International financial foolishness

Din Duggan, Contributor

LADIES AND gentlemen of the world community, my name is Jamaica and I would like to manage your hard-earned money. Heretofore, you have known me simply as that aesthetically endowed Caribbean nation replete with white-sand beaches (that are rapidly eroding), amazing rum (profits from which go to our good neighbours in Trinidad), and reggae music (part of an industry that has long been neglected by policymakers), but there is more to me than those things. In this speech, I will set out my qualifications for inclusion among the ranks of the world's international financial centres.

Actually, how inappropriate of me. I commenced this speech without providing any context, whatsoever. Two years ago, then minister without portfolio in the Ministry of Finance, Don Wehby, announced that by the end of 2009 Jamaica would become an international financial services centre (IFSC), providing offshore financial services to foreign depositors, similar to those provided by the Cayman Islands, Liechtenstein, Singapore, and Barbados. At the time, I didn't give much thought to the proposal. For one, I didn't find it necessary to give credence to the words of a man devoid of a portfolio but, more importantly, I thought the proposal was utter nonsense, considering Jamaica's troubling domestic condition. Apparently though, our leaders, both with and without portfolio, were serious about this plan.

Jamaica has reportedly taken a critical step towards this goal by joining the 'Global Forum on Transparency and Exchange of Information for Tax Purposes'. Prior to that, the government had paid $15 million to accounting firm KPMG to assess the local market for an IFSC. I won't point out the glaring irony in retaining a foreign firm to advise us as to whether we are qualified to advise the world. That's unimportant. What is important is that we are moving forward on this and, as a patriot, and a trained advocate, I consider it my civic duty to help promote the plan.

Our qualifications

Now, as I was saying, Jamaica is much more than foreign-owned rum, eroding beaches and a neglected entertainment sector. We also know money. Just ask the International Monetary Fund (IMF). Over the course of this year, we have passed a series of IMF-mandated fiscal tests. Sure, our fiscal situation is strictly monitored by the IMF due to a bailout necessitated by our recent record of crushing debt, nonexistent growth and anarchic tax administration. But, for the foreign depositor, that simply amounts to an extra set of eyes monitoring your money.

Jamaica also has a long entrenched banking oligopoly with a history of amassing tremendous profits by investing in high-yielding government paper, exploiting gaping spreads in interest rates, charging unconscionable fees to consumers and, generally, doing little to facilitate growth in productive sectors. But not to worry, that deplorable treatment is directed towards local consumers. Surely, we will roll out the red carpet and responsible practices for foreign depositors.

Beyond that, the government has displayed ingenuity in financial regulation. For the last several years, they assumed a deregulatory stance with regard to investment vehicles. This position resulted in two such investment entities, Cash Plus and Olint, experiencing astronomical growth. Less innovative governments would have labeled these entities as Ponzi schemes and shut them down accordingly, but our Government is unapologetically deferential to free enterprise - regardless of risk or legality.

It will also be comforting to know that Jamaica has long been an offshore tax haven, albeit an unofficial one. Our official corporate income tax rate is 33.3 per cent, but who's counting? One per cent of corporations pay 71 per cent of all corporate income taxes. The informal economy, which reliable estimates peg as amounting to 40 per cent of gross domestic product, goes largely untaxed. In fact, tax enforcement in Jamaica consists of seizing the luxury vehicles of a handful of dancehall artistes. So, even without a double-taxation treaty, your money will be safe from the taxman, providing you refrain from chanting 'Gaza' or 'Gully' while driving a Range Rover within our borders.

If you somehow conclude that this talk of Jamaica as an international financial centre sounds more like international financial foolishness, I beg you to rethink. We may not have Barbados' low crime rate, Singapore's transparent leadership, Cayman's long history as a tax-free jurisdiction, or Liechtenstein's fancy name, but we do have rum, Red Stripe and reggae. Surely, that must count for something. And I promise you, we know money. Just ask the IMF.

Din Duggan is an attorney and entrepreneur who now works as a consultant with a global legal-search firm. Contact him at facebook.com/dinduggan, twitter.com/YoungDuggan, or dinduggan@gmail.com.