Global Treasure Islands

View from a beach on Virgin Gorda one of the British Virgin Islands, with blue sea, golden sand and large boulders. There are bathers in the water, and in the background a variety of yachts and motor cruisers.
View of Virgin Gorda, British Virgin Islands – Kevin Stroup; Creative Commons Attribution 3.0

British Lawyer and MP Advises BVI Government For Small Fee

Sir Geoffrey Cox, the MP who also works as a barrister, is reported to have been paid more than £1m by the government of the British Virgin Islands (BVI). Reports on this case reveal that he is employed to defend the current government, led by Mr Fahie, against allegations by a recent Governor of misuse of public funds, including crony contracts and jury intimidation.

So Few Residents – So Much Treasure

The population of these islands is some 30,237 residents (2020 count), about the same as the Kent coastal town of Deal. How come there is so much money swishing around on these islands, and what is British about them?

They became British during the Anglo-Dutch War of 1672. Early inhabitants were Arawaks who were supplanted by the Caribs in the 15th century, before Christopher Columbus spotted the islands in 1593. They are situated to the east of what Columbus colonised as “Hispaniola” (now Haiti and the Dominican Republic). Slaves from Africa were shipped there once sugar plantations were established in the 17th century.

Nowadays most of the population (23,000) live in the capital, called Road Town. 60% of the economy is off-shore finance. There is no tax. Consequently it attracts some 448 000 companies registered there, a total that is second only to another Caribbean British overseas territory, the Cayman Islands. Setting up off-shore companies is legal, so this is dubbed “tax avoidance” rather than “tax evasion”.

Meet the Treasure Hoarders

So what kind of people want to tuck their wealth away from taxes in this way? Since 2018, when a new law was put through the UK Parliament, the beneficial owners of all companies have to be made public. Some of these companies are members of  ruling families, such as dos Santos of Angola and Karimova of Uzbekistan, or the owner of 41 Upper Grosvenor St, London, owned by a beneficiary in Kazakhstan or the case of the resources minister from Ukraine, Zlochevsky, as reported in Moneyland by Oliver Bullough.

Two recent books which report research on land-ownership in England (“The Book of Trespass” by Nick Harris and “Who Owns England” by Guy Shrubsole) have traced owners to BVI companies, such as 30 properties around the expensive Eaton Square in London, or the Cowdray Estate on the South Downs owned, via the BVI company, by a Russian plutocrat.

Unresolved Compensation Claim

The head of the BVI Government, Fahie, fending off the corruption charges, and hitting back at the British government, hinted that the islanders deserve compensation for being enslaved. That is an unresolved historic due because, of course, it was only slave-owners who were compensated some 190 years ago.

But the angel of justice might nowadays pay more attention to the impoverished slum-dwellers of oil-rich Angola, who have spent decades without the public services that oil revenues could have paid for – except the wealth was swished away to the BVI.

Tax Havens, For or Against?

The EU wants to legislate to close down such tax havens. The City of London resists: far too many there are being paid to set up or advise about the shell companies in these treasure islands. Profits are made by financial wizardry that is hard to unravel. “Tax efficiency” is the rationale, which means the State loses taxes from wealth that could support public services. Companies drawing revenue and paying employees here are allowed to list as BVI companies.

A glimpse of the harm this can cause appeared in Lord Sikka’s recent speech in the House of Lords debate about the new Health and Social Care and proposals. He pointed out that 90% of care homes are now “for profit”, many are registered outside the UK.

The five largest companies owning care homes in the UK have debts of £35 072 per bed which means that some £102 of the weekly cost of a bed in a care home is going to service this debt, most likely to a company registered in the British Virgin Islands.

Time to unbury this treasure?