The Tribune

By YOURI KEMP

Tribune Business

Reporter

ykemp@tribunemedia.net

THE BAHAMAS argued in vain to the Organisation for Economic Co-Operation and Development (OECD) that it should “not fail the entire test on one element” of tax information exchange, a Cabinet minister disclosed yesterday.

Ryan Pinder KC, the attorney general, told the Senate that the OECD and its Harmful Tax Practices Forum sometimes “don’t want to understand how we operate” in The Bahamas as he unveiled legal reforms designed to address deficiencies with this nation’s implementation of the Common Reporting Standard (CRS).

Speaking at the close of a debate that saw senators pass the Automatic Exchange of Financial Account Information (Amendment) Bill 2022, he revealed he spent three to four hours before the Forum and its ‘peer review’ group in making the case why The Bahamas should not be rated ‘non-compliant’ with the CRS.

That is the global, non-US standard for automatic tax information exchange, and Mr Pinder said he “kept at it” and “didn’t want to let go” after being given just 45 minutes to present The Bahamas’ arguments when himself and Michael Halkitis, minister of economic affairs, met OECD representatives in Paris around two months ago.

Noting that The Bahamas “failed one element”, the attorney general argued that this was far outweighed by the country’s compliance with all other elements. Mr Pinder said the Davis administration’s argument had been that this nation should not “fail the entire test on one element.

“If you pass three but fail one..... That was our argument. It’s unfair for you to regard us as non-compliant just when we’ve demonstrated compliance in the majority of areas,” he added. Not surprisingly, the OECD refused to budge from its insistence that The Bahamas was ‘non-compliant’ on the CRS standard for automatic tax information exchange, but it did agree a strategy and timeline for this nation to remedy the deficiencies.

“At times they don’t understand how we operate in this jurisdiction, and at times they don’t want to understand how we operate in this jurisdiction,” Mr Pinder said of the OECD and its member states. “We hope through our advocacy they will have a better understanding of our jurisdiction and how we operate. Needless to say, I don’t have a tremendous amount of confidence but that’s why we go” and talk directly to the group.

Mr Pinder described the Bill debated yesterday as “fundamental” to addressing the issues that caused the ‘non-compliant’ rating so that The Bahamas can be reassessed next year and, hopefully, escape this designation.

The Automatic Exchange of Financial Account Information Bill’s reforms will provide greater regulatory flexibility and oversight by enabling the Ministry of Finance to delegate its supervisory powers to the Central Bank, Securities Commission, Insurance Commission and Compliance Commission.

These regulators will then become responsible for ensuring their respective licensees and registrants comply with the requirements for automatic tax information exchange, thereby expanding their obligations but also easing the burden on the Ministry of Finance and expanding the supervisory net.

The Government was notified shortly after the September 2021 general election about the results of the OECD’s Global Forum peer review of The Bahamas, which gave the country a clean bill of health when it came to “exchanging information in an effective and timely manner” with other jurisdictions at the state level.

However, the Bahamas fared less well - and failed to meet the OECD’s requirements - when it came to its financial institutions and providers “correctly conducting the due diligence and reporting procedures”. While this nation met the standard required in one of the two areas reviewed, the overall rating for the “technical effectiveness” of automatic tax information exchange was deemed non-compliant.

Mr Pinder yesterday said the OECD had difficulty with Bahamian financial services regulators reviewing and inspecting their licensees for CRS compliance because the existing Act does not designate them as the ‘Competent Authority’. This designation currently only applies to the Ministry of Finance.

“That is this piece of legislation that we are debating today, a Bill that will legislatively designate the regulators as agents of the Competent Authority for this purpose,” the attorney general added. “We have also agreed an amendment to regulations that had Executive Entities as non-included entities for CRS (Common Reporting Standards) purposes. The OECD has taken issue with this, and we have agreed to remove such exemption.

“The OECD also had concerns about the ability for the ‘Competent Authority’ to test the actual data being used to substantiate the positions being taken with respect to CRS reporting and disclosures. We will have to work with the regulators to formulate an inspection or audit plan that would entail, as part of an inspection, the testing of an acceptable sample size of client accounts to test the validity of the data that is basing the positions being taken for reporting purposes.

“We view these issues as rather trivial and technical, and we maintain the position that they should not rise to the level of a non-compliant peer review report. Having said that, we have committed to addressing these deficiencies with a view to having the non-compliant elements reviewed and re-rated in the shortest period of time,” Mr Pinder added.

“The former administration was aware of these deficiencies and failed to correct them, ignored the identified improvements and adjustments recommended by the OECD, and thus we find ourselves regarded as non-compliant. A comedy of errors by the FNM now led by a comedian. We will fix their missteps, we will remedy their wrongs.”