitude that characterizes migrants
the world over. Their faces exude dignity and fortitude. They
no doubt will enrich the country.
Brazil needs more of them, though, and more who already
have the skills that a modern economy demands.
@2015 The Economist Newspaper Ltd. Distributed by
the New York Times Syndicate
In Brazil, no golden door for immigrants
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