The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamian financial services industry is reviewing the “final draft report” on reforming this nation’s tax structure, as it bids to enhance the sector’s competitiveness by identifying new business possibilities.

Tanya McCartney, the Bahamas Financial Services Board’s (BFSB) chief executive, told Tribune Business that the private sector had hired Deloitte & Touche’s UK arm to “benchmark” the Bahamas’ tax structure against rival international financial centres (IFCs).

“We had engaged a consultant, and we engaged in dialogue to help inform their research,” Ms McCartney said.

“We are in the process of reviewing their final draft report. The focus was on benchmarking our tax structure against comparable IFCs to identify opportunities for enhancing our existing tax structure to become more competitive. We’ve done a lot of work.”

Ms McCartney added that BFSB was joined in the effort by the Association of International Banks and Trust Companies (AIBT), Bahamas Chamber of Commerce and Employers Confederation (BCCEC) and Bahamas Institute of Chartered Accountants (BICA).

“We engaged Deloitte UK on the benchmarking and the options for consideration as to what would be best for an IFC such as ours,” the BFSB chief executive said.

Ms McCartney told January’s Bahamas Business Outlook conference that the Bahamas needed to assess whether its 57 year-old ‘no tax’ model was best suited to “the changed international operating environment” in which the financial services industry found itself.

Recalling the 1960 Parliamentary resolution that imposed the ‘no income and capital gains taxes’ platform, Ms McCartney effectively queried whether it was still an appropriate platform in an era of increased global demands for transparency and tax information exchange.

She outlined the proposed Deloitte consultancy then, with her latest remarks indicating that significant progress has been made on the taxation system review.

The BFSB chief executive implied in January that the focus of such a review would be whether a ‘low rate’ corporate tax would enable the Bahamas to enter into ‘double taxation’ and bilateral investment treaties with other countries.

And, in turn, whether such a tax structure and treaties would attract companies to establish a physical presence in the Bahamas “with mind and management residing” here.

Several financial services practitioners, such as Dominion Management principal, Paul Moss, have long argued that the Bahamas should switch from a ‘no tax’ to a ‘low tax’ model in terms of income and corporate taxes.

They believe that such a move will enable the Bahamas to shed the ‘tax haven’ image and give it extra legitimacy, while also helping to encourage high net worth individuals to follow their assets here and make this nation their primary domicile.

A ‘low tax’ model would also open up the possibility of entering into ‘double tax’ treaties, a move that could encourage more businesses to establish a presence in the Bahamas, as any profits they repatriated home would only be taxed once - at this nation’s lower rate.

Another proponent of such a move is Brian Moree QC, senior partner at McKinney, Bancroft & Hughes. He told Tribune Business earlier this year: “I certainly take the view that we have to transition from a ‘no tax’ platform to a ‘low tax platform. I think that certainly has to be part of the future.

“That transition is not as difficult as it might be. There are already numerous forms of taxation, certainly for domestic businesses.

“As far as international business, we’re going to have to shift the model to a ‘low tax’ jurisdiction, where we can look at taking some advantages from double taxation treaties and investment agreements that protect investments coming through the Bahamas,” he added.

“There are numerous international treaties and agreements the Bahamas could benefit from if we transitioned to a ‘low tax’ jurisdiction as opposed to what we have been recognised as: A ‘no tax’ jurisdiction.

“Clearly, these things have to be looked at as we figure out as a jurisdiction where the future of the industry is going in the Bahamas. The survival of the financial services industry in the Bahamas is really not an option for us.”

Ms McCartney, meanwhile, said the issue of tax reform came up in discussions between the industry and newly-appointed minister of financial services, Brent Symonette, on Friday.

“It was really to provide the Minister with an update on some areas we feel are opportunities for the sector,” she told Tribune Business. “The ease of doing business, looking at opportunities for tax reviews, Immigration, jurisdiction branding and how we seek to reposition our brand once we effectively implement the Common Reporting Standard (CRS). We looked at the industry as a whole, and the things we need to do to move forward.”