Caribbean Region: Review of Economic Growth and ... - USITC

firms from scrutiny, non-transparent administrative or legal provisions, and the lack of aprovision requiring establishments to engage in substantial activities. 54The Financial Action Task Force, a committee of the OECD, identified a number of CBERAcountries in its 1998 worldwide list of uncooperative tax havens. The effort was intendedto pressure countries into strengthening financial sector regulations that would eliminatemoney-laundering and terrorism-financing activities in their jurisdictions. Officials fromsome of the countries believed their nations were unfairly included, and that their financial55services industries suffered as a result. All of the CBERA countries, however, wereeventually removed from the list after they committed to effective information exchange and56transparency. Upon Panama’s removal from the OECD list, a number of LAC financialinstitutions consolidated there as the country—which provides foreign entities with afavorable investment environment, interest rate stability, and a U.S. dollar-based57economy —sought to establish itself as a regional financial center. Total assets in Panama’sbanking sector reached $43.4 billion in 2006, compared with $37.9 billion in 2000, the year58in which Panama first instituted tighter financial controls. Representatives from St.Vincent and the Grenadines, Barbados, and CARICOM have expressed concern that antitax-havenlegislation currently under consideration by the United States will again labelthem as uncooperative tax havens despite their being cleared by the Financial Action Task59Force.With many of their citizens living and working abroad, remittances constitute a significantshare of GDP in many Caribbean countries. According to one representative, the financialservices sector in CBERA countries reportedly would benefit from the establishment ofdeposit-taking branches in the United States in order to facilitate more efficient and lower60cost transfer of funds. At present, most such transactions are carried out through money61transfer centers such as Western Union and are subject to high fees, which include botha payment to transfer the money as well as exchange rate commissions. Despite the fact thatmoney transmittal costs to Latin America and the Caribbean decreased during 2001–2004as a result of increased competition in this market segment, the average price of transmitting$200 to various CBERA countries from the United States in 2004 ranged from54Organization for economic cooperation and development (OECD), Harmful Tax Competition: AnEmerging Global Issue, 1998, 23, http://www.oecd.org/dataoecd/33/0/1904176.pdf (accessed March 27,2008).55Embassy of St. Vincent and the Grenadines, written submission to the Commission, February 5, 2008.56OECD, “The OECD List of Unco-operative Tax Havens - A Statement by the Chair of the OECD’sCommittee on Fiscal Affairs, Gabriel Makhlouf,” April 18, 2002,http://www.oecd.org/document/28/0,3343,en_2649_33745_2082460_1_1_1_1,00.html (accessed March 27,2008).57EIU, Country Finance: Costa Rica, Nicaragua, Panama, 2008, 75, 83.58EIU, Country Finance: Costa Rica, Nicaragua, Panama, 2007, 68; and EIU, Country Finance:Panama, 2000, 7.59Post hearing submissions by the Embassy of Barbados; Embassy of St. Vincent and the Grenadines; andBerliner, Corcoran & Rowe, LLP. The concerns refer to the Stop Tax Haven Abuse Act currently underthstconsideration in Congress. U.S. Congress. Senate. Stop Tax Haven Abuse Act. S.681. 110 Cong., 1 sess.(February 17, 2007).60Mr. Jose Manuel Insulza, Secretary General, Organization of American States, testimony before theCommission, January 29, 2008.61Mr. Jose Manuel Insulza, Secretary General, Organization of American States, testimony before theCommission, January 29, 2008.2-30