The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A former Bahamas Financial Services Board (BFSB) chairman yesterday slammed this nation’s ‘blacklisting’ by the European Union (EU) as “irrelevant” and “gratuitous”, adding that it would have no impact on the industry.

Michael Paton, attorney and partner at Lennox Paton, told Tribune Business that the EU list, which named 30 international financial centres (IFCs), had merely “lumped the usual suspects” together as part of wider efforts to crack down on corporate tax evasion.

Given the Bahamas’ focus on private wealth management, as opposed to large corporate clients, Mr Paton said the EU action would have no negative repercussions for this nation’s financial services industry.

While acknowledging that the Bahamas needed to “register its disappointment” at being listed, Mr Paton added that this nation needed to instead focus on complying with automatic exchange of information, which will become the global standard from 2018.

He told Tribune Business that this would be “the true test” for the Bahamas and its financial services industry.

“My initial analysis is, no, this should not have any detrimental effect on the sector,” Mr Paton said of the Bahamas’ appearance on the EU’s ‘blacklist’.

“My understanding is this is something we need not be concerned about, as it’s primarily directed at the Base Erosion Profits Shifting initiative.”

He explained that the EU’s ‘blacklist’ was part of its response to fears that major multinational companies, such as Starbucks, Amazon and Google, are reducing their tax burdens to minimal levels through planning/structuring that allows them to book the bulk of their profits and sales in low-tax jurisdictions, such as Ireland and Luxembourg.

“That’s the genesis of it,” Mr Paton said. “I was at a conference in Geneva when this came out, and that was the analysis of why it came out.

“More than anything else, in the context of private wealth management and the Bahamas, it’s [the EU list] irrelevant. It doesn’t concern me. It seems gratuitous, lumping all the ‘usual suspects’ into a list again. These ‘blacklists’ have worn out their effective impact.

“We’ve complied with all the international initiatives. We know we’re on board with the OECD’s Global Forum, and have committed to the automatic exchange of tax information,” he added.

“We’re completely onside with these global initiatives, and can’t be faulted on our position. I don’t put any stock in that EU list.”

Mr Paton said the Bahamas had responded correctly, adding: “I don’t think the Bahamas’ reaction should be anything more than to register its disappointment and keep going on the path we’re going on.

“For us, the implementation of automatic tax information exchange in 2017-2018 will be the true test for us.”

Mr Paton said this, plus how the Bahamas fares in its next Caribbean Financial Action Task Force (CFATF) review, were more important than a ‘blacklist’ which was “too gratuitous to have any impact”.

He added: “The sector should be more concerned about automatic exchange of information, the impact from that and what follows on from that.”

Mr Paton’s analysis was backed by former financial services minister, Ryan Pinder, who told Tribune Business yesterday that the EU ‘blacklist’ would have “no immediate impact” on the Bahamas.

He described the EU list as “odd and discriminatory”, given that it did not include its own members that often figure prominently in corporate tax minimisation, such as Ireland and Luxembourg.

And, more significantly, Mr Pinder, who is now wealth management head and chief legal officer at Deltec Bank & Trust, said the Organisation for Economic Co-Operation and Development (OECD) had written to members of its Global Forum, which includes the Bahamas, saying it did not endorse the EU list.

He added that the Bahamas, and other nations ‘blacklisted’ by the EU had all fared well in their phase two ‘Peer Reviews’ by the OECD’s Global Forum, and had also committed to the automatic exchange of tax information.

“It would appear that the methodology used by the EU is not objective not based on a level playing field,” Mr Pinder said, adding that this was the complete opposite of the OECD approach.

With the Global Forum the main body for drawing up ‘blacklists’ of countries deemed ‘non-cooperative’ on tax matters, Mr Pinder said its lack of input into the EU action was mystifying, given that both bodies’ agendas were driven by the same countries.

“I think it’s entirely inconsistent with the initiatives of the OECD, and entirely inconsistent with evidence of good faith by countries like the Bahamas that have complied with best practices and are in good standing,” Mr Pinder said of the EU move.

“I think you have to commend the Bahamas on keeping the position of best practices and a level playing field.

“It seems to be very unfair, and certainly a public ‘name and shame’ exercise by the EU without any basis in objectivity, fairness and fact. It would seem like it’s just an arbitrary determination.”

The EU criteria for including a nation on the list was that it had been ‘blacklisted’ by at least 10 of its 28 members individually.

Yet Mr Pinder pointed out that these countries included the likes of Bulgaria, Slovenia, Lithuania and Lativa, which the Bahamas did “little or no business with.