By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
The Bahamas’ has an “upside down” economic model that is the “complete reverse” of what exists in most progressive countries, a former attorney general has charged.
Alfred Sears QC, in a recent interview with Tribune Business, branded The Bahamas’ investment regime as “perverse” because it favoured foreign investors and businesses over its domestic entrepreneurs and capital.
Arguing that the country urgently needs “a new economic architecture”, he argued that the current system “penalises” The Bahamas’ own nationals in comparison to overseas developers who enjoy access to greater and more numerous tax breaks and other concessions.
Reiterating his previous calls for “a rational appraisal of the Stafford Sands model because it is based on the wrong assumptions”, Mr Sears called on The Bahamas to develop an investment template that was “transparent, certain and predictable” and designed for its own interests rather than for the likes of the European Union (EU).
While foreign direct investment (FDI) typically lobbies for the same treatment as local investors wherever it goes in the world, a concept known as “national treatment” under rules-based trading regimes such as the World Trade Organisation (WTO), the ex-attorney general said that in this country Bahamian businesses are demanding the same status as foreigners.
“How can we have a system that marginalises and penalises national capital?” he told Tribune Business. “It’s inconsistent with the definition of sovereignty.
“In most places in the world foreign investors are fighting to get national treatment. Here in The Bahamas, it’s nationals are clamouring to be treated like a foreign investor. We have it upside down.
“If I go to the US or Europe, I’m going to ask to be treated as close as possible to national treatment. The system there is designed first and foremost to satisfy the need for incentives and access to public goods among their nationals,” Mr Sears continued.
“This is a perverse system we have. I understand the origins of it: It was designed, conceived and implemented in the colonial context, but we are a sovereign country so must always have regard to sovereignty.”
Mr Sears drew a distinction between nations that were colonised for exploitation, and those that were settled. Pointing to the likes of Canada, Australia and New Zealand as examples of the latter category, he said their economic policies had focused on empowering their own entrepreneurs and providing support for those that sought to export or expand overseas.
“In the Bahamas it’s the complete reverse,” he told this newspaper. “We penalise. You have to pay a premium to search for cheap money [exchange controls]. The Government must appraise the current system and not only where there is an external threat.
“There needs to be a complete overhaul. That is the only way The Bahamas can achieve sustainable development. It must grow a robust, competitive, innovative domestic entrepreneurial group or national capital.”
Mr Sears’ remarks are an extension of his previous arguments that the 60 year-old economic model left by Sir Stafford Sands is now “broken” and inadequate for The Bahamas’ needs, perpetuating an unequal investment incentive regime that favours foreigners over Bahamians and has failed to empower locals.
“I think we need a new economic architecture,” he told this newspaper more recently. “First of all, the ring fencing [preferential tax breaks available to foreign investors that are not accessible to the domestic economy] that previously existed exposed the jurisdiction to charges of unfair practices in The Bahamas’ external financial services sector.
“We’re not going far enough. Simply inventing a corporate tax is not sufficient. The foreign-owned enterprise should be subject to the same taxes as a Bahamian. The financial services institutions in The Bahamas, when they operate in the US, Canada and Jamaica, they have to pay local taxes, and where there are exemptions they apply to qualified persons - local and foreign.
“It’s not penalising foreign investors; it’s penalising your own nationals to satisfy foreign investors. Rather than acting pursuant to a threat, or perceived external threat, there needs to be a rational appraisal of the Stafford Sands model because it is based on the wrong assumptions,” Mr Sears continued.
“We see it in the financial services sector based on taxes. There has to be a realignment that is not based on our response to the Europeans. It has to be based on how we can achieve sustainable economic processes that give citizens and foreign investors - in joint ventures or by themselves - an even playing field of predictability, certainty and transparency in terms of tax incentives and subsidies.”
Mr Sears agreed that it was vital The Bahamas avoided the European Union’s (EU) tax “blacklist” and, at least for the moment, its listing of those nations that pose a risk because of weak anti-financial crime defences.
“It’s important to avoid the negative listings, however illegal they are, because The Bahamas is in such a fragile state that any external disruption will have a devastating impact as we are already on a downward spiral,” he told Tribune Business. “It’s important that we minimise external shocks as we can ill-afford it since we’re in a state of extreme decline.
“There are vital issues that need urgent attention. As long as we delay addressing the critical concerns and coming up with a vision for the future that’s consistent with the needs of a sovereign country will be signing the announcement of our own decline.”
Comments
geostorm 5 years, 6 months ago
@Mr. Sears, I agree with what you are saying. Our economic model does need an overhaul, however, you were a part of the previous administration at one point......why didn't you work on fixing it then.
You politicians are ridiculous!
bogart 5 years, 6 months ago
DA POLITICANS.....AINT RIDICULOUS..!!!!......dep selects da Gov of da Central Bank....selects da Board of Directors.....selects Judges....selects /imputs erry Boards of Directors of Corporations...Govt entities....allocates monies by taxpayers...no matter which side....promotes an keeps it together......an jus do da musical chairs...by educated politicians........Bottom line.....result largest National Debt....even certified 50% Bahamians strugglin more by Cemtral Bank report....Latin America economic report second biggest differences between economic an social between rich an pore...biggest illegals 50,000 .....ingrained corruption.........etcetcetc......an at da end dey will get a state recognized funreal....police band....flag flying half staff....and platitidues ....celebratin dere greatness..!!!!!....
joeblow 5 years, 6 months ago
... common sense only returns to them AFTER they have left office!
banker 5 years, 6 months ago
Sigh, what Sears doesn't understand, is that there is systemic injustice against Bahamians, because of Bahamian monetary and fiscal policy. When The Bahamas had a Currency Board, instead of a Central Bank, the Bahamian dollar was convertible. The Bahamian dollar was pegged to the British Pound until 1968, and then pegged to the American Dollar, and fully convertible around the world. Then the newly independent PLP government started spending like drunken sailors spending all of the reserve dollars and more and created the monetary system that we have today, making the Bahamian dollar a non-convertible currency. From the 10th July, 1973 to June 1, 1974, the Bahamian dollar of Independence was a convertible currency. Then the doors were shut so to speak, with the Central Bank of the Bahamas Act. This was a retrogressive step, since our money was now Monopoly money, only could only be spent in the Bahamas, it shut the door to easy, transparent access to capital for Bahamians. Since we couldn't pay back capital loans in a hard currency, we were shut off for capital. Capital is what drives the engine of the economy. Bahamians are still limited in their access to capital both domestically and internationally. Unless we change the entire system, Bahamians are children of a lesser God. We need to dollarize the local economy so that we can participate in the global economy. Sears doesn't understand this.
Economist 5 years, 6 months ago
I agree completely.
Further, our immigration policy is designed to make it uninviting for smart minds to set up here. Smart minds are the ones who create jobs and wealth.
ThisIsOurs 5 years, 6 months ago
Your assumption is that smart minds and "Bahamian" are mutually exclusive. There are many smart Bahamian minds in the Bahamas but we have much more threatened persons who steal ideas or put roadblocks in the way
banker 5 years, 6 months ago
They put roadblocks in the way, because there are people with power who like to keep tings the way they are because they are profiting immensely by it.
Well_mudda_take_sic 5 years, 6 months ago
This comment was removed by the site staff for violation of the usage agreement.
sheeprunner12 5 years, 6 months ago
His hands are stained with much blood of intellectually unwashed Bahamians
John 5 years, 6 months ago
A matter of cutting of your nose to spite your face. Politicians didn’t want to enrich or empower Bahamians because it allowed the politicians to keep control and maintain an elitist status. The foreigners came and pretended to be the experts and the professionals, the saviors even. Then bagged up every dollar and every penny they can get their hands on. And BPL is controlled by foreigners and no significant improvement in services. BTC has been ‘stole ‘ and despite being profitable under Bahamian management, politicians and overstuffing management to turn hefty profits. And so the last piece of carpets is being pulled Byron this lame elephant. After investing thousands of dollars to become franchise holders i of BTC the foreign CEO decides he no longer wants these franchise stores to do what requires a work permit as everything else will be done online and outside the country.so some have already been forced to close. The Top Up sales that have been operated by Bahamians since inception has now been outsourced to a foreign company who will now only hire Bahamians to . When the US automakers decided to pull out Detroit and the US, they didn’t realize the damage they would be doing to America and how much they would be enriching Japan. And when they decided to return little did they realize Detroit is not the same motor city they abandoned years ago and it has so much catching up to do to become relevant.
Giordano 5 years, 6 months ago
If we dollarized the Bahamian economy,there is no changes of anything internally for any local and we still don't know where the VAT MONEY is going because while this administration is in power,they failed to provide TRANSPARENCY as they said would do when they were in opposition. The fact of the matter is that they are collecting HUGE amounts of money from locals "Tax PAYER" and from Mr. Sear's stand point it's not clear if they are charging foreigners equally like locals. The most important thing,right now, is transparency. Where the VAT MONEY is going ? And how much are they really collecting? $3.00 Millions daily? Or $2.5 Millions ? Now we know it's something like that,without any doubt. Corruption is taking much more than that everyday and we need not only an architect for this newly economy but we also need some Patriot able to be on the right side of history by suffraging some justice and honoring the real pledge to the country or nation and not the pledge invented by the PM (Prime Minister). We need Bahamian men with courage ready to face this challenge appropriately. This is not "little money". It's something HUGE .!! to solve all kind of public concerns. We are talking about BILLIONS.!!! Only from VAT. Let's do the math pls. Anyone,anybody....
Sickened 5 years, 6 months ago
Needless to say our whole system of government needs to be overhauled and modernized. It is broken but yet these politicians stay with it, because they are the only ones who truly know how it works and how they can benefit from it.
Kalypsoisland 5 years, 6 months ago
Finally, someone talking sense! Now what Bahamas needs is a prime minister who talks sense and a minister of finance who talks sense. Maybe next election, sigh!
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