The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian financial services provider yesterday renewed calls for this nation to adopt a low-rate corporate income tax as the platform to prevent the industry “dying a slow, painful death”.

Paul Moss, Dominion Management Services president, warned that the country’s financial services industry will “fall flat on its face” unless it enters true tax competition and better defends its right to participate in the sector.

Speaking after Julius Baer announced its exit from The Bahamas with the loss of 30 jobs, Mr Moss argued that the jurisdiction has “nothing to lose” by implementing a low-rate corporate income tax as it stands to “lose it all” under the present zero-tax model.

The head of one of the few Bahamian-owned businesses in the international financial services niche, he told Tribune Business that the sector had been contracting for two decades without anything being done to “recover it and bring it back”.

“It’s very disconcerting to hear that although I’m not surprised,” Mr Moss said of Julius Baer’s decision to close its Bahamian subsidiary. “We’ve made tremendous changes in this country, and they and others have stood up for a long time without going out of business. This something that’s probably been on the drawing board for a while.

“It’s to be expected having regard to the changes in this country. Every time there’s a ‘blacklisting’ there’s a pressure for change, and change is not good for the sustainability of this industry. It [Julius Baer’s exit] really points out that financial services is dying a slow, painful death.

“One can only imagine that 30 workers out of a job will have difficulty finding similar work in the industry as there’s fewer jobs. As time passes, unless The Bahamas puts on its ‘big boy pants’ and fleshes out an industry that’s sustainable, there’s going to be more downsizings, close outs and clients moving assets.”

Calling on The Bahamas to “defend what we have” as a first step, Mr Moss added: “We’ve been saying for a long time that The Bahamas is a well-regulated, first class financial centre. We need to defend that. We can’t capitulate at everything that comes up, every scream, every cry that comes up.

“The business has been contracting since 2000, for 20 years, and there’s been nothing done to revive it and bring it back. All we’ve done is react to changes against us, we’ve never stood our ground and fought, and have not brought like jurisdictions together instead of responding to all this individually as we always do.”

Repeating his long-held calls for a fundamental change in The Bahamas’ taxation system, Mr Moss told Tribune Business: “I believe The Bahamas ought to enter into the world of taxation with a low rate corporate tax. It would then be able to enter into “double tax” treaties, and remove us from the stigma of being a ‘tax haven’. It will put us in the tax competition business.

‘“That rate needs to be between 3 percent to 5 percent. I don’t know why we’re so reluctant to do it, otherwise this industry will fall flat on its face and many other people will be out of jobs.”

Both the European Union (EU) and Organisation for Economic Co-Operation and Development (OECD) frown on corporate income tax rates of less than 10 percent, but Mr Moss said this was why The Bahamas had to “defend what we do” as there was no need for a double-digit rate.

Suggesting that this nation seek US help to defend itself, he added: “If we do this it ensures people understand we’re in the business and know what we’re about. Quite frankly, we have to participate in that way as opposed to being a zero tax jurisdiction as we’re going to be attacked at every turn.

“We have nothing to lose because if we stay in this holding pattern we will lose it all. We may as well be among the first jurisdictions of those like us that don’t have a corporate income tax to implement it. That’s what we ought to do.”