It was my intention to write about FATCA and taxes today but it is hard to ignore the results of recent local government elections here in England. I’ve previously written about UKIP in the context of the Eastleigh by-election but last week went on to win over 140 seats and average 25% of the vote in council wards they contested. UKIP leader Nigel Farage now talks about these gains representing a “game changer”.
Friday night I met up with some former work colleagues and politics came up. One of my friends is actually a UKIP supporter and as I said to him, I have nothing against UKIP in principle and their focus on their twin pillars of anti-EU and anti-immigration. What concerns me is the way in which the debate is being framed as an emotional one as opposed to a data driven one. As long as this is allowed to happen, populism and poli-tricks may be allowed to trump logic and pragmatism.
Firstly there is the anti-EU stance. Not that I am a defender of the EU as presently constructed but my questions are what about the economic studies that speak to the potential impact leaving the EU? Brussels has made it clear that the Swiss option will not be on the table and assuming that one is not deluded into thinking that the UK can thrive without aligning herself with a trading bloc, with whom should she align herself? The Obama administration has made it undiplomatically clear that it wants the UK to remain engaged with the EU to help influence its evolution from the inside. Prime Minister Cameron has been to the far-east twice and the Indian business leaders (Indian employers are by far the largest industrial employers in the UK!) who now control what little remains of the British industrial base have made it clear that they need the UK to remain in the EU to ensure duty-free access for their goods.
Secondly there is the anti-immigrant stance. Last week I wrote about the productivity puzzle. The UK barely avoided the dreaded triple dip and productivity continues to decline especially when compared to the US where even those to the right are advocating relatively liberal immigration policies. Why? It’s pure numbers. According to the pressure group - Partnership for a New American Economy, about 40% of Fortune 500 firms were founded by immigrants or their children. More specifically, this represents the firms behind seven of the ten most valuable brands in the world! Even though foreign-borns are only an eighth of America’s population, a quarter of high-tech start-ups have an immigrant founder. That’s a key part of why productivity in the US is climbing while the UK has been declining in my opinion.
High-tech firms such as Google (whose co-founder Sergey Brin moved to America from Russia as a child) haven’t just created jobs for their own workers. They have also inspired the creation of entirely new categories of job. An article in April’s Economist noted that a few years ago no one earned a living as a mobile-app developer. Now they are everywhere. It is not just full-time workers who benefit: firms such as oDesk, a Silicon Valley outfit founded by two Greeks, are nurturing an online freelance economy that is in its infancy. Last year Americans using oDesk’s platform found over 2m hours of freelance work.
So returning to UKIP, again I have nothing against an open debate on the EU nor on immigration. I just get concerned when discussions are framed by emotive sound bites by power hungry politicians who see economic data as a distraction to be avoided.
Perhaps next week I will have the opportunity to focus on FATCA compliance in the Caribbean. Based on the FATCA model, the UK, France, Germany, Italy and Spain have entered in an agreement for the multilateral automatic exchange of tax information. What’s also interesting is that all British Overseas Territories in the Caribbean are also included in this agreement.
As if to emphasize the perception that transparency and compliance in independent Caribbean territories lag behind that of British Overseas Territories, last week U.S. District Court Judge Thelton E. Henderson of the Northern District of California granted a Department of Justice petition to serve a John Doe summons in an “ex parte” proceeding—meaning the government was able to keep the summons secret until it was served. The summons requires Wells Fargo Bank to turn over records that could identify any U.S. tax payers who held accounts from 2004 through 2012 at CIBC / First Caribbean International Bank Limited (FCIB), which operates in 18 Caribbean countries.
In previous commentaries, I made the point that compared to the British Overseas Territories and the Bahamas, both governments and indigenous financial institutions in independent Caribbean territories were not giving FATCA the level of attention it needed. In this game changer, it appears as if the US authorities are making an example of FCIB. Let us see how the rest of the region responds to this wake-up call now.
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