The San Juan Star / December 1, 1997
By Larry Luxner
ST. GEORGE'S, Grenada -- Mention Caribbean tax havens, and the first places one normally thinks of are Bermuda, the Cayman Islands, the Bahamas and St. Vincent. Potential investors can now add Grenada to the list, thanks to a recently passed Grenadian law that allows foreigners to quietly deposit their money in sheltered, tax-free accounts.
"What we have to put into place is a very efficient and responsive oversight body authority that can respond to applications very quickly, process these and also have a very good database for managing the whole thing," says Rupert Agostini, an independent accountant and unofficial adviser to Prime Minister Keith Mitchell.
Under the law, qualified foreign investors pay zero personal income tax regardless of how much they invest. Locals pay tax only if their annual income levels exceed EC$60,000 (US$22,000). This effectively means a virtual repeal of income tax, since the vast majority of Grenadians earn less than that.
"My strategy was to have the whole tax removed, and that was the main thrust of our fiscal policy," says Agostini, "but the influence of regional institutions sort of prevented the prime minister from going all the way."
Nevertheless, Grenada benefits from the offshore legislation by charging hefty bank licensing fees on the order of US$40,000 or more.
"Clearly, our banking fees would have to be competitive, otherwise we'd run ourselves out of the market," Mitchell said in an interview. "Let's face it, bankers and people with lots of money want to diversify. They don't want to concentrate their investments in any particular area. This is the way they operate. If I had money like them, I'd do the same thing."
Earlier this year, the Mitchell government decided to let offshore companies set up gaming operations. This will allow people to call the companies and place bets on the likely outcome of basketball, football or hockey matches. "No bets are allowed within Grenada, and no credit given to any customer," said Mitchell. "All transactions are done through data communications via the Internet or by telephone calls. Our plans are to issue about 10 licenses by the end of 1997, providing 150 new jobs for young people."
Several months ago, Mitchell also signed into law an economic citizenship measure which allows wealthy people to buy a limited form of Grenadian citizenship for EC$60,000 (US$22,000) including spouse; applicants must also put EC$45,000 ($16,700) into a "development levy" or investment fee to be used for development projects at the government's discretion. Under the program, such immigrants receive Grenadian passports but are prohibited from voting, owning property and running for elected office. After six years of living continuously in Grenada, the restrictions against voting and property ownership no longer apply.
According to a government news release, "the provision, sale and administration of this program internationally is restricted to approved agents who can satisfy criteria with respect to their background, as well as their development of approved projects and a sound business plan. The aim is to minimize abuse of the program and to reduce the administrative burden on the public service."
"This area will work well for us," Mitchell said in an interview. "We have all the control mechanisms in place to make sure that the people we provide citizenship to are people we can be proud of."
Adds Finton De Bourg, founder of Capital Bank International in St. George's: "We see this as a major avenue for bringing in capital, since an economic citizen has to invest a certain quantity, and there are major projects which cannot be financed otherwise."
Asked about his political rivals who oppose the selling of Grenadian passports to wealthy foreigners, Mitchell had this to say: "If you really want to propel your country into the 21st century, you'd better be prepared to look at innovative ways of doing this. We have no illusions at all. To me, the main thing is that this country has serious potential for attracting people with resources who can help improve this country's development. Therefore, we would be unwise not to put ourselves in a position to attract those people."