The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Cabinet Minister yesterday said current proposals for the global automatic exchange of tax information are “fundamentally flawed”, and would impose “impossible obligations” on the Bahamas.

Ryan Pinder, minister of financial services, said the Bahamas would advocate for changes to the OECD-created ‘global standard’ for automatic information exchange to ensure this nation not only complied but positioned “ourselves for sustainability and growth” in financial services.

He told the Nassau Conference that the G-7/G-20 were looking for all members of the OECD Global Forum to commit to the new standard at its next meeting which, “surprise, surprise”, is scheduled for the end of this month.

Mr Pinder, though, said the Bahamas was objecting to the “sometime forceful suggestion” that countries sign the OECD’s Convention on Mutual Administrative Assistance in Tax Matters.

This, which would commit signatories to the automatic exchange of tax information on a multi-country basis, appears to be the basis on which the new global standard would be implemented.

And Mr Pinder said: “This appears to require for some countries, particularly the Bahamas, obligations that are difficult if not impossible to implement on a multi-country basis.”

He revealed that, if there were 80 signatories to the multi-country convention, the Bahamas and its financial services industry would need to instantly know structures designed to avoid tax in each of them and provide the relevant information instantly.

“Tell me: Is that possible?” asked Mr Pinder. “That’s an impossible request on a multi country basis, certainly for a country like the Bahamas.”

To combat the OECD-led proposals, Mr Pinder said the Bahamas would adopt the same ‘constructive engagement’ approach it had used over the US’s Foreign Account Tax Compliance Act (FATCA) and other recent global regulatory initiatives.

Acknowledging that the Bahamas would not be able to stop automatic exchange of tax information from becoming a reality, Mr Pinder said it might be able to alter the implementation method, and obtain benefits and advantages for itself from implementing someone else’s rules.

“We have clear positions we advocate for, and a clear position on how we believe the [automatic exchange of information] standard should be implemented,” Mr Pinder said.

“We believe the method of implementation using a multilateral basis is fundamentally flawed.”

The Bahamas is instead pushing for the automatic exchange of tax information to be implemented on a bilateral, or country-by-country basis, which would give it more control over who passes client details to.

Explaining why a multi-country approach was not appropriate, Mr Pinder referred to the OECD’s own guidance, which said tax information exchange should not take place unless countries had legal and administrative frameworks in place to ensure the details provided were kept confidential and used properly.

Forcing the Bahamas to enter into automatic information exchange with multiple countries, the Minister warned, could expose it - and the financial services industry’s clients - to nations where details would be used improperly or shared with the wrong people.

This, in turn, could jeopardise the safety and security of clients.

“We in the Bahamas realise this more than others, as we have re-focused our industry in Latin America, in countries where many practitioners would say that the risk to personal safety of clients is real, and that a transparency agenda brings these concerns to the forefront,” Mr Pinder said.

“We believe that an objective case can be made for many of our key markets that this clause on confidentiality and use of information would apply, resulting in a lack of an OECD mandate for an automatic exchange agreement with these countries.

“In fact, to make the case that this clause would apply is fundamental to the survivability of a legitimate financial centre serving the Latin American market.”

He added: “Likewise, what would be the alternatives if automatic exchange with these countries was ‘not appropriate’? Certainly, these countries are not going to merely accept that they are outside the entire scope of these international initiatives.

“Does this re-open the debate between automatic exchange of information and a regime of anonymous withholding and reporting? We think it just might. However, it can only be the case through sustained engagement.”