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Caribbean FDI Down Five Percent In 2014

by Mike Godfrey, Lowtax.net, Washington
09 June, 2015

The Economic Commission for Latin America and the Caribbean has reported a further fall in foreign direct investment into the Caribbean and has questioned the efficacy of tax breaks offered to investors.

According to the report, FDI into the Caribbean shrank by 4.7 percent in 2014 and has fallen by 37 percent since 2008.

ECLAC noted that FDI as a proportion of gross domestic product (GDP) is higher in the Caribbean region than in most other regions, making Caribbean countries highly vulnerable to variations in FDI flows.

During 2014, FDI flows to the Bahamas fell by nine percent, by 13 percent in Saint Vincent and the Grenadines, and by 14 percent in Saint Kitts and Nevis.

However, FDI into Antigua and Barbuda rose 66 percent in the same period, following the recent launch of its Citizenship by Investment (CBI) program. FDI also rose markedly in Dominica, by 36 percent.

The report said the Caribbean territories attract significant investment through tax incentive schemes. These policies range from actions to improve the overall business climate, to the use of financial measures to stimulate FDI inflows, such as exemptions from income tax and customs duties.

ECLAC said that some of these measures may no longer be efficient. It recommended that Caribbean countries revise their usefulness, taking into account the high fiscal costs of these measures for their economies and tax competition between Caribbean states. Under the framework of the Caribbean Community (CARICOM), earlier proposals have been put forward to harmonize the territories' tax offerings.

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