US Tax Information Exchange Agreement with Antigua and Barbuda

On December 6, 2001, the governments of the United States and Antigua and Barbuda signed an agreement for the exchange of information with respect to taxes. Specifically, the object and scope of the agreement targets each country's assistance to assure the accurate assessment and collection of taxes, to prevent fiscal fraud and evasion, and to develop improved information sources for tax matters. At hand for the signing were Treasury Secretary Paul O'Neill and Antiguan Prime Minister and Minister of Finance Lester Bird. In a Treasury News press release announcing the signing, Treasury Secretary Paul O'Neill made the following remarks at the signing:

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"The agreement we are signing today provides continuing evidence of our commitment to establishing and maintaining effective information exchange relationships with countries across the Caribbean and throughout the world. I want to extend my sincere appreciation to the government of Antigua and Barbuda for demonstrating its desire to cooperate with the United States in our efforts to ensure adequate enforcement of our tax laws. As I have said many times, we have an obligation to enforce our tax laws... Today's signing marks another important step forward in our efforts."

Tax Havens have long been popular as locations where US citizens can invest and benefit from the lower or nonexistent tax structures of independent nations, such as the Bahamas, the Cayman Islands, Antigua and Barbuda, as well as many other islands in the Caribbean Basin that rely heavily on foreign investment for economic development amid economies that are otherwise tied to the uncertain fluctuations of tourism or foreign trade in coffee, bananas, and sugar.

This foreign investment greatly increases the progress of a country's development.

Clearly 30% of the Gross Domestic Product of the tiny nation of the Cayman Islands, for example, relied on Offshore Investments.

In November of 2001, the Cayman Islands lost its 30 year status as a leading tax haven for US citizens through a similar tax information exchange agreement as that signed on December 6 with Antigua and Barbuda.

In effect, both the Cayman government and the Antigua and Barbuda government will from now on serve as an enforcement arm of the US Internal Revenue Service, applying US tax law to US citizens with business in these two countries.

US interest in gaining tax information on US foreign investments began in earnest with the Clinton Administration, but has increased during the current Administration.

The effort is fueled and justified largely from concerns over drug money laundering and US tax evasion, but the majority of individual investments overseas are legitimate ventures.

With tax information exchange agreements, many foreign investors, in order to maintain privacy, will redirect their investments to friendlier climates, depriving some struggling nations a chance at development.

Two viable positions object to these types of agreements:

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First is the restriction of individual rights regarding US citizens to invest their money where they choose to do so without being subjected to US tax regulation.
Second is the loss of private revenue generated by foreign investment, which has become the mainstay of island economies in the Caribbean Basin.

Just how far reaching is the recent accord with Antigua and Barbuda? The following is a release from The Office of Public Affairs Office of the US Treasury Department.

You may agree it is far reaching and will greatly inhibit private foreign investment in Antigua and Barbuda.

The document goes further in providing a blueprint for future measures to restrict choice and economic development.