Havens In The Net

Anguillan Entrepreneur Offers Offshore Alternative For Net-Based Business

By Jack Powers

Bruce Sterling's 1988 novel Islands In The Net predicted interesting times when small independent nations (and other even more independent groups) discover that information, power, and money are traded everywhere.

Those times are already here. As noted in the Valentine's Day issue of EFFector Online : The Internet is a phenomenon in which science fiction turns into fact even as we watch. Now that the politicians have discovered the Net, the heat is on and things are happening faster than ever. Bruce Sterling's 1988 novel "Islands In The Net" predicted interesting times when small independent nations (and other groups, even more "independent") discover that information, power, and money are traded everywhere.

Those "interesting times" are already here.

The Valentine's Day issue of EFFector Online, an email newsletter of the Electronic Frontier Foundation, reported:

    "To cater to censored US users, "offshore" anonymous Internet
    access providers are popping up, such as Offshore Information
    Services Ltd. - http://online.offshore.com.ai/ - offering $50/month
    privacy-protected accounts from tax-haven island Anguilla."
A peek at the Anguilla service's page shows that the rest of the world (surprise!) is quite up to date on cyberpolitics; viewers are asked questions like- Americans used to thinking of the United States as the world's most open and free society might become a bit uncomfortable trying to answer questions like these.

Small nations with economic ambition will be adding "Data Haven" to "Tax Haven" on their list of attractions as more people discover that the Internet has no borders.


Many people are curious about tax havens and wonder whether they can get away with tucking away their cash in a cozy spot far from the clutches of the IRS. (Quick answer: not nearly as easily as the scamspam salespeople would like you to believe.) Now that Big Government wants access to our files as well as to our wallets, it is natural to wonder about tax/data havens.

A little research on Anguilla shows that it is a British Dependent Territory, the northernmost of the Lesser Antilles Islands, about 190 miles East of Puerto Rico. The Virgin Islands are not far away. Anguilla has an interesting political history, having provoked a bloodless British invasion in order to remain under the British flag (quite a story, that). About 9,000 people live there, most of them descendants of African slaves. The tallest point on the 35-square-mile island is 213 feet above sea level. Tourism is the biggest source of foreign exchange, but that business slowed slightly in the wake of the recent hurricane Luis.

I contacted Vincent Cate, who operates Offshore Information Services (OIS) in Anguilla, and asked about the business he is pioneering. A friend, Ken Crandall, had just signed up for WWW service from Cate's company.

Vince Cate likes his home and place of business. "Anguilla is a lovely tropical island. The views of the ocean are amazing. I almost have to pinch myself to know it is not a dream, when I look out the window and see where I am."

"The country has many of the characteristics of a small town in the USA. Seems like everyone knows everyone. The water is warm all year round, and many shades of blue. We are in the trade winds, so we have a good breeze almost all the time. The national sport is sailing, and Anguilla is ideal for this. I have a couple of kites that I use with my small boat (with electric motor for backup). It is lots of fun. One of the kites is a 15 foot kite with two strings, so I can control where it is. I have to tack back and forth to go upwind, just like a sailboat."

Vince was attracted to Anguilla, after doing more research and travel than most people who want the IRS to leave them alone. "I got the IRS tax code and it said if you live outside the USA the first $70,000 you earn is tax free. I read several books on tax havens and then visited 5 islands in the Caribbean. Anguilla seemed the best for several reasons. It is a pure tax haven- no taxes on profits, sales, wealth, or corporations. Also, it is stable, not corrupt, very friendly, very safe, and has two computer stores and a number of people that sell computers out of their houses. I could not imagine too many towns of 10,000 in the US having this much computer infrastructure . And it has been nice, if I need an extra modem or ethernet card I can pick them up in town. I think that many businesses selling things over the Internet could incorporate in a tax haven like Anguilla, and pay NO taxes. I think in helping this to happen, I should be able to make a buck and have some fun. I think it will be a rapidly expanding market as Internet payment schemes mature and tax havens get higher bandwidth connections."

Not surprisingly, most of OIS's growth is expected to be outside Anguilla, although activity now is about evenly divided between local and off-island use.

There are technical challenges to serving the WWW from a tropical island, some of them meterological. Most of us don't think much about the weather affecting the Net, but OIS can't ignore it. "Before hurricane Luis the power was probably less reliable than in the USA. In the first year there were several times that my UPS could not last as long as the power was out, but after the hurricane they put up new poles and wires and I don't think the power has gone out in the last 4 months", says Cate.

OIS connects to the Net via Cable and Wireless, the oldest international telecom company. They have a node in Anguilla, about a mile from Cate. "They have 64 Kbits to Cable and Wireless Antigua, which has 128 Kbits to Sprint. One friend from visiting from Silicon Valley said that my net connection is much faster than her connection at home.", he says.

One might wonder about the reasons for putting files, or WW pages, or an entire business in a place like Anguilla. The reasons are both political and practical. OIS claims: "First, there are no taxes. So you really want to incorporate here and have the computers for the corporation here, hire someone to answer phones here, etc., and not have any taxes. Since there are no taxes, you don't have the paper work that a US corporation has. Also, if you have a corporation here, you could probably get it to fly you in for board meetings and such - and Anguilla is a nice place to visit (or live)."

Privacy is important

OIS's spokesman says:

"There are strong secrecy laws in Anguilla. It is a crime to give out confidential information. Anguilla does not have any laws specific to Internet usage (though they have general anti-fraud, anti-drug, etc. laws). So if you live in Singapore and you were restricted your Internet access, you could get an account in Anguilla and have total access to the net."

Why Not?

I asked "Why might you NOT put data in a place like Anguilla?" Cate replied that something like a pornography site wouldn't do well in Anguilla. "Anything with lots of photos would not do well. Anguilla is great for investment info, mailing lists, etc. Things with simple graphics and text."

New Angle on Diversity

My friend Ken Crandall, who sells quartz crystals to New Age customers, says that he doesn't advertise differently on Anguilla-based pages than he does in direct mail in the USA, but he worries about freedom to advertise. "If the rules change about advertising products like mine on the US, I could disappear overnight. From an Anguillan base, I might survive long enough to respond to the bureaucracy".

The Web Site Next Door

Vince isn't worried about storing data that his customers might not want to have at home... and common sense bears him out. As bandwidth to places like Anguilla increases, however, things might change. He isn't concerned about the politics of running a data haven, or that Anguillan, British, or other power blocs might bring pressure if his clients stored things that were politically incorrect, even without his knowledge or access to the data. "I don't worry about that. If it is something illegal in Anguilla too, I would have to turn off the account. If it is legal here, I can't really imagine the US or some big power getting worked up enough about what my clients are doing to actually do anything. The main thing my clients want to do is just set up a business in a tax haven."

There is considerable lore about tax havens, much of it crap, and some of it interesting. Cate claims "The US does not like the idea of tax havens, because they really do help people cut down on the US taxes they would otherwise have to pay, but the US has to tolerate tax havens (and has for a long time). If they were to pressure or bribe one (say Switzerland) to change, the free market is such that other countries will pick up the slack. For a small country like Anguilla, having a few thousand offshore companies means several million coming into the country every year. Given the size of our economy this is a real boost. Being a tax haven is actually a very competitive industry - there are many small countries trying to do it."

Double Standard

"Actually, the USA is the world's largest tax haven." Cate continues. "People and companies outside the US can invest in US government bonds and not pay any tax on the money they make. The US government debt is more than a trillion, so when a small country like Anguilla takes in *well* under a billion, it is hard for the US to point fingers. There are many "double standard tax havens" like the USA, where it is a tax haven if you don't live there, but if you live there they tax you to death. Anguilla is a pure tax haven, they don't tax you even if you live here."

Most of Vince's offshore clients are just starting a business in Anguilla. He claims that "one stop shopping" can save money and time for new ventures. "If someone has an idea for an Internet business, they could hire a lawyer in California to incorporate there, then hire someone to handle the computers, then hire someone to answer the phones, etc. But if they contract it all out here, it costs less to operate the company, and there are no taxes."

Which part of "No Taxes" don't you understand?

Island Free Speech

I asked if Anguilla had any laws relating to political speech. "No, there are no laws controlling speech, and in fact free speech is guaranteed in the constitution. Libel, slander, and fraud are the ways one would get into trouble by publishing information."

What about pornography? As usual, feelings are mixed. "Pornography is illegal. But legally things like Playboy are not considered pornography, and can be found in local stores. The XXX or kinky things are not permitted. So I would say "soft porn" is tolerated, though certainly not encouraged." Other evidence of tolerance exists. "... nude sunbathing is illegal. But part of the half hour loop program on the tourist channel is a couple talking about how Anguilla's many secluded beaches are great for nude sunbathing."


Vince Cate may be right about not having to take heat for the nature of the data his clients store in Anguillan computers, and Anguilla seems like an unlikely place for serious intrigue, for now.

But-- it is easy to imagine scenarios that would be candidates for movie plots... for example, what if the the Mafia or the Irish Republican Army hid secrets in a small-country data haven (or, more likely, split them up among several of them)? Even if it was totally without the haven operator's knowledge, the pressure from outside governments to divulge or destroy it could be greater than a small company or even a small country could stand. Even worse would be intervention by groups outside the law who might not have much concern about the lives or property of innocent third parties.

It has been said that the Net treats censorship as error and automatically routes around it. That bodes well for freedom of information, but every silver lining has a cloud inside it... there could be casualties as that flow seeps into places unprepared for it. This may take more imagination, intelligence, and foresight than our present forms of government can provide.