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September 2, 2010 |
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| May 05, 2009 |
By: Wayne Tompkins |
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wo influential Florida banking groups are working to save a crucial tax break for international bankers that would be repealed under a bill that is part of the state Legislature’s budget negotiations.
The Florida International Bankers Association and the Florida Bankers Association argue that the exemption is crucial to save jobs and keep the state competitive with offshore banking havens.
Included in the bill, SB 2546, is a provision that removes the international banking facility tax exemption, which allows banks in Florida to take in deposits but book them as if they are outside the country, where they are not subject to state taxation.
“That encourages banks that have lending activities in this hemisphere to book their loans through offices here in Miami because these agencies have the IBF facilities,” said Clemente Vazquez-Bello, a Gunster attorney and general counsel to the Florida International Bankers Association. “They’re able to book it through the offices here and not subject it to tax.”
The provision is part of a bill that would create the Florida Fair Business Competition Act, which would revise the corporate income tax and raise new revenue by repealing provisions allowing certain deductions by financial institutions. It would also restrict the deductibility of intangible expenses, interest expenses and management fees. Its chief sponsor, Sen. Thad Altman, R-Melbourne, did not return a phone call seeking comment.
Alex Sanchez, president of the Florida Bankers Association, said his group has made preserving the international banking exemption one of its top priorities of the legislative session.
The tax exemption was enacted to make Florida more competitive in international banking and trade with countries such as Panama and the Bahamas, Sanchez said. It’s especially vital for Miami-Dade County, where international banking is heavily concentrated, he added.
“Dade County legislators really need to fight for this,” Sanchez said. “Maybe legislators in other counties aren’t giving it its respect.”
Removing the tax exemption may cause these international banking jobs to move to other states or offshore, and “we certainly cannot afford to lose these high-paying jobs, especially now,” he said.
FIBA executive director Patricia Roth said the organization’s database shows that international banks employ at least 1,500 people in the Miami area.
“We’re trying to keep jobs in Florida,” she said. “We want to make sure it’s always the first choice in this hemisphere for international financial transactions.”
Bowman Brown, an international banking attorney for Shutts & Bowen, said the state risks losing international business, not just to the Bahamas and the Cayman Islands, but to the state of New York, which also has the exemption.
“So guess what? All of these international banks have major New York offices,” Brown said. “It will take just the flip of a switch, and it will be out of here. It’s not as if they’re moving bricks and mortar. The transactions that are booked here will be booked somewhere else, and the people who are servicing those transactions will presumably lose their jobs or be asked to move to New York.”
Vazquez-Bello tells a story from before the exemption’s enactment when a South Florida banking colleague would make regular flights to Nassau specifically to close deals offshore for tax purposes.
“Our problem is we have a coastline, and we have these jurisdictions right close to us,” he said. “The business will simply go to a jurisdiction where it is not taxed.”
The Florida Bankers Association said it has calculated that lifting the exemption would produce about $20 million in revenue for the state, a relatively small amount of money that it argues would be offset by job and business losses. The international banking sector generates $1 billion a year in the state, the association said.
Legislators who want to repeal the exemption have argued that while it was originally designed to make Florida banks attractive for international transactions, interstate banking has limited its intended benefits.
“I understand their dilemma to try to generate as much revenue as they can from as many sources as possible, but if by doing it you create unemployment, then it seems to me that you are offsetting the benefits,” Roth said. “We’re trying to keep jobs in Florida. We want to make sure it’s always the first choice in this hemisphere for international financial transactions.”
Vazquez-Bello said he fears legislators don’t understand the ease with which international bankers can skirt state taxes.
“If you raise taxes, for example, on mortgages or on recording warranty deeds, it’s not going to stop people from buying houses or buildings,” he said. “But if you eliminate the benefit of an international banking facility, it’s not very difficult for the large foreign banks who use it to say instead of doing it here, we’ll do it in the Bahamas. This is a business which is portable. It can be here one day, and it can be gone the next.”
The bill is part of budget negotiations between the Florida House and Senate, where the exemption’s supporters are trying to remove the provision that would repeal it.
“When the budget is published, if it’s in there, it’s a done deal,” Sanchez said.
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BY THE NUMBERS
$20 million
How much revenue the state would get if a tax break for international bankers is lifted, according to the Florida Bankers Association. The group says that would be offset by job and business losses at international banks operating in Florida.
$1 billion
How much international banks contribute yearly to the state in direct and indirect economic activity, according to the FBA.
1,500
The number of South Floridians employed at international banks, according to the Florida International Bankers Association.
Wayne Tompkins can be reached at (305) 347-6645.
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