By Youri Kemp
Caribbean News Now associate editor
NASSAU, Bahamas — As The Bahamas grapples with a hike in value-added tax (VAT) and the government’s debt burden continues to rise, a local real estate broker, Mario Carey, is convinced that an economic citizenship programme is an idea whose time has come, and could prove to be exactly what the government needs to lift the economy out of the doldrums.
Carey, the founder of Better Homes and Gardens Real Estate MCR Bahamas Group, first floated the idea publicly last and he now envisions The Bahamas becoming a luxury citizenship by investment (CBI) jurisdiction, commanding top dollars from foreign investors.
Essentially, economic citizenship would result in individuals or families acquiring Bahamian passports following a sizeable investment in an approved project in a Family Island.
“The formula I’m proposing is a two-step process. The investor purchases land or a residence, that’s the first part, and secondly, they contribute funds to a specially created fund that provides for three specific needs — hurricane and disaster relief and recovery, national development and the National Health Fund,” said Carey. “These figures could be adjusted in a further discussion but I would recommend considering a $750,000 purchase and a minimum contribution of $1 million to the fund which lies outside the Consolidated Fund.”
Carey suggests that a minimal time frame for a presence on the island of choice also be considered.
“The investor would be required to spend at least 90 days in The Bahamas annually, demonstrate that their presence is resulting in additional employment and would not be able to sell their property for at least five years without an appeal in extenuating circumstances,” he said. “Again, I think it is really important to stress that this would apply only to approved projects or purchases in the Family Islands and could be the economic shot in the arm they need, helping to stem the tide of people turning to Nassau for jobs. It could lead to better education, improved health care and other positive outcomes for Family Islands and based on other countries’ experiences, we would not be likely to attract more than 350-400 persons per year, a number the country could easily absorb and should readily welcome.”
Countries around the world – the US, UK, Canada, Australia — have adopted various forms of economic citizenship programs. But nowhere has the concept gained more favour than in the Caribbean, where several Eastern Caribbean countries have used investor funds to recover from economic decline and the devastation of hurricanes and other natural disasters.
“The objective is not to compete with St Kitts, Antigua and Grenada, where for less than half a million dollars an investor could purchase citizenship,” Carey said. “The Bahamas can command more.”
Antigua and Barbuda, St Lucia, Dominica, St Kitts and Nevis and Grenada all offer economic citizenship that could come in one of three ways: financial contribution to a national development fund, real estate investment, or by establishing a business. For most nations, paying into the national development fund offers the cheapest route, although residency requirements sometimes apply. Processing time for the region takes three months on average.
The most popular entry into Antigua’s citizenship by investment program is a $100,000 investment in the National Development Fund for a family of four, with an associated processing and due diligence fees of $25,000. That figure jumps to $200,000 for citizenship in Grenada and Dominica, not including additional expenses.
St Kitts and Nevis launched the world’s first citizenship by investment programme. Foreigners must invest into the Sustainable Growth Fund – US$150,000 for a single applicant and US$195,000 for a family of four. Last September, St Kitts allowed investors to gain citizenship by donating $150,000 to the Hurricane Relief Fund. That initiative expired in March.
St Kitts and Nevis has been offering CBI since 1984, and to date 11,000 foreign investors have become citizens, an average of 324 per year, injecting at least US$2.75 billion into the local economy based on the historical contribution requirements.
Former St Kitts and Nevis prime minister, Dr Denzil Douglas, credits the programme with assisting to transform the country from a sugar-based economy to a high-end tourism model.
For a high net worth individual (HNWI), a second citizenship in the right jurisdiction could improve financial security by way of yielding strategic tax planning opportunities. For those hailing from a less politically or economically stable region, an alternate passport provides a sense of security, along with an escape route in order to avoid political persecution or conflict in war-torn areas. The right passports provide visa-free entry into some 150 countries.
In the case of the United States, economic citizenship is possible through the EB-5 Green Card by Investment Program. It requires the alien entrepreneur to invest anywhere from $500,000 to $1 million in projects designed to increase employment, with evidence that the investment capital was obtained by lawful means. The investor has to live in the United States as a permanent resident for a minimum of five years.
In Canada, the path to economic citizenship comes through the Quebec Immigrant Investor Program (QIIP), which caps the amount of applications it receives annually to fewer than 2,000 applicants. Foreign investors must have a legally obtained minimum net worth of CAD$1.6 million. Investors must reside in Canada as a permanent resident for at least three years.
In the UK investors with at least £2 million in investment funds could apply for economic citizenship via a Tier 1 Investor Visa and in Australia, economic citizenship is attainable through Australia’s investment-based, three-step immigration process for obtaining citizenship. The investor must possess a net value of at least AUD$600,000.
Offering citizenship to investors has helped other countries raise hundreds of millions of dollars while expanding their economies.
Montenegro is one of the latest countries to consider implementing such a programme and, as a government minister explained at a Global Citizen Forum held there last year, it should not be viewed as selling passports but buying intellectual assets in the shape of new investors/entrepreneurs.
Carey points to the facts in The Bahamas: the national debt stands at $7.8 billion, with a debt to GDP ratio of 67.8 percent, according to the Central Bank of The Bahamas’ 2017 annual report. Last year the government borrowed $750 million for debt servicing.
“The Bahamas has dug itself into a deep financial hole. Even if we were now to live within our means and utilize the VAT increase to pay down debt we would still find ourselves in a financial bind for years and years to come,” said the real estate broker. “What we need now is new money, a new source of revenue as opposed to borrowed funds and our heavy reliance on tourism and financial services.”
However, successive governments have resisted the idea, which would see Bahamian passports issued to persons not from The Bahamas.
“The government has to decide whether it wants to continue hitting the pockets of the Bahamian people for money that is simply not there, or raise revenue in the least economically harmful manner, through an economic citizenship programme,” Carey said.
“There may be pushback from an emotional standpoint, but from where I sit, it is essential that we collect more dollars to improve our aging infrastructure and essential government services such as health and education. A well-constructed economic citizenship programme will generate economic growth,” he added.