The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The deputy prime minister yesterday said a planned OECD review of The Bahamas is “pointless” and “will be deferred” because this nation has yet to enter any income tax treaties.

KP Turnquest told Tribune Business that the government was in the process of “resolving” this issue with the Organisation for Economic Co-Operation and Development (OECD) after it placed The Bahamas among nations it was scheduled to assess for compliance with its anti-tax evasion/avoidance offensive this fall.

The assessment examines how effective countries have been in implementing the so-called “Action 14” of its Base Erosion and Profit Shifting (BEPS) initiative, which deals with the inclusion of dispute resolution mechanisms in tax treaties between countries so that any difficulties/differences between the parties can be resolved in an agreed manner.

Mr Turnquest, though, explained that “Action 14” and the OECD peer review process are currently irrelevant for The Bahamas given that it has yet to sign any income or capital-related tax treaties with other nations.

He agreed with the OECD’s own statement that the review of The Bahamas will be “deferred” until such time as it enters such agreements, either with individual nations on a bilateral basis or multiple countries.

“The review will be deferred until such time as The Bahamas enters into a bilateral or multilateral tax treaties,” Mr Turnquest said in a message to Tribune Business. “As The Bahamas has not entered into any tax treaties on income and/or capital, it cannot be involved in any such treaty-related disputes.

“The review of the implementation of the ‘Action 14’ minimum standard would be pointless, which is the reason why they are asking us to confirm before launching the process in August.”

The OECD last week said it was “gathering input” for the review of The Bahamas and other states, but confirmed: “If Turks and Caicos Islands and The Bahamas do not have any tax treaties by August 2019 their peer review will be deferred.”

Mr Turnquest, speaking to Tribune Business earlier, said there was “no cause for alarm” over any of the OECD’s statements, and that the Government was working to achieve an agreed resolution with it over the peer review process.

“They basically said that if you don’t have any tax treaties they would defer our peer review that is scheduled for the fall,” he added. “We don’t have an income tax so it’s not really applicable.

“Those conversations are being had, and we are discussing all these matters for resolution. It’s par for the course. It’s another administrative discussion and a resolution that needs to be achieved, and we will continue to do what we always do, which is to meet the standard.

“This particular thing is not particularly relevant to us, and we will address it with the OECD and look for a mutually acceptable resolution and move on.”

The BEPS initiative aims to ensure that the profits of multinational companies are taxed in the country where they are generated. It attempts to prevent multinational companies using often-legitimate tax avoidance strategies to “exploit gaps and mismatches” between different countries’ tax rules and “artificially shift profits” to low or ‘no tax’ jurisdictions.

This enables them to minimise their tax exposure by paying a lower rate, and more than 100 countries worked under OECD oversight to implement 15 so-called BEPS “actions” designed to halt the loss of much-needed tax revenue by developing countries due to such practices.

Countries had to confirm they were implementing a minimum four out of these 15 “actions” by December 2017. The four that The Bahamas selected were (Action 5): Countering Harmful Tax Practices; (Action 6): Treaty Shopping; (Action 13) Transfer Pricing Documentation and Country-by-Country Reporting; and (Action 14) Dispute Resolution.

The latter is, of course, the focus of this latest OECD peer review.