G20 nations must recognise the stimulus effect of IFCs in the global economy

By added on 10/06/2010

A survey released by Invest Barbados shows that the majority of people in Canada, the United States and the UK believe that investments in low tax jurisdictions (international financial centres) are good for business, but bad for their local economies, according to Canada News Wire.

The survey revealed broad misconceptions among major G20 nations about the beneficial role of international financial centres in the global economy.

In Canada, 64 per cent believe that Canadian investments in low tax jurisdictions are good for business, yet 60 per cent think they are bad for the economy.

However, according to Dr. Walid Hejazi, a faculty member at the Rotman School of Management at the University of Toronto, approximately 20 per cent of Canada's foreign direct investment abroad moves through low-tax jurisdictions, of which Barbados is the largest recipient.

"My research illustrates that increases in Canadian direct investment abroad, through legitimate international financial centres in countries such as Barbados, result in higher levels of Canadian capital formation and employment," said Hejazi who is the author of "Offshore Financial Centres and the Canadian Economy" and joined a panel discussion on the topic at Economic Club of Canada.

"In recent years there has been much rhetoric in several G20 countries against tax havens in a way that stigmatizes legitimate international financial centres," said Minister Darcy Boyce, Minister of State Finance, Investment, Telecommunications and Energy for Barbados.

"The reality is that well-regulated, transparent tax-treaty based centres, like Barbados, assist in the growth of both Canadian multinationals and their home economy by generating higher tax revenues and job creation in Canada in the long term. At a time when most G20 nations need sustainable stimulus structures, governments should recognise the domestic benefits of legitimate international financial centres."

Barbados was the only independent jurisdiction in the Caribbean to be "white-listed" originally by the Organisation for Economic Co-operation & Development (OECD) and has a long standing Double Taxation Agreement with the Canadian Government. OECD white-listed jurisdictions are those that have substantially implemented the internationally agreed tax standard and agree to exchange tax information.