The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Organisation for Economic Co-Operation and Development’s (OECD) latest review endorses the “huge strides” the Bahamas has made in meeting its tax information exchange obligations, a leading financial executive said yesterday.

Aliya Allen, the Bahamas Financial Services Board’s (BFSB) chief executive, said the “favourable” findings in the recently-published Phase 2 Peer Review by the OECD’s Global Tax Forum meant “no one can question our commitment” to meeting existing international standards.

The OECD report, with assessed whether the Bahamas had implemented its tax transparency and information exchange obligations in practice, and the mechanisms for doing so, noted just three specific criticisms/recommendations.

Probably the most serious criticism raised by the report was the absence of “regular compliance monitoring system” at the Registrar General’s Department to determine whether all registered corporate entities were supplying ownership identities/information.

“The Registrar has confirmed that it has not enforced any penalties or struck from the register any companies for non-compliance with information-keeping requirements,” the OECD report revealed.

The Registrar General’s perferred approach, the document added, was to notify guilty companies when breaches occurred and give them time, “usually 30 days”, in which to make correction.

“Therefore, even though there is a vast array of penalties in place for non-compliance with information-keeping obligations, there have been few instances where these penalties have been applied in practice,” the OECD Peer report said.

“The lack of monitoring and enforcement of penalties by the Registrar, and the scope of the supervision by the regulators may not ensure that complete ownership information is being maintained in respect of all legal entities.”

And, pointing out that legislation stipulating that all Bahamas-domiciled corporate entities maintain accounting records for a minimum five years was relatively new, the OECD report said: “As these obligations only came into force in 2011, 2012 and 2013, they are largely untested in practice and the implementation of these amendments and compliance with these obligations should be strictly monitored by the Bahamas.”

The Government has tweaked these recordkeeping requirements several times, seeking to balance the need to address the OECD’s concerns with avoiding the imposition of an unnecessary regulatory burden - particularly on small Bahamian-owned businesses.

The impending arrival of Value-Added Tax (VAT), though, will likely mean such burdens are coming anyway.

The final concern articulated by the OECD report was that “a limited number” of Bahamas-domiciled investment were allowed to implement simplified Know Your Customer (KYC) processes, meaning that full ownership information may not be available.

But, arguing that the tax information exchange request “figures and turnaround time” proved the Bahamas was “obviously committed” to meeting its regulatory responsibilities, Ms Allen said of the report: “It was pretty favourable.

“Having read it, it really confirmed that the Bahamas is truly committed to the international standard on information exchange - the currently accepted international standard.

“And that we have made huge strides in the last few years in refining the administrative framework to make sure we are able to respond to requests pursuant to Tax Information Exchange Agreement (TIEA) obligations,” the BFSB chief executive added.

“No one can question our commitment to be a responsible member of the international community. It really just shows the Bahamas is living up to its commitments.”

Ms Allen told Tribune Business that while “there might be certain things we take issue with” in the OECD report, the Bahamian financial services industry was “in general satisfied with the report”.

Ryan Pinder, minister of financial services, did not return Tribune Business e-mails seeking comment before press time.

However, in a response annexed to the OECD report, the Government said its findings “confirm the effective practical implementation of the standards for transparency and exchange of information”.

Pledging its “continued commitment” to the OECD Peer Review process and international standards for financial services and cross-border co-operation, the Government said it had approved another amendment to the International Tax Co-Operation Act that is set to be tabled in Parliament.