The Tribune

The Editor,

The Tribune,

Your article today, headed ‘Bahamas moves to stop ‘devastating’ blacklisting’, is just another step down a road that has already devastated the financial services industry in the Bahamas.

See, for example, the 20 dissolution notices published yesterday in your same newspaper. A loss to the management company of at least $2,000 in fee income per company, or $40,000 per annum plus Government fees of $350 x 20, which equates to $7,000. Not to mention banking fees and investment management fees, and even trustees’ fees. The effects of this loss will not be felt this year, but next year and each year after that. Has anybody calculated the total loss to our economy of all the companies dissolved, plus the many that are just allowed to be struck off, resulting in no more fees, although not gazetted.

I set out below a letter being sent today to the Minister of Finance, the Minister of Financial Services and the Bahamas Financial Services Board (BFSB), with the request that they step back and negotiate a transparent and workable solution that will not prove to be a costly mistake for the Bahamas, which gains no benefit from exchanges of information on tax matters. On the contrary, we only suffer great expense in responding to any treaty obligations to provide automatic tax information, which banks must give without any knowledge of the true legal position of any discretionary beneficiary of a trust, or foundation, that may own the company that has a bank account.

This entire breach of confidentiality is unconstitutional, and will be challenged as illegal in the first place.

My letter states:

“This is a plea to ask you and the Government to stand up for the fundamental rights contained in the Constitution of the Commonwealth of the Bahamas, on behalf of all persons residing in the Bahamas, including Bahamian International Business Companies (IBCs), trusts and foundations.

I write to express my concerns that the sovereignty of the Commonwealth of the Bahamas is being eroded. I look to the new Government, under Prime Minister Dr Hubert Minnis, to reject attempts to cause the rights of all persons and citizens living in the Bahamas, including corporations established here by foreigners, to lose any of their fundamental rights to ‘Life, Freedom, Security, and the protection of the Law’, as well as “freedom of religion, expression, association, and privacy for all persons in their homes and for all their property”.

As a manager and director of over 400 International Business Companies over the past 40 years, a number now reduced to less than 40, the need for the protections granted by the Constitution of the Bahamas have been recognised by legal advisors all around the world.

Examples of this included the protection of wealth earned all around the world by families who were concerned about four things:

1.Confiscation of assets by governments

2. Abuse of wealth by their own family members

3.Excessive taxation by socialist and Communist governments

4. Confidentiality and Privacy

In many cases, the original funds were gifted to a trustee. There is no law in any country that prevents you giving away your assets. If taxes were due or paid before the gift, that is the concern of that jurisdiction. In the UK, for example, a gift no longer attracted death duties if the donor survived for a certain number of years.

The Bahamas sold these trust services, which benefited this country economically. We provided a professional service as International bankers, wealth managers and trustees. But the adverse focus by the media and foreign governments on trying to ‘blacklist’ the Bahamas, by wrongly designating it as a ‘tax haven’, has resulted in a massive loss of legitimate asset protection entities.

It is ironic that many countries now seek to deprive their own citizens of the rights to the fundamental freedoms enjoyed by Bahamians. It is ironic that Wall Street, and financial centres such as London, Switzerland, the European Union (EU) and now the China and the Far East are saying that their own taxpayers are seeking to avoid taxes when most legitimate Bahamian trusts, foundations and their wholly-owned IBCs hold assets in these countries, which already impose withholding taxes on dividends as well as on profits, and have the power to charge other taxes in their own country on remittances abroad. In most countries, a gift, whether from an individual or a domestic trust, or by will, is not taxable in that country where the donee is resident in a foreign country.

The US is maybe an exception, and it encourages its citizens and foreigners to form trusts in certain states that are not taxable at all! There is no register of beneficial interests, and the trust company will issue a letter confirming that no one can find out who is a potential beneficiary, donor, beneficiary or even a director of a company. That is not the case in the Bahamas now, where the Register of Directors and Officers is on public record.

It is therefore ironic that the Swiss banks and others are moving client corporations in large numbers to trust companies in the US, where the laws and regulations make it impossible to obtain information on the ownership, beneficial interests or beneficiaries, while allowing such entities exemption from all US taxes.

No Bahamian financial institution wants to accept anything but good, clean funds, and they take extensive steps to ensure they do not accept monies that are being laundered to hide criminal activity.

This has resulted in cash becoming king, and forged notes are being discovered here in the Bahamas in large numbers. But not in the banks. Many innocent persons will fall victims to this trend. Robberies for cash will increase. But to attack the confidentiality of Bahamian clients and beneficiaries (who are often unaware of their future expectations) by signing an automatic exchange of tax information treaty, which is against every fundamental right provided by the Constitution of the Bahamas, is madness.

CONSEQUENTIAL DEVASTATING LOSS TO THE BAHAMAS

Although the previous Government tried to limit the access to information held by banks and others, requiring a court Order and proof of a legitimate reason for the information requested to be given to a foreign nation, its introduction was enough for more than 100 banks, and many many trusts and corporations, to close. The business of managing wealth from the Bahamas has reduced by over 50 per cent, and may never return. Job losses among educated Bahamians, and the knock-on effect for landlords, has brought property prices down. This hits all sectors of the economy, as highly paid executives are let go. The Bahamas must learn very fast, and the economy must be managed in a way that keeps every dollar circulating in the country. This is economic activity that enhances our GDP.

SUGGESTED SOLUTION

It is essential that the industry works to craft a solution that puts the Bahamas first. It needs to be negotiated on a ‘level playing field’. If we give up any of our rights, what benefits does the country receive in exchange? Being taken off a ‘blacklist’ is a joke. The industry has already moved to go to other jurisdictions such as Singapore and Hong Kong. We are left with the less sophisticated, smaller clients, who may own a patent or hold long-term investments producing no income. These should all be restructured to avoid being caught in any automatic exchange of information.

The solution is with our own - the accountants, lawyers, bankers, trust companies and regulators, who are all subject to their own codes of conduct.

They can be mandated to inspect the files, and uncover evidence of legal ownership, in a form that would reveal any attempts to avoid taxes. The Bahamas can collect those taxes under contract with each foreign government.

Accountants and lawyers in countries such as the US and Canada are themselves tax collectors for their own revenue authorities by virtue of having to prepare tax returns for cases where a corporation does business in that country.

Please save our financial services industry from this latest attack on the country’s sovereignty.

Yours faithfully

ANTHONY HOWORTH, BA (Juris, Oxon), AIBT (UK) (Trustee Diploma).

PRESIDENT

EURO-CARIBBEAN MANAGEMENT SERVICES