Introduction
St. Vincent and the Grenadines is situated in the Eastern Caribbean at the southern end of the Windward Islands chain. It is an archipelago of islands, St. Vincent being the largest, with the smaller Grenadines comprising Bequia, Mustique, Canouan, Mayreau, Union Island, Palm Island, Petit St. Vincent and a number of small islets.
The country covers approximately 384km², and has a total population of 111,380 (1998) updated figure). The capital, Kingstown has a population of 25,000. The official language is English, with approximately 85% of the population being functionally literate
The country gained independence from Britain on October 27, 1979, instituted a Parliamentary Democracy on the Westminister model, and has remained a part of the Commonwealth.
Business Environment
The British telecommunications giant, Cable and Wireless has traditionally dominated the telecommunications services market in St. Vincent and the Grenadines. Telephone, facsimile, telex and cable services are in wide use, together with e-mail (internet services). Cellular phone services are also available. The Government has liberalized the telecommunications market.
Kingstown has a natural deepwater harbour with a wharf to accommodate ocean-going ships. There are regular services between St Vincent and the major ports in North America, Europe and the Caribbean. A container park at Kingstown and a container port at Campden Park have been completed, and cruise ship facilities in Kingstown are being updated. The E.T. Joshua Airport located on St. Vincent’s south coast has a modern terminal building, night landing facilities and accommodates small aircraft such as BAE 748 Avro.
There are more than 580 km of all-weather surfaced roads to handle heavy traffic which allow for the free flow of goods and services between the various centers of economic activity and also facilitate the movement of workers to the industrial
estates.
Economic Environment
Agriculture, dominated by banana production, is the most important sector of this lower-middle-income economy. Key sectors are banking, trusts, insurance and mutual funds. The services sector, based mostly on a growing tourist industry, is also important. The tourism sector has considerable potential for development over the next decade. Recent growth has been stimulated by strong activity in the construction sector and an improvement in tourism. A further boost is expected to be provided by the new international airport which is currently under construction. There is a small manufacturing sector and a small offshore financial sector whose particularly restrictive secrecy laws have caused some international concern.
Taxation
St. Vincent and the Grenadines operates a favorable taxation regime for international entities, which are not subject to tax under the country’s laws. Furthermore, under the domestic tax regime there is no capital gains tax, no inheritance tax, and no tax on dividends. Corporate tax ranges from 10% to 35%. Income tax is levied on all persons whose chargeable income is more than EC$12,000 per annum whilst National Insurance (social security) Contributions are payable from salary up to EC$20,040 per annum at rates of 3% for the employer and 2.5% for the employee. Capital and profits may be freely repatriated up to a limit of US$100,000 whilst amounts exceeding this sum require approval before repatriation. Also there are no exchange controls on current transactions under US$100,000. There are no taxes or duty’s on income or profits. It is also exempt from stamp duties on transfer of property and any exchange controls. An IBC receives upon formation a Government Certificate of Exemption from taxes for 25 years from the date of incorporation.
Banking
The currency used is the Eastern Caribbean dollar (EC$), with an exchange rate of EC$1 = US$0.37. In addition to the US dollar, the British pound sterling and the Canadian dollar are widely accepted.
Saint Vincent and the Grenadines is a member of the Eastern Caribbean Currency Union, which has a common central bank and currency. All domestic commercial banks in Saint Vincent and the Grenadines are regulated by the Eastern Caribbean Central Bank. The financial sector is small and dominated by banking. Government influence in allocating credit is not substantial. There are six commercial banks, and foreign presence in the banking sector is significant. The financial-services sector plays an important role in the country’s overall economic development strategy. The offshore financial sector is relatively small and concentrated. Capital markets are very underdeveloped, and local entrepreneurs lack adequate access to a wide variety of financing instruments.
Offshore Banking
In the offshore banking sector, the regulator has concentrated its efforts on ensuring that only well managed and adequately staffed banks with a physical presence are licensed in the jurisdiction, and therefore, no shell banks will be found in SVG. At present there are only a handful of banks licensed to conduct international banking business, all of which are subject to on-site examinations by the authorities every 12-18 months.
The IFSA collaborates with the Saint Kitts-based Eastern Caribbean Central Bank in the licensing and supervision of offshore banks, and SVG banking firms must adhere to strict staffing requirements. Under the International Banks Act, 1996 institutions must have local employees and a minimum of two OFA-approved directors, one of whom must be resident in the jurisdiction. Whilst SVG in the past afforded a high degree of confidentiality to account holders, the Exchange of Information Act passed in 2002 in order to bring the jurisdiction in line with international anti-money laundering standards has of necessity compromised this to a certain extent.
As mentioned above, the SVG offshore sector also caters to the mutual fund industry, which is governed by the Mutual Funds Act 1997 (as amended in 1998). The act provides for the licensing of both domestic and offshore mutual funds and licenses can be granted either for private and accredited funds public funds. There are no capital adequacy requirements or minimum subscription limits placed on public funds although they must maintain accounting records and financial statements as well as publish a prospectus and file it with the OFA.
The international insurance sector was also identified by the government as an additional growth area for SVG. The sector is currently governed by two Acts passed in 1998 and 1999 which attempt to create a high quality legal and regulatory framework designed to attract market participation and offer flexibility to insurers wishing to conduct international insurance business.
In a bid to secure future growth for the jurisdiction’s finance industry, the government created a new international promotion agency, known as National Investments Promotions Inc (NIPI). This new body commenced operations in August 2004.
