White List

I've mentioned before in the blog that the largest economic sector in the Turks and Caicos Islands is finance. And I've suggested that this is really just a pretty name pasted over an ugly practice: tax evasion. Just yesterday, however, I stumbled across a headline that suggested TCI was cleaning up it's act. Perhaps it's just my cynical character, but after reading it in full I was left with the impression that there was just enough compliance to keep their crooked dealings out of the spotlight.

Read the article here: http://www.tcweeklynews.com/link.asp?smenu=1&sdetail=1808&wpage=1

The article reports on TCI's removal from the G20's "grey list" of countries that don't comply with international tax transparency standards. This would appear to be a huge step in the direction of cleaning up the country's reputation for corruption and shady dealings. And, indeed, a spokesperson for the Governor is quoted as saying just that. But it appears it took considerable arm twisting to get this far - according to the article, the recent actions leading to TCI's removal from the list came just weeks before threatened sanctions were scheduled to take effect.

What does it take to get off the G20 grey list, anyway? A listed country must sign a minimum of 12 Tax Information Exchange Agreements (TIEAs) to be removed. Is it any surprise that TCI has signed on to exactly that number, including ones with the likes of Greenland and the Faroe Islands (population 50,000)? I guess there might be some Inuit seal hunters or dogsled runners that are going to have to find somewhere else to hide their unbounding wealth. To be fair, the twelve agreements do include the UK, France, and the Scandanavian countries, and there are plans to sign agreements with several other wealthy countries. Notably, however, there is no agreement in place (and no indication is given of plans for one) with the United States, which according to the article loses "around $100 billion each year due to offshore tax evasion."

Evidence of this kind of dirty money passing though the Turks and Caicos is everywhere. I'd be willing to bet that much of the luxury tourism on Provo is a byproduct of such tax evasion. How so? Let's suppose you have a large amount of taxable assets in the United States. And even if you paid the most crafty accountants to find all loop holes in the tax code, you'd still owe the government 25% of it. So look to the Turks and Caicos for some place to hide your assets. An unscrupulous banker here in the Islands would gladly help you to find "investment" opportunities - a new luxury resort, for example. You move enough capital into a Turks and Caicos account to fund the development. On paper the development might cost $5 million. In reality maybe it only cost $2 million. The remaining $3 million can then be moved into secret accounts that the IRS can't track. If the tax evader then wants access to that money without it being linked to his or her devious activities, that money must be laundered. At this point it is simple, fudge the books a little and hide the money in the returns coming back on the tourism investment. That extra cash can then be used to buy something nice like a yacht.

When I start thinking about all this it makes me sick. When I'm in Provo I can't help but think everybody around me is a tax cheat, fraud, and the sort of person responsible for the recent economic collapse. Excess isn't enough for these people. They'll take everything they can get, and when it all comes crashing down, it's the honest laborer that suffers the most.

Food-Boat Day

I wish every day was food-boat day. Every other Tuesday a shipment comes in from Florida. In the days leading up to it, we usually eat things like macaroni & cheese or hot dogs. In the days after it we have things like salad, steamed carrots and broccoli, kiwis, bananas, yogurt, Cheerios, and occasionally a free sample of fancy little frozen desert cakes.

Before

After

Almost nothing, agricultural or manufactured goods, is produced in TCI. It is all shipped in at huge expense, inconvenience, and use of fossil fuels. On South Caicos, nothing would grow. The soil is only a few inches thick above sandstone and almost entirely sand, and much of it is full of salt from the salinas. Fresh water is also scarce. I've read that conditions are slightly better on Middle Caicos, but the crops they have don't do very well. After the American Revolution, a community of exiled Loyalists settled here and attempted cotton and sugar cane plantations, but apparently they were never that productive and were abandoned after a trade blockade during the War of 1812 and a severe hurricane. I'm not sure exactly why we don't get more locally produced seafoods, but it is probably cost related and just easier to cook processed foods - regrettable, but I can't complain because I don't pay for it.

So what keeps the TCI economy going? On South its mainly conch and lobster exports. On Grand Turk there's a little tourism, but it's mostly government. On Provo its finance. The sort of "finance" you'd like to hide from the eyes of regulatory agencies at home. There's also high-end luxury tourism on Provo (i.e. places where you can find a room for $10,000 per night) as a consequence of the offshore finance. The financial sector has, of course, suffered most directly from the recession, but I'm unsympathetic.