The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas will likely come under immediate pressure to convert its existing 27 Tax Information Exchange Agreements (TIEAs) into the ‘automatic sharing’ variety, after the G-20 last week “eliminated all doubt” that is now its goal.

Brian Moree QC, senior partner at McKinney, Bancroft & Hughes, told Tribune Business yesterday that in light of Friday’s G-20 statement confirming that it considers the automatic exchange of tax information to be the global “standard”, the “ultimate fate” of the Bahamas’ financial services industry depends on how well its business model is adjusted to face the new realities.

The communique issued by G-20 finance ministers and Central Bank governors following the end of their April 18-19 meeting in Washington leaves little doubt that the ‘goal posts have moved again’ in their bid to clamp down on global tax evasion/avoidance.

“We welcome progress made towards automatic exchange of information, which is expected to be the standard, and urge all jurisdictions to move towards exchanging information automatically with their treaty partners, as appropriate,” the G-20 statement said.

“We look forward to the OECD working with G-20 countries to report back on the progress in developing a new multilateral standard on automatic exchange of information, taking into account country-specific characteristics.”

The G-20 statement will cause little surprise to many in the Bahamian financial services community, given that it was widely predicted that the ‘automatic exchange of tax information’ was the ultimate goal.

What this means for the Bahamas is that it may well have to further modify its existing network of TIEAs, as indicated by the G-20.

These are currently ‘information on request’ treaties, which guard against so-called ‘fishing expeditions’ by foreign tax authorities, instead requiring them to supply specific details on the information being sought and the location where this is held.

Such safeguards would be scrapped under an automatic tax information exchange regime, with the Bahamas and its financial institutions expected to disclose what was requested immediately. This would also likely increase the costs and administrative burden associated with information exchange.

Reflecting on the implications of the G-20 statement, Mr Moree told Tribune Business: “I would not be surprised to see an inquiry started, and robust call, for the Bahamas and other international financial centres (IFCs) to provide a platform for the automatic exchange of information with all those countries we currently have TIEAs with.”

The well-known QC said the G-20 communique “for the first time seems to openly identify the objective” as being the automatic exchange of tax information, a target its members have long sought to conceal.

“They have now eliminated all doubt that they expect a regime of automatic exchange of information,” Mr Moree said, agreeing that the Bahamas and other IFCs were facing “shifting sands”.

He added that the communique, when added to the US Foreign Account Tax Compliance Act (FATCA) and French president’s call to “eliminate” so-called ‘tax havens’, meant “the pretence is now finally over”.

To-date, Mr Moree said the G-20/OECD had been able to hide their automatic information sharing goal behind a ‘mission creep’ strategy that made “incremental demands” of international financial centres.

He added that “the timing...., the specific details and means” by which the Bahamas ultimately modified its existing TIEAs for the automatic exchange of information would be key to maintaining its competitiveness against rival IFCs.

“The new reality is that IFCs are going to have to co-exist with regimes for the automatic exchange of information, and the business model for going offshore has to be constantly assessed,” Mr Moree told Tribune Business.

“We here in the Bahamas have to carefully consider how this affects our business model, and be very clear about the reasons for people looking at IFCs.”

And he added: “I would describe it as an insatiable appetite of the major countries to ensure nations like the Bahamas are, in effect, deputised to their own law enforcement agencies to collect taxes.

“The process continues to become more and more intrusive, and our ultimate fate will continue to depend on how we adjust our business model to meet the needs of the international community in an environment of cross-border co-operation and automatic exchange of information.

“In the Bahamas, we have shown we have been very resilient to date, and have adapted to these shifting sands.

“Here we go again. We are expected to do the same, and the only question is: ‘What comes next?’ This is an inexorable process where every time ground is gained, the G-20 countries simply set their sights on the next objective.”