Democratic Gov. John de Jongh toured New Yorklate last week with regional economic development officials, meeting companies and investors. De Jongh has been promoting the territorys 90 percent cut in corporate income taxes to financial firms and light manufacturing companies, among others.
That comes alongside a 90 percent cut in personal income tax, and considerable exemptions for excise, property and import taxes. There are no territorial or local taxes in the U.S. Virgin Islands, which has about 100,000 residents.
These generous tax breaks dont render the Virgin Islands a corporate or offshore tax haven, like such well-known rivals as Bermuda or the Cayman Islands, de Jongh asserted in an interview with IBTimes. Thats because the Virgin Islands tax benefits are legally sanctioned by the U.S. government, unlike regimes at overseas havens under pressure from a global regulatory crackdown.
Our program is sanctioned by the Congress and the U.S. Treasury, Percival Clouden, CEO of the Virgin Islands economic development authority, told IBTimes. Its a safe environment for them [businesses] to operate.
Mandated job creation offsets any lost tax revenue, added de Jongh. Under the incentives program, companies must employ at least 10 Virgin Islands residents and invest $100,000 or more toward the economic well-being of the territory.
The program has 85 corporate beneficiaries so far, with 15 pending applications, mostly from financial companies. Existing beneficiariesinclude hotel companies.
Asset managers and hedge funds have increasingly left high-tax places for low tax jurisdictions, said de Jongh, who seeks such firms as low-hanging fruit for the islands. The Virgin Islands already hosts Denali Asset Managementas one longtime resident firm.
The Cayman Islands, a British territory, has a reputation as a hedge and mutual fund haven, hosting thousands of accounts that collectively managed $1.8 trillion by the end of 2011, according to the Cayman Islands Monetary Authority.
One reason for de Jonghs outreach is the January 2012 lossof the islands single biggest taxpayer and employer, the HOVENSA oil refinery. That shutdown cost the island $100 million in revenue and 2,000 jobs, worsening an economy that has shrunk 22 percent since the 2008 financial crisis.
Tourism is one of the largest sectors in the Virgin Islands, accounting for almost half of employment alongside trade in 2010. Officials are promoting tourism from Europe, especially from Denmark, which ruled the islands until selling them to the U.S. in 1917.
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