An article in the May issue of World Trade Magazine sings the praises of the foreign sales corporation program, but the verse on jurisdictions sounds a sour note for the Virgin Islands.
The V.I. has been the premiere jurisdiction of FSCs ever since the federal government created the tax incentive program in 1984. Published figures on the number of FSCs vary, but hover around 6,000 in total, with close to 4,000 of them in the Virgin Islands. Barbados, however, has been growing in popularity in recent years. Some report put the number of FSCs there at about 2,000.
In a section of the World Trade article titled "Where to set up," author Mel Mandell suggests the best place is Barbados. He says the V.I.'s dominance has been declining "because the depressed and crime-ridden islands have instituted franchise taxes on FSCs (that) top out at $25,000."
In Barbados, FSCs pay a flat fee of either $500 for a "small" FSC or $1,000 for a "regular"FSC.
"This article makes me very angry," said Lorna Webster, director of the V.I. corporations division. "It's full of half-truths. It makes me see the lengths some people will go to to further destroy this territory."
Webster stressed "I am not a spokesperson for the government," but she made her comments as the person who administers this program.
One of the "half-truths" she cited is the comparison in local government fees.
The Virgin Islands requires FSCs to pay an annual franchise tax based on gross receipts and tabulated in increments. A "small" FSC, with gross receipts under $2 million, pays $400; one with gross receipts between $2 million and $5 million, pays $900. The tax schedule for a "regular" FSC has seven increments, beginning at $1,000 for a FSC with gross receipts under $10 million. The table does go all the way up to $25,000, but that's for a FSC with gross receipts of more than $500 million — clearly the exception.
Most large V.I. FSCs fall into either the first or second category on the tax table, meaning their franchise tax is either the first or second category on the tax table, meaning their franchise tax is either $1,000 or $2,500, Webster said.
And, the Virgin Islands also grants its FSCs something called a "wage tax credit"– an offset of as much as 50 percent of the tax due as a credit for wages the company paid its V.I.- based management company.
The World Trade article is a "disservice," Webster said, and "the V.I. FSC Association should address it." Members of the private industry group come from the 10 or 12 FSC management firms operating in the Virgin Islands. Most of those companies also have operations in Barbados.
Despite the strong reaction it elicited in the Virgin Islands, the subject of jurisdictions is a minor one in the World Trade article.
Entitled "Threatened FSCs Still Pay Off," the piece spends more time talking about he Europan Unions' pending challenge to the U.S's FSC program, and discussing how to set up and run a FSC.
A representative of the magazine said it has a circulation of 85,000 across the U.S. It is not available in the territory, however.
