Belize, a Tax Haven? – I am not convinced

Geographical arbitrage has become a big business. As baby boomers are getting ready to retire, they are looking for places to make their retirement budget go farther.

Many companies make a very good living assisting people in making the move. These companies are experts at selling memberships, magazines, information products, seminars and even real estate. When doing your research for finding your perfect abode in the sun – be very careful whose advice you are listening to, and be very aware of who this information is actually benefitting.

One of the “selling features” of Belize is that it is an off shore-banking haven – I call bullshit on this.

Sure Belize’s International Business Companies (IBC) Act allows international investors to establish offshore companies in Belize. Sure, Belize may have a banking act that ensures banking secrecy and higher liquidity rates – But for this Gringo there is no way I would hide my hard earned money in Belize’s banks.

There is another side of the coin –  the side not shown on the slick webpage copy.

The reality is that the government of Belize is flat assed broke, with public sector debt above 70% of GDP.  Belize also has a track history of defaulting on its loans. In September 2012, Belize defaulted on its external debts totaling approximately US$554 million.

Besides not paying its bills, the Government of Belize has also expropriated businesses owned by foreign investors. In 2011, the government passed special legislation, which resulted in majority government ownership of utility providers (including water, electricity, and telecommunications).

“Belize Telemedia Limited (BTL) is Belize’s telecommunications provider. In August 2009, the company was nationalized by the Government of Belize, who appropriated 94% of its shares which were previously controlled by Michael Ashcroft”. (Wikipedia).

Fortis a Canadian based power company had assets worth an estimated $125 million expropriated by the Government of Belize.

These are big companies with expensive lawyers and deep pockets.

The following is what the Index of Economic Freedom, an annual guide published by The Wall Street Journal and The Heritage Foundation has to say about Belize:

“Belize’s economic freedom score is 56.7, making its economy the 115th freest in the 2014 Index.  Belize is ranked 21st out of 29 countries in the South and Central America/Caribbean region.

Over the 20-year history of the Index, Belize’s economic freedom score has declined by 6.2 points, the 12th largest rating deterioration. The gains achieved in trade freedom and the area of government size that measures fiscal freedom and government spending have been outweighed by substantial declines in investment freedom, property rights, and freedom from corruption, all of which deteriorated by at least 30 points over the same period.

Registering its lowest score ever in the 2014 Index, Belize’s economic freedom status remains “mostly unfree.” Economic dynamism is constrained by institutional weaknesses that undermine prospects for long-term broad-based economic development. In particular, the judicial system remains inefficient and vulnerable to political interference.

Corruption is seen as widespread. Business owners complain that government officials, including police and others, often solicit bribes or show favoritism. The court system, although constitutionally independent, is often influenced by the executive. Expropriation of personal property is relatively rare, but the current government has expropriated major private foreign-owned electricity and telecommunications companies”.

This would be my advice before setting up an off shore account in Belize.

Get a written guarantee from the banks head office – not the Belizean subsidiary. You want a written guarantee that your funds are safe if the Belizean government goes after your cash. Please let us know if you have any luck with this.

When the Belizean oil fields dry up and the Government of Belize is desperate for cash they may come knocking at the door of your “secret bank account”. If Belize decides to expropriate cash and you cannot afford the expensive lawyers all I can say is “Good luck getting the government you were hiding our money from to help you get it back”.

There are other tax havens in the world, including Switzerland, The Isle of Man, Guernsey, Bermuda, the British Virgin Islands, The Cayman Islands etc… Maybe you may want to check their track records too before deciding where you hide your hard earned money.