Minister of Finance Camillo Gonsalves says that citizenship-by-investment (CBI) programmes such as those being run by the four other independent Organisation of Eastern Caribbean States (OECS) nation are a loophole and not a niche.
He said St. Vincent and the Grenadines, under his Unity Labour Party government, remains philosophically opposed to CBI, also known as economic citizenship.
But Gonsalves said that his government remains also opposed to CBI because it represents a financial loophole rather than a niche.
“Mr. Speaker, the important thing we have to say on this matter is that there is a difference between a niche and a loophole. I’ll say it again. There’s a difference between a niche and a loophole.
“And we all accept, and the Honourable Member for Central Kingstown said earlier today that we have to look for niche industries. We are a small country and I accept that and I support that and I promote that. We have to find niches. But a niche is not a loophole, because a loophole can close on you and when a loophole closes on you, you are left holding the bag.”
Gonsalves was responding to a question from Member of Parliament for Central Kingstown, St. Clair Leacock, an opposition lawmaker.
Leacock said that the government has rejected CBI, which he described as “this large revenue stream” even as it annually budgets for millions of dollars in loans, all of which, the opposition lawmaker said, “could have been financed from this new established sustainable source of income without being a burden on our taxpayers”.
But Gonsalves said that CBI programmes are unsustainable, noting that Grenada suspended their programme after 9/11 because they were concerned about “the type of persons they were giving citizenship to”.
The minister further said that the International Monetary Fund speaks of the very high sudden-stop risk related to the rapid changes in advanced countries’ policies.
Essentially the IMF is saying that any moment the rug can be pulled under a country with a CBI programme, Gonsalves told Parliament, reading from the IMF working paper, “Too Much of a Good Thing? Prudent Management of Inflows under Economic Citizenship Programmes”
“So where are we on sustainability?” the finance minister said.
He said that the Organisation for Economic Co-operation and Development (OECD) has said that CBI can help to undermine common reporting standards.
“The OECD is considering a range of additional approaches to prevent the abuse of citizenship by investment schemes and this may include policy related measures and will take into account the role of all stakeholders involved, including the jurisdiction involved in the schemes’
“Mr. Speaker, Honourable Members, we have seen this movie before. When the OECD and the IMF start ganging up on you and telling you that they are going to close loopholes on you and there is a risk that things are going to end soon.
“We saw this in the financial services discussions,” he said, adding that the rug was pulled from under many countries who thought that the next panacea was “tax havens and staying off black lists and the rest of it.
“So when you tell me about sustainability, you have to tell me about the sudden stop risk, you have to tell me about the OECD cracking down on jurisdictions and you have to tell me about the European parliament which in April created a special committee on financial crimes, tax fraud and tax avoidance and said the parliament will be investigating, for the first time, tax privileges for new residents or foreign income such as citizenship programmes internationally.”
Gonsalves said that CBI is a “race to the bottom”, adding that the OECS countries are selling the same thing, “a passport”, which he said gets holders the same thing: visa-free travel in the Schengen zone and the possibility to get a visa to go to some other place.
He said that countries budget for the income under CBI but there is a race to the bottom because the value of the passport is the same but the cost varies.
In one fell swoop St. Lucia reduced their price by 50 per cent to $100,000, he said, adding that Castries did so after Antigua and Barbuda and because Dominica was charging $100,000.
Gonsalves said he would not speak about “the scandals that have proliferated around these programmes nor the criminals, suspected terrorists, the diplomatic passports sold to unsavoury characters.
“And I don’t want to stand here in judgement of any other country and their decisions, but we see what citizenship by investment had produced. And I am waiting, Mr. Speaker, I am afraid of what is going to happen now that the Supreme Court of the United States has upheld the Muslim ban, the travel ban on people from certain countries and say those people can’t come in to our country.
“I wonder what happens when they have a passport that they have bought specifically to enter those countries.”
CBI comes with risk of disconnection for correspondent bank relationships, Gonsalves said, adding that this may lead to Vincentians overseas not being able to wire money back home.
At this point, Leacock accused Gonsalves of being involved in scare mongering.
Gonsalves denied the allegation and went on to say that CBI could lead to visa restrictions.
“Like Canada?” said Leacock.
In 2012, Canada imposed visa requirements on holders of SVG passports – where the CBI programme ended when the ULP came to officer in 2001.
Canada said it had concerns about the security of the SVG passports, saying that persons who had been deported had returned to Canada with new passports under different names.
Ottawa also said it had imposed the visa restrictions because of the high number of persons filing for refugee status in Canada.