The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

THE Bahamas wants the Organisation for Economic Co-Operation and Development (OECD) and its affiliates to stop using so-called ‘blacklists’ to pressure international financial centres, arguing that “greater transparency” can be achieved through different means.

The recommendation to discontinue the use of ‘blacklists’ was contained in a Ministry of Financial Services position paper sent to to the OECD on May 2, setting out how the forum’s transparency drive could be married with the Bahamas’ ambitions to growth its financial services industry.

“Serious international financial centres (IFCs) understand that transparency in financial matters is extremely important,” the paper said.

“The fiscal pressures on all of our economies from the sustained economic slowdown and changing population demographics (iin the case of many developed countries – an aging population) creates a strong impetuous for better tax administration and enforcement.

“These pressures are the same regardless of the tax regimes used - Customs duties or property taxes in the Bahamas, VAT in much of the Caribbean or income taxes in much of the developed world.”

The Government added: “The Bahamas, as one of those serious financial centres, also understands that the new reality must ensure that financial centres continue to grow and thrive. Indeed, any other outcome would attempt to solve one problem through the creation of another – the destabilisation of a number of states.

“The Bahamas serves as an example of how to achieve both; that is transparency with growth through the responsible operation of the trade of financial services. The OECD and G-20 roadmap to transparency for developing countries, and its work through the Global Forum, must be equally cognisant of the need for a dual mandate of achieving growth with jobs in these countries, and with its other mandate of finding a pathway to greater financial sector transparency.

“One cannot be separated from the other. Both are equally important, and both should be a consideration for the international community if the dialogue on transparency is to be truly respected as an honest one.”

Speaking at the Society of Trust and Estate Practitioners (STEP) Caribbean Conference yesterday, Ryan Pinder, minister of financial services, said the Bahamas has worked with the OECD in respect of tax information exchange since 2002, when it committed to implementing international standards ion this and transparency.

He charged that the Bahamas has performed better than its peers, and in line with many top-ranked financial centres.

“The Bahamas has an exchange of information (EOI) network covering 30 jurisdictions. Twenty-six of these agreements are presently in force, and the Bahamas has taken all steps for its part which are necessary to bring the remaining agreements into force,” said Mr Pinder.

He added that the Global Forum has concluded that the Bahamas is considered by its partners as a “reliable exchange of information partner, and maintains clear lines of communication with its exchange of information partners throughout the processing of a request”.

“In the recent Phase II Peer Review, one of only 50 countries to have a Phase II review complete, the Bahamas was considered to be largely compliant, found fully compliant in eight of the 10 categories, and largely compliant in the remaining two,” said Mr Pinder.

“We have performed better than peers, and in line with many top-ranked financial centres and comparable to G-20 and OECD countries.

“Maintaining a position of compliance with these multilateral evaluations is of utmost importance to the integrity and advancement of our regional financial services industries. This is a fundamental element for growth – abiding by the agreed standards in information exchange and compliance.”

The Government’s position paper said small countries have been provided with limited avenues to meaningfully participate in the global effiort to improve transparency; although they remain largely compliant with the accepted norms as evidenced by their Global Forum performance on transparency assessments.

“The experience has been that small states have been invited to participate in the discussion of matters which have already been substantially decided on in an ‘after the fact’ manner,” the paper said.

“Small states are often invited to the Global Forum discussion, after the road map or the standard has been developed, rather than as equal co-drafters of the global standard. Indeed, small states are not members in the bodies where the actual decisions are made, and as such their genuine concerns are not heard until much later in the process, most of the time after the standard has been developed and agreed. This must change if policies are truly to be implementable on a global basis.”

The Bahamas government added: “With respect to the key opportunities and challenges which affect small states’ compliance with the transparency agenda of the advanced economies, the Bahamas posits that one of the major issues is resources – both human and financial.

“Participation, the only way that an IFC can truly keep abreast of the changing policy environment, is extremely expensive. Indeed, the Secretariats’ of these organisations, such as the OECDs Global Forum, are themselves funded by member states, many of which are small states.”

It added: “The Bahamas would encourage the international bodies, such as the G- 8, G‑20 and OECD to begin to consult with small states on the annual financial outlays and the man- ‑hours expended to participate in these meetings and to implement standards. The Bahamas is confident that this would be an instructive exercise.”

The Government added that some small states face the high costs of implementing new transparency rules “from the ground up”.

It pointed out that in the Bahamas’ case, a country without a centralised income tax system, to implement the US FATCA alone will cos between $4 to $10 million, with ongoing costs of over $200,000 per year.

The Bahamas is also calling for open, high-level, global dialogue on transparency with countries engaged in financial services, including small states.

“While meetings at the technical level are instructive, the Bahamas contends that there should be a better understanding of what is being asked of IFCs at the higher political levels,” it addedx.

“These dialogues should provide a platform for IFCs to have meaningful input into the development, interpretation and implementation of global standards that are developed.

“For example, the Bahamas is of the view that aspects of the OECD Convention on Mutual Administrative Assistance in Tax Matters, such as the spontaneous exchange of tax information, should be agreed bilaterally between countries rather than multilaterally.”

The Government is supporting a graduated approach for moving towards greater transparency, but believes the same phase-‑in timeframe should be observed by all countries.

“The Bahamas believes that through meaningful global dialogue, a realistic timeframe and a set of implementing rules can be developed in the path towards greater financial sector transparency,” the position paper said.

“The Bahamas advocates that the international organisations should consider providing funding for participation in peer reviews and developing transparency expertise throughout the world, including in small states.

“The Bahamas’ position is that moving the process of exchange of information review and monitoring entirely to an external body ensures that the system will viewed as being ‘imposed’ on small states rather than being participative, and that it would ultimately prevent small states from becoming experts and knowledgeable in these issues.

“The Bahamas offers instead that there is a need to expand funding for the United Nations, a truly representative body, in this matter.”