by Linda Straker
- Repealed legislation critical for removal from EU blacklist could shut IBC sector down
- At least 6 of 84 IBCs registered with GARFIN provide 1,500 jobs
- No legislation is being drafted to protect those jobs
Almost 4 months after passing legislative measures to remove Grenada from the European Union (EU) blacklist, government has given assurance that about 1,500 workers who could be facing the breadline, will be protected.
The New National Party (NNP) government administration which controls all 15 seats in the Lower House and dominates the Upper House of Parliament, said that it is putting countermeasures to save those jobs. Grenada was placed on the EU blacklist in 2017 and repealing 5 pieces of legislation was critical for the country’s removal.
“We are aware that enforcing the legislation will affect some of the international business companies with workers here, but I must say that the companies that are based here will not wind up. They will not be affected because we are working to ensure that these jobs will not be lost,” said Michael Stephen, Comptroller of Inland Revenue.
In December 2018, both the Lower and Upper Houses of Parliament repealed the International Business Companies Act, the International Insurance Bill (2018), and the Offshore Banking Bill (2018), and the same time amended the International Trust (Amendment) Bill (2018) and Banking (Amendment) Bill (2018).
At present, 84 IBCs registered with the Grenada Authority for the Regulations of Financial Institutions (GARFIN) contribute thousands in revenue directly to the statutory body. Besides having local agents as required by law, at least 6 of them are providing overall direct local employment of approximately 1,500 jobs.
One of the main advantages of International Business Companies (IBC) is to avoid paying corporate tax to the country where they are registered. The approval of the legislative measures basically meant that the international business sector would shut down.
In doing the necessary research about the effects repealing will have on the local economy, Prime Minister Dr Keith Mitchell and several government ministers seem to have been unaware about the wide implications repealing the laws would have on the economy.
“We do not have any offshore companies, so we cannot lose jobs related to that area,” Dr Mitchell replied to a question asked via Whatsapp text message. The Prime Minister then instructed that the Comptroller of Inland Revenue be contacted.
It must be noted that in law, an IBC is different from an offshore financial company, though both must register with GARFIN.
Economic Affairs and Planning Minister, Oliver Joseph when contacted, was informed about the name of one of the companies. Joseph then said that he could not see the companies closing their doors because they will be protected. “I am telling you the companies will not close their doors. They will not wind up, the workers will not lose their jobs,” he said, but was unable to provide information as to the form of protection that government will adopt to ensure that the workers do not become unemployed.
Joseph then recommended that the Ministry of Legal Affairs be contacted, but a check with that ministry revealed that no legislation is being drafted to protect those jobs.
During the Lower House of Parliament sitting, Minister for Legal Affairs Kindra Maturine-Stewart in presenting legislation for debate, said that the law was being repealed as part of measures to remove Grenada from the 2017 EU blacklist.
“The International Companies Act in its current construct gives incentives to foreign entities that are not domicile in Grenada and Mr Speaker that has been deemed to be unfair and lack a bit of transparency by the EU intergovernmental code of conduct group on business taxation,” she said, while informing the House that Grenada was among 90 countries screened against tax transparency, harmful tax practices and based erosion profit shifting.
“It has become necessary to re-examine, to amend or even abolish existing tax measures, legislation or regimes that constitute harmful tax competition and also to reframe countries from introducing new measures that constitute harmful tax competition,” said Maturine-Stewart. According to the minister, the EU Group provided guidance for the type of measures for each country to be removed from the list. Grenada was removed from the list in early 2019.
Though members of the Upper House approved the repealing of the legislation, there was a strong objection. During the debate, Senate President Chester Humphrey and most members on both sides of the floor described the repealing as “unfair” and suggested that there be “a grown-up” conversation with those who are making the repealing demands.
Senator Winston Garraway who serves as a junior minister in the Ministry of Climate Resilience, the Environment and Information told the Senate that the demands from the EU are one of pressures and punishment on small islands states who have found a way to develop their economies. “The label of harmful tax is not fair. We did not do anything wrong; we were finding ways of developing the economy,” Garraway said, calling for small sovereign states to stand up and speak about this injustice to developing economies. “This is an injustice against us, against our growth and development, against our people, but as I said, we have to do it,” he added.
After listening to the explanation for presenting the international financial legislation for parliament’s approval, Humphrey wanted to know the impact that repealing such laws will have on other territories where the international financial sector is a thriving business.
Presenter of the Bill, Senator Simon Stiell said that in Grenada there will be less of an impact, but in other regional territories, there will be a significant impact.
“I feel very offended, really offended by these repealings,” Humphrey said after being told that Caricom member states like Barbados and St Vincent and the Grenadines have thousands of companies registered as international businesses.
Ron Redhead was the only senator supporting the repealed measures. During his deliberation, he told the House that Grenada should have never passed such legislation in the first place because it is an avenue for massive corruption.
“We are a bit worried because the damage of these laws and its activities will remain,” Redhead said. Redhead was appointed to the Senate by Governor General Dame Cécile La Grenade on the recommendation of the main opposition National Democratic Congress (NDC) because there was not an elected opposition leader following the 13 March 2018 General Election.
Redhead said that it was his hope that Grenada has learnt its lesson for choosing to venture into the sector without proper legislation. “However, we believe we should still pursue the offshore banking sector. It is still functional in many countries throughout the world,” he said, referring to research conducted that speaks to the advantage of having a properly regulated offshore sector.
According to the repealed legislation, all the companies registered as an International Business Company (IBC) will have to voluntarily wind up before 31 December 2021, or GARFIN will mandatorily dissolve them.
The companies include Clear Harbor, which employs hundreds of young people and is based at the Frequente Industrial Park which is managed by the Grenada Investment Development Company (GIDC); Superfund and its 9 subsidiaries, along with international betting companies Bravio and Sol Mutuel Ltd.
No part of this article may be reproduced without the express permission from the author and the publisher.
NOW Grenada is not responsible for the opinions, statements or media content presented by contributors. In case of abuse, click here to report.