Feb. 25, 2004 — The head of the Economic Development Authority says in spite of the recent incident linking a federal tax fraud prosecution to one of its beneficiaries, the agency's program designed to stimulate the V.I. economy by attracting investors is sound.
In a statement released late last week, EDA Chief Executive Officer Frank Shulterbrandt defended the worthiness of the Virgin Islands Economic Development Commission as a federally approved tax incentive program. He also suggested the EDC, under his two-year administration, was doing a better job of encouraging compliance from those taking advantage of the program.
Shulterbrandt said tax cheats and other kinds of white-collar criminals can be expected to appear from time to time. During a recent interview he pointed to a national press report saying the U.S. Internal Revenue Service had collected hundreds of millions of dollars from some 1,300 investors using offshore investment schemes.
"The EDC has taken extraordinary measures to protect the integrity and maintain the confidence in the program. By way of example, a full complement of compliance officers was hired to ensure that EDC beneficiaries comply with the terms and conditions of their Certificate of Benefits. Additionally, a compliance conference is held annually for beneficiaries to address any issues or concerns about the EDC program and to offer solutions to resolving them," Schulterbrandt said.
Earlier this month Gary Payne, identified by the U.S. Justice Department as a partner in an EDC business called The Partnership, pleaded guilty to two counts of tax evasion. A special agent at the IRS Miami field office said the company is believed to have financial dealings in at least 26 states and was using its V.I. company to hide money that should have been paid in federal taxes.
Schulterbrandt said he believed one of the reasons this happened was because of ambiguous rules regarding V.I. residency.
"Because of the urgency related to the above referenced tax matters at issue, the Bureau of Internal Revenue and the U.S. Department of Treasury have agreed to meet and issue new regulations, which will more fully detail what 'residency' and 'Virgin Islands source income' mean. The Economic Development Authority is working closely with the Bureau of Internal Revenue in this endeavor to ensure that significant input from current beneficiaries is considered before the issuance of final rules and regulations on these matters," the EDA chief said.
On Tuesday Schulterbrandt said efforts are already underway to tighten up EDC regulations with regards to residency. "Whenever we have potential investors coming to the Virgin Islands they will understand very clearly whether they qualify or not," he said. "The residency issue is looked at as the totality of the circumstances and right now we don't have any definitive rules and regulations from the federal government on that particular issue," he said.
However, Schulterbrandt said officials with the V.I. Bureau of Internal Revenue, in anticipation that residency requirements for EDC beneficiaries would some day become an issue, have already begun talking with the Treasury Department to better define the rules. Schulterbrandt said his agency will have a chance to look over the planned revisions and hopes to present them to beneficiaries already taking part in the program, allowing them to offer their ideas and suggestions as well.
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