STATEMENT BY
DR. THE HONOURABLE NATALIO D. WHEATLEY
PREMIER AND MINISTER OF FINANCE
AT THE SIXTH SITTING OF THE FOURTH SESSION OF THE FOURTH HOUSE OF ASSEMBLY

JULY 21, 2022

“FINANCIAL SERVICES UPDATE – REVIEWS AND ASSESSMENTS”

Territorial Assessments

Madam Speaker, I wish to now give an update on preparations for the various assessments that the Virgin Islands is presently involved in. Whilst these assessments are at varying stages and are reviewing diverse areas in the tax and regulatory sphere, they all have one thing in common. A successful conclusion and outcome of each assessment is paramount to sustaining a viable financial services industry for the Territory.

By way of background, I should clarify that the Virgin Islands is a member of the Financial Action Task Force (FATF), through its membership in the Caribbean Financial Action Task Force.

Further, the Virgin Islands is also a member of the OECD’s Inclusive Framework for Base Erosion and Profit Shifting (referred to as “BEPS”). The BEPS framework looks at tax planning strategies to try to curb abuse. The BEPS package includes 15 measures that seek to improve tax transparency and 4 of these 15 measures are minimum standards that the Virgin Islands must have committed to.

The Virgin Islands is also a member of the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes.

Against that backdrop, membership in all these groups has its perks and, of course, its responsibilities. Of note, regular assessments are carried out to ensure continued compliance.

Madam Speaker, the Territory is either presently subject to, commencing or concluding some nine assessments covering financial services regulation, tax information exchange, anti-money laundering and ancillary matters. 

In the interest of time, I will briefly summarise these as follows:

The Caribbean Financial Action Task Force peer review – this assessment is also an absolute priority for the Territory.  It will be carried out by the IMF on behalf of the CFATF. The CFATF’s review is an assessment of the Territory’s level of effectiveness in combating financial crimes, terrorist and proliferation financing and money laundering.  The aim is to demonstrate a high level of effectiveness as this positively correlates to compliance with the Financial Action Task Force’s Recommendations.

Preparations for this assessment are presently underway with a week of stakeholder training concluded last month and several amendments to various pieces of financial services legislation being made. As the assessment draws closer, the Competent Authorities and other stakeholders are focused on strengthening cooperation with one another.

On the current schedule, assessors are expected to visit the Territory for the on-site portion of the assessment around May 2023. The Virgin Islands is currently rated largely compliant.

Global Forum’s Peer Review on Exchange of Information Upon Request – In December 2021, the OECD’s Global Forum launched its peer review of the Virgin Islands which entailed a recently concluded assessors’ onsite visit on 30 May through 3 June, 2022.  The review is presently on-going and far-reaching as it impacts not only tax information exchange requests but also certain anti-money laundering practices and procedures. If matters remain on track, the Virgin Islands’ report should be approved by the OECD’s Peer Review Group sometime in October and adopted by the Global Forum sometime in November. The Virgin Islands secured a conclusion of “Largely Compliant” in its previous assessment.

Three (3) Global Forum’s Automatic Exchange of Information reviews – The OECD’s Global Forum has set up a subgroup called the AEOI Working Group to carry out reviews of members concerning the Automatic Exchange of Information (AEOI) standard (i.e., the Common Reporting Standing popularly referred to as “CRS”). This review is divided into three parts: the legislative assessment, the confidentiality and data safeguards assessment and an assessment of implementation in practice. Reports on the tri-partite review should be considered by the AEOI Peer Review Group any day now but will not be adopted by the OECD’s Global Forum until later on this year in November.

OECD’s Economic Substance review –With the launch of the economic substance regime in 2019, the OECD’s Forum for Harmful Tax Practices annually monitors the implementation of substance activities. The 2022 review has just been launched earlier this month. In all previous reviews it was determined that the Virgin Islands has a fully equipped monitoring mechanism with last year’s determination accompanied with two recommendations – one to improve the collection of data and the other to continue to undertake compliance actions particularly with respect to pure equity holding companies.

OECD’s Inclusive Framework Mutual Agreement Procedure peer review – One of the OECD’s minimum standard for BEPS, is for jurisdictions to improve the resolution of tax-related disputes between them. Inclusive Framework jurisdictions, such as the Virgin Islands, are reviewed by their peers for compliance with this minimum standard. The most recent report for the Virgin Islands published earlier this year concluded that the Virgin Islands had met this standard in principle and recommendations flowing from the assessment are being addressed. This review has no rating.

OECD’s Inclusive Framework’s Country by Country Review – Another one of the OECD’s minimum standard for its BEPS project is for jurisdictions to gather and report certain data from multi-national enterprises in that jurisdiction. The data collection and sharing is meant to improve tax transparency. The last review, in 2021, made 2 recommendations for the Virgin Islands which have now been addressed.  We are awaiting the publication of the 2022 review. This review does not have a rating.

OECD’s Inclusive Framework’s Treaty Abuse review – Yet another one of the OECD’s minimum standard for its BEPS project is for jurisdictions to discourage treaty abuse such as tax treaty shopping. The last report on the Virgin Islands last year made a single recommendation in respect of a treaty. This review has no rating.

Given the breadth and reach of these assessments, it would be remiss of me if I did not pause here to urge everyone involved to be cooperative as possible as we continue to address the assessments that are still on-going. We must continue to safeguard the Territory’s reputation as a responsible and compliant international financial centre.

Legislative Agenda

Madam Speaker, it would not be lost on my colleagues in this Honourable House that the legislative calendar is regularly engaged with financial services, tax and regulatory legislation and now perhaps, Madam Speaker, my colleagues can better appreciate why. Today is no exception as we will shortly urgently consider legislation meant to assist with some of these assessments. To keep pace and fully comply with international standards and obligations, legislative amendments to financial services and related legislation routinely require amendment. These legislative changes are imperative to enable the Virgin Islands, as a well-regarded and efficient international financial centre, to continue to attract business.

The Outlook

Madam Speaker, allow me to say, that our legislative efforts do reap rewards. I was delighted to read very recently that the Virgin Islands financial services sector was lauded as the most successful in the Caribbean by Economic Commission for Latin America and the Caribbean (ECLAC) consultant, Dr. June Soomer. Dr. Soomer made the comment during her presentation on the BVI’s National Sustainable Development Plan to the financial services sector during BVI Finance’s Breakfast Forum, on 30 June.

But let us not rest on our laurels! She explained the importance of input by the financial services industry as critical in the drafting of the National Sustainable Development Plan, a 15-year vision and road map for the Territory. The Ministry of Finance’s Economist, Emery Pemberton, emphasised his support that the plan and goals are not only the responsibility of the Government, but also the responsibility of businesses and citizens. 

This is why I remain grateful to all industry stakeholders who serve in one way or another by contributing know-how and expertise whenever called upon. I fully appreciate that we must now take bigger steps towards tapping into those with expertise both locally and abroad, to assist more aggressively with horizon scanning and re-charting our Territory’s future - not only in light of these assessments, Madam Speaker, but also new initiatives such as digital tax, global minimum tax, enablers legislation, and, not least of all, the EU’s initiative on its broadly defined ‘shell company’.

The Government of National Unity remains firmly committed to continuing the collaboration and moving forward.

Madam Speaker, I thank you.