The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Opposition’s deputy leader yesterday expressed alarm at “the potential reputational damage” that may have been inflicted by allegations that the Bahamas is ‘non-cooperative’ in the “global war on tax dodgers”.

K P Turnquest said the article in the respected magazine, the Economist, which described this nation as “cocking a snook” at efforts to crack down on international tax evasion and avoidance, could negatively influence investor perceptions of the Bahamas and its financial services industry.

“That is the crux of the concerns I would have, and the industry has,” the east Grand Bahama MP said of the article, which was published on September 10, 2016.

“That this kind of unfortunate article has the potential to cause reputational damage to the jurisdiction. Those individuals who may be investors here may not understand what is behind the article, and may be induced to believe there is something here, and that the persons quoted are speaking with authority.

“The article does have the potential to cause damage for the Bahamas.”

Entitled ‘The Holdout’, The Economist article portrayed the Bahamas as non-compliant with the global efforts to implement automatic tax information exchange, suggesting that this nation was singlehandedly resisting the fight against tax evasion and avoidance.

Of particular concern is that The Economist has a global circulation, while its target readership is the business and financial community - the sectors of society that generate the Bahamas’ financial services clients and foreign direct investment (FDI).

Tanya McCartney, the Bahamas Financial Services Board’s (BFSB) executive director, described The Economist article’s negative portrayal of this nation and its financial services industry as “unfortunate”.

She told Tribune Business that its claims were refuted by the Bahamas’ actions when it came to meeting global regulatory and tax transparency standards/best practices, and said: “Our track record speaks for us.”

“The view of BFSB is that we believe our actions over the years from 200 to-date - the anti-money laundering and counter terror financing regime, and with the TIEAs and FATCA - demonstrate our commitment to tax compliance and achievement of the highest international standards and best practices,” Ms McCartney said.

“Our actions can speak for us. People can look at what we did in response to the blacklisting in 2000, and when we implemented FATCA, and see that when the Bahamas makes a commitment it does all it has to do to deliver on that, and it’s the same with automatic tax information exchange..”

Both Ms McCartney and Mr Turnquest emphasised that the Bahamas’ decision to implement the Common Reporting Standard (CRS) for automatic tax information exchange on a bilateral - as opposed to multilateral - basis had been approved by the Organisation for Economic Co-Operation and Development (OECD) itself.

The Bahamas believes the bilateral approach, which has also been adopted by the likes of Hong Kong and Singapore, is better suited to its system of indirect taxation.

The Economist article attempted to gloss over the fact that other countries and international financial centres (IFCs) have opted for the same bilateral approach, instead reserving all its fire for the Bahamas.

“As many as a dozen other CRS countries have declined to sign the convention or equivalent multilateral agreements,” the article admitted. “But most either have lots of Tax Information Exchange Agreements (TIEAs) with the countries where their clients live (Hong Kong, for instance) or are minnows....

“But the Bahamas displays a unique combination of defiance and a sophisticated offshore trust and banking sector, giving clients plenty of choice. Its banks have assets of $223 billion, 26 times its GDP.”

Mr Turnquest was especially exercised by the fact that both The Economist, and the OECD’s tax policy head, Pascal Saint-Amans, who was quoted in the article, appeared to completely ignore the fact that the latter’s own organisation had approved bilateral CRS implementation.

“What the hell more do they want?” he asked Tribune Business. “Why should we bow to their position when it is one of the methods they propose?

“I am advised by industry leaders that the jurisdiction is well advanced in putting in place the required legislation and regulations to ensure that it meets the accepted deadline of 2018 for the first round of reporting. I am advised that the bilateral approach is more suited to countries like ours who do not have a formal direct tax regime.

“What more should be expected of the Bahamas? Why should we be treated differently from other, more developed jurisdictions who are able to make an independent sovereign decision as to which tax system works best for its citizens and business interests?”

Mr Turnquest said the effective tax rate in the Bahamas was 40 per cent, and even though the rate applied to international financial services clients was “significantly lower”, they were still subjected to a strong regulatory regime.

“The only thing we can do is speak in defence of the industry, and point to the advances that have been made,” he added. “To the extent Mark Morris feels it’s disingenuous non-compliant compliance, he has to prove his position.”

Mr Morris was the ‘independent tax expert’ quoted in The Economist article, and Mr Turnquest added: “As far as I’m aware, the jurisdiction has passed its OECD peer reviews, and to the extent there’s new requirements and timelines with the CRS, it is premature to say we’re dragging our feet and being non-compliant.”

Mr Turnquest said his only concern was the allegation by Mr Saint-Amans that the Christie administration had failed to submit a formal response to the presentation he had given to his Cabinet in Nassau last year.

“If this Saint-Amans guy is right, the Ministry of Financial Services has been negligent in its duty to respond to them. That’s unforgivable, and may have been reflected in the article,” he added.