By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
A former Bahamas Financial Services Board (BFSB) chairman yesterday urged the Government to resist “disingenuous” international pressure, after this nation was accused of single-handedly undermining the global “war on tax dodgers”.
Michael Paton told Tribune Business that the Bahamas needed to remain steadfast and meet the commitments it has made to implement the Common Reporting Standard (CRS) for automatic tax information exchange on a bilateral (country-to-country) basis by 2018.
He warned that it would be “a big mistake” for the Bahamas to alter its position in response to an article in the respected international magazine, The Economist, which described this nation as ‘The Holdout’ on automatic tax information exchange,
The article, published both in print and electronically on September 10, 2016, described the Bahamas as “chief among the recalcitrants” who had not agreed to the automatic exchange of tax information on a multilateral basis.
Agreeing to this would require the Bahamas to exchange tax information on the financial services industry’s foreign clients with all signatory countries - more than 100 - instantaneously.
Instead, the Bahamas has agreed to implement the CRS on a bilateral basis, meaning it will negotiate agreements one country at a time with nations seeking to automatically exchange tax information with it.
Even though the Organisation for Economic Co-Operation and Development (OECD), the global tax information overseer, has agreed that countries are free to determine their approach - bilateral or multilateral - the Bahamas has been portrayed as a non-compliant threat to the international order.
The Economist, whose target readership is the global financial and business community, just the sort of high net worth clients this nation wants to attract, accused the Bahamas of a “go-slow approach” to meeting its international tax information exchange commitments.
“This looks like an excuse to drag its feet,” the magazine, which has a global circulation, said of the Bahamas’ bilateral approach, in an article that said: “The Bahamas cocks a snook at the war on tax dodgers.”
It then quoted a ‘Mark Morris’, who its described as an ‘independent tax expert’, who accused the Bahamas of adopting a “disingenuous ‘compliant non-compliance’ strategy”.
This was described as the Bahamas joining the CRS, but using the bilateral approach to delay automatic tax information exchange, while using “fabricated concerns” about whether other countries would properly protect the shared data to agree deals with as few nations as possible.
Given the magazine’s standing, the article’s depiction of the Bahamas as a non-compliant, non-cooperative jurisdiction threatens to undermine its international financial centre reputation - potentially scaring off both current and future business (see other article on Page 1B).
Mr Paton, though, called on the Government and financial services industry to provide a resolute response, and not be intimidated by what he described as crude pressure intended to force the Bahamas to adopt the ‘multilateral’ approach.
He also accused The Economist of basing its article on “a false premise”, namely that the Bahamas would only agree to automatic tax information exchange with those 33 countries with which it has existing Tax Information Exchange Agreements (TIEAs).
“What’s their problem with that?” Mr Paton said of The Economist’s criticism of the Bahamas’ bilateral approach. “That’s an agreed approach to the adoption of the CRS.
“And no one is saying the Bahamas is only going to enter into automatic tax information exchange agreements with those countries it already has a TIEA with. That is clearly not true.
“That is a false premise right there, and it is very disingenuous for them to say that. Nowhere has the Bahamas come out officially and said that. It’s certainly not the assumption that the Bahamas Financial Services Board and the industry are operating on.”
Reiterating that the OECD had itself approved the CRS implementation approach that the Bahamas is taking, and which is also being used by the likes of Hong Kong and Singapore, Mr Paton said the position being taken by Morris, the ‘tax expert’, was “very loaded and disingenuous”.
“The Economist is a well-respected publication, so of course I’m concerned,” Mr Paton told Tribune Business of the potential repercussions from the article.
“Do I think it will have a real impact? It will only have a real impact if the Bahamas Government does not react in a way that is measured and considerate.
“The Bahamas stated a position, and it would be very unwise to resile from that position. The objective of the industry now is to hit the [implementation] milestones. I’d like to see the enabling legislation in place by the end of the year, and there’s nothing to stop the Bahamas initiating automatic tax information exchange agreement negotiations now.”
Mr Paton further blasted The Economist article as “hypocritical”, and suggested the Bahamas was being singled out because of a perception that it was less able to defend itself than the likes of Singapore and Hong Kong.
“If they think that’s going to make the Bahamas turn and agree to the multilateral convention, I’d be very surprised,” he added.
“I’d counsel against doing that. We’ve taken a legitimate, correct position that’s been endorsed by the OECD itself. I’d say stick to our position. We have nothing to be apologising for. We’ve given our formal commitment, and are well within the timelines to do what needs to be done.”
Apart from Mr Morris, the only other source quoted in The Economist article was Pascal Saint-Amans, the OECD’s head of tax policy.
He said the Bahamas had failed to respond to a presentation he gave to the Christie Cabinet last year, and told the magazine: “I told them if they play games they will lose. Their reputation will be hit.”
Mr Saint-Amans said he had been left “extremely disappointed” by the Bahamas’ response, and was now planning to send the Christie government what was described as a ‘stern letter’.
Mr Paton, though, slammed Mr Saint-Amans for “not being honest”, reiterating that the Bahamas was implementing the CRS via an approach his own organisation, the OECD, has already endorsed.
“The OECD has already said we’re well within our rights to do what we’re doing,” he added. “This sounds like someone’s got an axe to grind.
“If they’re trying to put the pressure on, resist it. We’re well within our legal rights. Until such time as we don’t meet a milestone, they don’t have a right to criticise...
“My advice to the Government and the industry would be to stick to the position taken. It’s legitimate, and as long as we meet the implementation milestones, we’re good. It would be a big mistake to change tack now.”
Comments
observer2 8 years, 2 months ago
The Economist is correct. We need to sign on to internationally accepted automatic tax and criminal related banking exchange information agreements where ever possible. If not we will eventually loose even more correspondent banking relationships. If you think international banks are leaving the Bahamas rather quickly due to bone headed offshore banking through backs, just watch this space. Citibank has stopped correspondent banking with Venezuela, no official reason given.
banker 8 years, 2 months ago
Here is the article:
http://www.economist.com/news/finance-a…
They correctly cottoned on to the fact that most of the wealth managers in the Bahamas are chasing Latin American money because all of the "legit" customers have left the jurisdiction and are now compliant with their home countries and taxation laws.
Mr. Paton may huff and puff and call the Economist everything except a child of God, but of course he is wrong. If he can't see the slide -- no make that tsunami of departing funds, then he is blind as a bat. At one point we had a trillion dollars under active management, and now it is at 20% of that -- $200 billion and falling like a rock.
I personally have seen two billionaires leave the Bahamas -- sell their huge houses on PI at the Ocean Club Estates and depart for better places to live. One moved to Europe and the other moved to Colorado of all places (He is not an American, but his current wife is). The one that moved to Europe said that as a permanent resident due to having his money here, he and particularly his wife felt trapped. He found life quite sterile behind the walls of Ocean Club Estates and the Bahamas as a whole, was quite parochial.
We can dig in and not play ball, and watch the second pillar of the economy degenerate into something akin to a Baha Mar, or we can be proactive and capitalise on what we have left. Personally it doesn't make a difference, because in a very short time, it will be a fraction again of what it is now. Like our tourism product, our financial services products are stuck in the past, and nobody will want our offerings except the undesirables and the lowest level of non-compliant customers, bordering on the shady and criminal.
Sadly, if we had pivoted into merchant banking or commercial banking prior to 2008, we could have done quite well, solely for the fact that we are not American banks and would have had no exposure to toxic assets like the synthetic CDOs that brought down the sub-prime housing market.
Bottom line -- the Economist is right. (and I am willing to bet that if questioned, Mr. Paton couldn't even tell you what a synthetic CDO is without Googling it, and even then the explanation wouldn't be that accurate).
Well_mudda_take_sic 8 years, 2 months ago
You're right @banker. There's not too much between the ears of silver spooned Michael Paton. Michael was an early proponent of the Bahamas signing on to the global tax man's initiatives to defeat privacy laws under the guise of fighting money laundering around the world. My oh my.....now it seems the light bulb is at last shining bright in Michael's head....albeit a decade or so too late!
killemwitdakno 8 years, 2 months ago
Ah blow it out your wazoo. HOLD OUT Bahamas! There's many ingenuous reasons to do so.
Look what Facebook was going to do for Africa, sent a satellite up for satellite wifi! Where'd they get the savings? Who's going to sue them ? EU for who? The suffering European people? Nooo. American gov't? For the heads of the EU.
killemwitdakno 8 years, 2 months ago
We're not the bad guy. Highly unfair to make us look so.
When we need automatic money transfers do we get it? No. We can't get accounts at the banks, the banks are leaving. Do we get to invest on any stock in the globe? If we had such tech for auto transfer of info , the benefits for locals would be obvious. Only now those calling this rule are saying they will help facilitate, only now.
killemwitdakno 8 years, 2 months ago
Do we get automatic transfer of arms export information?????!!!!
US is committed to the Arms Treaty too. Ok then.
"expected to track the destination of exports to ensure they don't end up in the wrong hands"
"all weapons—including all military, security, and police arms, related equipment and ammunition, components, expertise, and production equipment;"
"all types of transfer—including import, export, re-export, temporary transfer, and transshipment, in the state sanctioned and commercial trade, plus transfers of technology, loans, gifts, and aid; and
all transactions—including those by dealers and brokers, and those providing technical assistance, training, transport, storage, finance, and security."
"The world's number one arms exporter will sign the treaty as soon as all the official UN translations of the document are completed, U.S. Secretary of State John Kerry said in a statement."
“The U.S. government is quite aware of our concerns about the violence, which is being let loose on our societies because of the guns being exported from The United States of America,” Mitchell said.
We gone hold out like Kaepernick.
observer2 8 years, 2 months ago
Through the invention of 400 webshops replete with bank accounts, global transfer capacity and no KYC the PLP has created a perfect parallel banking system that no other Country can rival.
Deposit under $10,000 in cash at numerous locations and internally transfer to other web accounts.
No published audits, no banking reserve requirements and one sovereign correspondent - BoB. Indeed, these shops aren't even fully licenced.
Automatic tax and criminal exchange treaties become useless without KYC.
When it comes to global regulation the PLP had created an escape hatch.
JohnDoe 8 years, 2 months ago
Try to at least gain a modicum of understanding of the issues before posting nonsense.
observer2 8 years, 2 months ago
Extract from the Economist article:
Pascal Saint-Amans, the club’s head of tax policy, was concerned enough to fly to Nassau last year to address the cabinet. “I told them if they play games they will lose. Their reputation will be hit,” he says. The lack of a response has left him “extremely disappointed”.
When we get Black Listed again please don't say the G 20 did not warn us.
bogart 8 years, 2 months ago
Repeated calls for public inquiry seem to go nowhere as pressure groups seem to lack technical information to get involved in the financial industry and prefer to berate the foreign chinese at Bahmar, persons are shooting from the hip and they have critical parts of the future financial direction, lawyers and bankers play a vital role, persons are upset that Bahamians have to be watchmen for tax cheats who are aided by their own countries tax professionals to leave, noone seems to want to have a public committee to look into why our NATIONAL BANKING institution Bank of the Bahamas of which we should be proud have slipped. Simply put many have critical parts of the picture and should call for public inquiry to investigate so the best foot can be put forward. KYC, TAX, OECD, EU, WEBSHOPS, BOB, FACTA, 2018, CBOB, BASEL, CAPITAL RATIOS, MOODYS, MOSSACK, TAX LAWYERS, CONFIDENTIALITY, CORRESPONDENT BANK, DE-RISKING..........
The_Oracle 8 years, 2 months ago
While foreign wealth is leaving, Bahamian wealth is returning, to dismal returns, but the TIEA's signed have opened up the very closed box called "expatriated wealth" Income tax is coming, and TIEA's allow the ground work to be done. Real property tax is coming, and it will include foreign land holdings. Nowhere left to hide it all........ Which is also why the ministerial/civil service corruption has expanded locally, a case of grab it while you can, cause the IMF,OECD, WTO and the rest will soon be in total audit control.
JohnDoe 8 years, 2 months ago
The fact that the primary goal and objective of the OECD is to eradicate what they term "harmful tax practices" in international financial centers is and has been well known for about two decades. I am a bit surprised and somewhat baffled by the response from government officials and industry professionals to this article. Unfortunately, there are no good outcomes to these issues for us. To a large extent we can blame that charlatan Ryan Pinder and the Michael Paton's of the world for not recognizing that the issue is not about multi or bi lateral agreements but about the fact the Bahamas is prosecuting and following a financial industry business model that is no longer viable or acceptable in the global financial industry.
BahamaPundit 8 years, 2 months ago
While Banker and others have made some valid points about adhering to OECD demands for multilateral automatic tax information exchange, I am hesitant. My reason for hesitancy is that I strongly believe the final intention of the OECD is to completely close the Bahamas financial service sector down. The OECD wants nothing more than to terminate us permanently from any offshore banking activity period. With this in mind, knowing the grand intention of our foe, how can we comply with our own extinction. We are not suicididal, are we? We must find our Panama Canal, our position of leverage, and move forward from there. Are we ready to return to an abandoned fishing village or are we willing to fight for global relevence and affluence. We may lose regardless, but we should fight to the very end.
banker 8 years, 2 months ago
There is nothing to fight for -- except the last remaining scraps of Latin American dollars. Our capital under management has declined by 80% in the past several years. We are damned if we do and damned if we don't. By not doing anything, we are forestalling the inevitable. By doing something (multi-lateral exchange) we will kill off most of our business overnight, but there might be something left to save from the carcass (or not -- it is unknown).
But I have looked into the this Mark Morris guy. Neil Hartnell was right to put the phrase "tax expert" in quotes. He is a self-employed "tax expert" who proclaims that on almost every single page of his amateur web page called the-best-of-both-worlds.com which I think was re-purposed from his 18 years as a financial planner (for expatriates as he says). Since 2002, he has hung out his shingle as a consultant. His big claim to fame, was that after an unsolicited proposal to the German parliament, he was asked to present and that made him a star consultant that he trades on ever since. It was mentioned that no one has heard of him in the international community, and that is true.
Based on his claim to fame, he probably gets gigs as a consultant to the OECD. Pascal Saint-Amans, who runs the tax division, is like any other bureaucrat who sucks on the public teat. He is lazy, and gets consultants like Morris to do his work for him, while he swans around the world, pontificating on his tax wisdom.
I rather suspect that Morris submitted the article to the Economist to get payment for the piece, with the complicity of Saint-Amans. I think that since Morris sent the Tribune an unsolicited email in a personal capacity, blasting the Bahamas for bilateral exchange, that he has a bee in his bonnet that migrated into a personal vendetta when his email was not given the respect that he thinks it should. So he is flexing his muscles.
I bet you that if Fweddy sent Saint-Amans an official protest note from the Ministry of Foreign Affairs demanding a public apology, Saint-Aman would buckle and say that it was Morris freelancing and it would be given. The note can't come from Hope -- everyone knows that she is a lightweight in this game, and everyone knows that Ryan is bullshitter.
Morris collects gig money from the OECD and his calendar says that he is going to be here from November 21-November 25th of this year. Since he is not a member of the OECD, for any business purpose he requires a work permit. It wouldn't take much -- a word from Fweddy to refuse him permission to enter the Bahamas at the airport, and that would put an end to his personal vendetta with this country. Just saying.
I suspect that he in fact was freelancing with the Economist article, and that a little bit of sovereign muscle will get Saint Amans and the Economist to retract -- if Fweddy would do his job.
BahamaPundit 8 years, 2 months ago
I agree. The Bahamas should sue the Economist for defamation, if a nation can do such a thing at law. We did, after all, make a valid choice which was offered to us. Bilateral exchange was put on the table; who are they to now judge us harshly for accepting it. The whole thing reeks of bullying smaller nations. Meanwhile, the US continues to increase its share of offshore banking business. We must be as Sparta and, come hell or high water, stand strong.
JohnDoe 8 years, 2 months ago
Unfortunately this game is already over. The childish talk of "resisting" and standing strong is akin to a minor child standing strong against the rules their parents are enforcing in the household. We have been sold the bill of goods that the web shops are driving de-risking when all of the web shop transactions are domestic with no cross-border nexus. No one wants to talk about the real elephant in the room which is the hundreds of billions of dollars of cross-border grey money either domiciled or passing through our system primarily of Latin American origin. We have continued to hang on to a business model that not only is no longer viable, its basic premise is antithetical to prevailing global standards and in fact poses an existential threat to almost all G 7 countries where debt is exploding and tax rates realistically cannot be raised any higher. Some of you seem to be conflating the KYC/AML/Terrorist financing issue with the grey money issue.
banker 8 years, 2 months ago
Agree on the futility of resisting. However, the webshop proceeds are another thing. A very high profile webshop owner, (one of the originals) is exporting money and was mentioned in the Panama papers. Although the webshop transactions are entirely domestic, the proceeds of such are not, and that is the concern. American currency garnered from the webshops is stored in Panama. Even the webshop owners fear the consequences of a failed state.
The big question about the Economist article, is how much of the opinion expressed belongs to the freelancer conducting a vendetta and how much of it is offical view of the OECD?
JohnDoe 8 years, 2 months ago
I spoke about web shops but you speak about web shop owner.
Well_mudda_take_sic 8 years, 2 months ago
The continued silence of our PM, who is also our Minister of Finance, on all of these grave matters is deafening! Christie, and Christie alone, has sold out our country by cozying up to the numbers bosses (Craig Flowers and Sebas Bastian) and corrupt Chinese officials within the China Construction Company (CCA) and the Export-Import Bank of China (EXIM). This is the legacy of Christie.....grossly enriching himself while throwing the Bahamian people to the wolves! And he still foolishly believes his maker will nevertheless let him pass through the pearly gates. He's in for a rude awakening for all eternity!
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