The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A former attorney general yesterday urged the Government to "do a better job" of safeguarding The Bahamas from "protectionist" attacks disguised as global regulatory initiatives.

Alfred Sears QC, pictured, again demanded "full disclosure" of the Minnis administration's commitments to the European Union (EU) and Organisation for Economic Co-Operation and Development (OECD), arguing that it was impossible to assess "the efficacy" of proposed legislation without understanding the scope of these obligations.

He warned that the Bahamas was making the mistake of viewing the EU and OECD initiatives as "isolated problems" that only impacted the financial services industry, rather than the "bigger picture" of national sovereignty and the imposition of rules that this nation had no say in crafting.

Questioning whether The Bahamas has a "medium and long-term game plan", Mr Sears expressed concern that the numerous Bills designed to address EU/OECD concerns threatened to force radical change on this nation's economy without the consequences being properly thought through.

"My view is that the Government must do a better job of defending the jurisdiction," he told Tribune Business, "and I think that we ought first of all to really raise the question of a multilateral body, of which the Bahamas is not a member, on a threat of sanctions and punitive action demanding a radical transformation of our country and the implementation of reporting requirements.

"The next step will be the imposition of a tax regime. No independent country ought to impose any domestic system of taxation without forethought, proper deliberation, and only for the peace, order and good governance of the Commonwealth of the Bahamas in accordance with the constitution. You don't stumble into a new tax regime under the threat of sanction."

The Government last week tabled the Multinational Entities Financial Reporting Bill in the House of Assembly, which is legislation designed to meet the requirements of the OECD's latest anti-tax avoidance drive, the Base Erosion and Profit Shifting (BEPS) initiative.

The Bill requires Bahamian-domiciled entities, which are either the parent or 'surrogate parent' in a multinational corporate network with an annual turnover greater than $850 million, to break down their profits/revenues on a country-by-country basis and supply these to the Ministry of Finance for forwarding to 'home jurisdictions'.

At the same time, the Government also tabled legislation to create a central Beneficial Ownership Registry that will contain information on owners of all Bahamas-domiciled corporate and legal entities, minus a few exceptions.

K P Turnquest, the Deputy Prime Minister, confirmed the Registry was a response to the EU/OECD automatic tax information exchange requirements, plus the Financial Action Task Force's (FATF) demands in the fight against financial crime and terrorism financing.

And the frenetic pace of legislative activity is set to continue through the summer, as the Bahamas will have to draft more Bills to address the EU's 'ring fencing' and 'economic substance' concerns by year-end 2018 and avoid the threat of being 'blacklisted' again.

The Government ultimately stripped the possibility of introducing corporate taxation from the Multinational Entities Financial Reporting Bill, but Mr Sears yesterday called for "a national conversation" on how the Bahamas should respond to the likes of the OECD and EU.

"We need to ask some fundamental questions, rather than engage in measures to ease some immediate pressure," he urged. "The goal posts are constantly moving, and we are making, radical, dramatic decisions without careful consideration."

Mr Sears said it was impossible to properly provide feedback on the Government's proposed legal reforms without knowing what the Bahamas has committed to in complying with both BEPS and the EU's demands.

"I'm calling for full disclosure," he told Tribune Business, "on what commitments were made, and we evaluate the legality of multinational bodies of which we are not a member taking penalising actions against the country.

"What is our medium and long-term game plan? The question of extra-territorial reach and scope of international obligations, and the national interests of the Bahamas, these are all issues that have to be harmonised.

"Simply responding to an external threat by a multinational body that is not a universal body, and of which the Bahamas is not a member, raises some profound legal questions we should address."

Mr Sears argued that the Bahamas needed to see 'the bigger picture', as the issues raised by the OECD/EU were "not only a question for the financial services industry" but this nation's sovereignty.

Pointing out that the Bahamas should participate in crafting international regulatory regimes, he explained: "We are simply looking at it as a matter affecting the financial services sector; one sector, and viewing it as an immediate, isolated problem without looking at it in terms of the systemic impact, and international legitimacy and sovereignty, and the right of every country to participate in the making of the rules.

"The more fundamental issue is what is the medium and long-term strategy of our country to ensure it has, as a sovereign country, the right to participate in this exercise? The reality of real politick means that we, as a small country, are faced with a certain reality, but we compete with large countries in financial services and we have to ensure that under the pretext of regulation we don't have protectionism."