Established in 2013 through an act of parliament, the Antigua and Barbuda Citizenship by Investment Program (CIP) was intended to increase foreign direct investment. It was envisioned as a way to promote development without imposing any new taxes on the country’s 100-thousand citizens.
Today, the program makes up about 10% of the country’s overall budget revenue. Prime Minister Gaston Browne told CIJN this kind of non-tax revenue helped the country “create fiscal space, [to] continue to fund government operations.”
In 2021, that amounted to more than $45 Million USD.
The Citizenship by Investment Program offers a way for high income individuals to purchase a passport that gives them visa-free access to more than 150 countries. It includes the “crown jewel” of access to the Shengen region of the European Union.
Key for many wealthy clients is the fact that Antigua and Barbuda has no income tax, capital gains tax or inheritance tax on funds earned outside the country.
Another feature is that this second passport can be acquired in as little as 3 months without ever stepping foot in the country. Unlike rival programs in the Caribbean, Antigua and Barbuda requires applicants spend at least 5 days visiting the islands every 5 years.
There are assorted application fees and a $7,500 USD charge for “due diligence” to determine if the applicant has any criminal history or links to terrorism or organized crime.
Essentially, an individual can purchase a passport for as little as $137,500USD
There is a straightforward table of additional charges for spouses and children who would also receive passports. The real estate option costs more but gives prospective buyers an opportunity to sell their properties after a set number of years and earn return on investment.
A complete list of options is available online.
Transparency and Accountability
When first presenting a report to Parliament in 2014 on the monies received by Citizenship by Investment in the National Development Fund, then Finance Minister Harold Lovell promised “The money will be used to improve domestic infrastructure, support small businesses, and encourage entrepreneurship – particularly among the youth.”
Examining the budgets and flow of funding, CIJN found ample evidence CBI revenues have become an essential source for day to day spending by the government.
CBI funds are being used to fill critical gaps and shortfalls blamed on the COVID-19 Pandemic that resulted in a loss of tourism and declining revenue from taxes.
A “virtual visit” by IMF Staff in February 2022 noted how Antigua and Barbuda’s economic fortunes suffered a pandemic-related decline of more than 20 percent in 2020. That report says Antigua and Barbuda’s economy is now rebounding and could see 7 percent growth in 2022.
By law, CBI funds should be used in “approved projects.” But the same legislation makes it possible for a simple cabinet vote to approve spending on virtually any expense.
Some of that is critical. When the country’s tax revenues couldn’t cover pension payments and government checks fell 2 months behind; protests erupted in the capital, St. John’s.
The Cabinet responded by dipping into funds from the Citizenship by Investment program’s National Development Fund to fill the gap. Hundreds of thousands of US dollars were used to prop up the pension plan every month according to records furnished to CIJN through the Citizenship Investment Unit (CIU) reports.
CIJN was only able to acquire two 6-month CIP reports from parliament. Those reports covered July to December in 2020 and January through June in 2021. It is important to note that this is the period in time when the country’s economy was hard hit by the pandemic.
For example, more than $500,000 USD in CIP funds were used to shore up the regional air carrier LIAT. The airline suffered losses directly related to the decline in tourism.
There were significant expenditures directly related to the COVID-19 Pandemic during that 12 month period between 2020 and 2021 for which we have records.
Food for the quarantined, the purchase of drugs and medical supplies and a buy-in into the U-N’s COVAX program are notably important.
Certainly, not all of the spending CIJN noted in the two six-month reports we were able to acquire could be considered “essential.”
On July 15, 2020 the cabinet approved spending $9,259 USD (25,000ECD) for catering from “Joe Mike’s” Hotel and Casino for the cabinet members themselves.
Two days later, the cabinet approved $74,074 USD to the Antigua Carnival Committee for “outstanding prize monies.”
Other entries indicated CBI funds had been used to repair a compressor in judges chambers, paying for a satellite navigation system and unexplained “economic costs” for an unknown number of law students. $50,000 USD was also approved by the cabinet to replace computers in government Ministries.
Questioning the Spending
The political opposition in Antigua and Barbuda called it “foolish” to use CIP funds for recurrent expenditure of the government since CIP is dependent on the cooperation of other countries and is susceptible to external factors.
The UPP’s political leader, Harold Lovell, stressed to CIJN that the program was meant for development; it was not for the day-to-day expenses of the government.
“Unfortunately, it has not gone that way,” lamented Lovell, “they have basically just commingled all the funds, just thrown everything in a pot so what we now have is a situation where you cannot point to anything and say as a result of the CIP programme we have a hospital, we have a school, we have a new highway or anything like that. What we can say is that they have used it to fund regular government expenses.”
Prime Minister Gaston Browne denies his administration is over reliant on the CBI program compared to others in the region.
“It’s an important source of revenue, but at 10% I would not say that we’re over reliant,” insists Browne. “There are many other countries in the OECS sub-region, in which CIP, would have counted up to maybe 50% of the total revenue, I mean, those countries (are) clearly far too reliant on CIP,” the Prime Minister told CIJN. While admitting it was substantial, he defended his use of CBI funds, stressing “10%, it is significant, and it’s income that we appreciate, it’s income that has been utilized to fund socio-economic development.”
Transparency and Accountability
The Citizenship by Investment Unit (CIU) is mandated by law to produce a report to parliament twice a year.
Online availability of any of the reports to the public is wholly lacking. For example, for the June 2020 report, only a pie-chart of the original nationality of applicants is furnished. Clearly labeled an “Appendix,” there is nothing else about the report open to online inspection.
CIJN was able to physically go to the Parliament and retrieve copies of only two of a possible 14 reports. We were informed other reports were “unavailable” at the time. (April 2022)
The laws governing Citizenship by Investment clearly require the CIU to furnish data about beginning and end balances for the National Development Fund (NDF) for each 6 month timeframe. These are direct, non-refundable contributions made to buy a passport.
Specifically, the law requires:
‘the aggregate amount in the National Development Fund at the date of the report; and the date on which payment made by a successful applicant was transmitted from the National Development Fund to the government sponsored project or the approved non-profit organization, as the case may be together with such other information as the Minister considers appropriate’.Source: Citizenship by Investment Act 2013
But those end or aggregate balances are missing from the reports we were able to access. Without that data, it is difficult if not impossible to determine what was spent and what’s left as an accumulated balance in the National Development Fund account. The NDF is the primary option used by applicants to gain Antigua and Barbuda Citizenship by Investment.
The CEO of the Citizenship by Investment Unit Charmaine Quinland-Donovan didn ’t respond to our requests for an interview.
The reports do indicate the number of passports purchased during each 6 month timeframe. They also indicate the number of applicants, their original nationalities and the investment type they chose.
Most applicants (76%) choose to invest in the National Development Fund. Around 16% invested in real estate. While 7% made “business investments” and fewer than 1% invested in the University of the West Indies. Source: Antigua and Barbuda CIU report June 2021
Thus far, according to the CIU report, Antigua and Barbuda have issued 5,252 passports under the program.
By law, the CIU should also show specific nationalities of applicants, how many were accepted and who was rejected. The reports CIJN was able to access showed how many were accepted and their original nationality but did not show who was rejected, as required under the Act.
Prime Minister Brown Skeptical of Real Estate Option
The Real Estate Options require at least twice as much of an investment in the CBI program as a donation to the National Development Fund. But what you see isn’t necessarily what the government actually gets, according to Prime Minister Browne. The PM cautioned that real estate investments come with “expectations and incentives” by agents and developers that can end up reducing how much the country benefits; whereas a deposit into the NDF is a guaranteed $100,000 USD dollars for every application.
“ Normally, with these real estate projects, you have to incentivize them so heavily that the net amount due to the government we see would reduce considerably,” Browne town CIJN. He called the structure “usurious.”
“I do accept that it will bring some benefits,” he conceded. “But, you know, when you look at the yield, you know, we think that there’s something vulgar about how some of these investments are structured, and we have not shown any appetite for those investments to date.’
PM Browne has been outspoken about his differences with developers. While there are 42 projects approved for investment, there are mixed results.
One deadlocked real estate investment under the program was The Callaloo Cay Resort (dubbed the Waldorf Astoria Antigua.) The $200 million USD renovation was to become a five-star sustainable luxury resort.
Five years later, the more than 30-acre property lies ghostlike in the sands of Morris Bay.
The project included the total remodeling of the ruins along the southern shoreline of the island.
In February 2022, Antiguan media reported the government was making plans to take over the entire operation and was set to cancel the partnership with Al Caribi Antigua Development Limited.
A Question of Confidentiality
Like its counterparts in the Caribbean, the government of Antigua and Barbuda has come under scrutiny for vague information that is published about CIP applicants, their native countries and other information that is collected as part of the due diligence process.
For example, Antigua and Barbuda’s laws that created its CBI program require that anyone who applies for citizenship but fails to pass the “due diligence” process be reported. But those names are not found in any of the Citizenship by Investment Unit’s reports we were able to examine.
Opposition Leader Lovell has pointed to the need for greater transparency and the enforcing of a reporting requirement.
“We also felt it was important to disclose the names of the persons who received citizenship to Parliament and we are of the view that the areas where developments were to take place, again everything is Cabinet, you apply to Cabinet, you don’t know what criteria they use to disburse funds. We had in mind a board consisting of persons who would be able to give consideration to all applications for funding,” Harold Lovell said.
Vocal CIP Agent Nuri Katz disagrees. (Agents are the intermediaries between the client and the government and earn commissions based, in part, on the number of applicants they assist entering the CBI program.)
“I don’t see what the reason is for the public to know. Now these countries are part of the international security apparatus so for a company to share the names with Interpol or the US or Europe or whatever internally through their channels, I think it’s perfectly fine,” Katz said. “ But to publish these names…why would you publish the name of a guy just because he’s getting citizenship. Why don’t you publish the name of everybody who gets driver’s licenses?”
Keeping names in confidence is directly linked to competition with other CBI programs in the Caribbean. When some programs began holding back the publication of applicant names, others quickly followed. The reasoning was that applicants themselves preferred to remain anonymous and would choose a CBI program that offered that privacy.
The prime minister reaffirmed his confidence in the existing due diligence process that excludes publication of applicants’ names.
As it relates to the publishing of names he stated, “We cannot publish people’s personal financial information. And that aspect of it, as I said, this will only be revealed where there is an infraction”.
The Future of Citizen Investment Programs
CIPs throughout the Caribbean are now under threat as the European Union has begun warning they should be shut down. EU lawmakers say the programs open the door to corruption, money laundering and tax avoidance. Some of those lawmakers have indicated they could strip visa-free travel for countries using CBI to promote foreign investment.
Prime Minister Browne is at the forefront of fighting to keep the program, calling for a regional monitoring body or regulator.
“I think the assumption is that countries will hide any deficiencies in their programs. And if we have an independent regulator, which could even involve individuals from, let’s say, the United States, Canada, Europe, to serve in that commission, then I think it will give added impetus or let’s say we provide greater confidence in our program and to assure international partners that our programs are well regulated,” he said.
The Prime Minister wrote a letter in March 2022 to U.S. and E.U. lawmakers warning of the importance of CBI programs to the economies of small Caribbean states.
Since the start of the Russian / Ukrainian War in February 2022, Antigua and Barbuda quickly joined the other four Caribbean CBI nations in banning applications from Russia, Ukraine and Belarus.
In addition, Antigua and Barbuda also bars applications from North Korea, Iran, Yemen, Somalia, Afghanistan and Iraq.
“(If) there’s instability in that region, we’re not in position to do any successful due diligence,” Browne said. “And from that standpoint, we have chosen not to process those applications.”
Barring Russians from applying is already costing Caribbean states whose Citizenship by Investment Programs benefited significantly from their investments .
As of June 2021, official records show Russia made up 7% of Antigua and Barbuda’s total applications for a passport. Ukraine and Belarus made up less than 1% combined.
Small Island Developing countries in the Caribbean have few options to raise revenue. They lack natural resources and the physical space to develop agriculture for export. Heavily reliant on the tourism industry, the COVID-19 Pandemic has reminded them just how vulnerable they are to external shocks beyond their control. That includes climate change and associated severe weather events. In this small corner of the world, Citizenship by Investment remains a crucial source of income.