The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A veteran financial services provider yesterday warned that automatic tax information exchange could breach fundamental rights protected by the Bahamian constitution, while threatening to make this nation a “European satellite”.

Anthony Howorth, president of Euro-Caribbean Management Services, questioned whether the Government and financial services industry had “really thought through” the consequences of bowing to international demands to exchange tax information automatically via a multilateral basis.

He argued that compliance with the wishes of the Organisation for Economic Co-Operation and Development (OECD) and its members would further transform the Bahamas into a ‘vassal tax collector’ for other countries, while undermining the competitiveness of a sector that underpins this nation’s middle class.

Mr Howorth said the Bahamas had been wrongly characterised as “a tax haven” when it was really “an asset protection haven” focused on legitimate business, and warned that an estimated 50 per cent of this nation’s business was preparing to move as a result of automatic tax information exchange.

“I don’t think people have really thought this through,” he told Tribune Business yesterday. “Do we want to be a sovereign nation, or a satellite country of the European Union (EU)? That’s the main point I’m making.”

Mr Howorth added that automatic tax information exchange “should be challenged” in the courts on constitutional grounds, given that it appeared to breach privacy and confidentiality rights granted to Bahamians - and their clients - by the constitution.

“The more and more I think about it, that’s the route to take,” he said.

Mr Howorth set out his concerns in a letter to sent to two Cabinet ministers and the Bahamas Financial Services Board (BFSB) yesterday. He told K P Turnquest, the minister of finance, and Brent Symonette, minister of financial services, that automatic tax information exchange was merely the latest in a series of external regulatory impositions that have “devastated” the industry over the past two decades.

Arguing that the Bahamas would only incur greater costs, and no benefits, from assisting other countries with their tax collection, Mr Howorth urged the Government to “stand up for the fundamental rights” of Bahamians and their financial services clients.

“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,” he wrote.

“As amanager and director of over 400 International Business Companies (IBCs) 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.

“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.”

Mr Howorth’s remarks to Tribune Business, and letter published on Page 2B today, provide an alternative viewpoint on how the Bahamas should respond to the latest international regulatory initiative targeting its financial services industry.

Both the Minnis administration and its predecessor, and many in the financial services industry, believe the Bahamas cannot afford to resist the pressures to conform to the demands of the OECD, EU and their member states.

The Government and wider sector have taken the position that this nation must avoid ‘blacklistings’, such as the one threatened by the EU, at all costs given the significant reputational damage and loss of access to the global financial system this would inflict.

However, Mr Howorth’s comments are likely to strike a chord with a significant number of Bahamians who believe this nation should stand up to the OECD’s bullying tactics. This is especially since the numerous regulatory initiatives that have targeted the Bahamas since 2000 are perceived as a thinly-disguised attempt to erode this country’s competitiveness and drive it out of the financial services business.

Mr Howorth himself added that he was greeted with cheers when he expressed the sentiments contained in his letter at a recent Rotary Club meeting.

“This is what the politicians and bankers don’t feel very happy about,” Mr Howorth told Tribune Business yesterday. “In talking to people, some of them have gone to Hong Kong already, and some have said they’re going to open banks in Shanghai as they feel it’s a more comfortable way to deal with offshore assets in Chinese currency. Others have gone to Singapore.

“You’ll probably find 50 per cent of the business is starting to move, if if has not moved already. The Bahamian people have not been told this, and goodness knows if the government people realise the effect on the economy in the next two to three years.”

He added that the OECD had deliberately mischaracterised the nature of the Bahamas’ International Financial Centre (IFC) model, adding: “We’re not a tax haven; we’re an asset protection haven.”

As an alternative to the Common Reporting Standard’s (CRS) automatic tax information exchange model, Mr Howorth suggested that Bahamian accountants and attorneys be engaged to review account data for such purposes.

He argued that “no date and information should go outside this country”, with home country tax authorities instead having to come to the Bahamas to get the information they need.

“It would be under the supervision of auditors, and take the onus off the banks themselves,” Mr Howorth said. “We don’t know the tax laws of the other countries. Automatic exchange: What the hell does that mean? We don’t know what they want to know. Why should we give information that is not applicable?”

Whether the OECD and its members would agree to the Bahamas remaining an “outlier”, going against its commitments to implement the internationally-agreed CRS standard by September 2018, is another issue entirely.