The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas may have “some light on the horizon” in its tax battles against the European Union (EU) and Organisation for Economic Co-Operation and Development (OECD) via a new United Nations (UN) resolution.

The resolution, voted on Wednesday, paves the way to potentially wrest control of international tax policy from the OECD and developed countries by creating a pathway for a UN convention on taxation and a new global tax body.

This is something present Cabinet ministers such as Alfred Sears KC, minister of works and utilities, have been urging for years while in private practice as it would provide a fairer forum for resolving tax-related disputes and potentially blunt the ‘blacklisting’ and ‘naming and shaming’ tactics employed by the likes of the EU to force The Bahamas to change its laws and undermine financial services competitiveness.

Paul Moss, president of Dominion Management Services, one of the few Bahamian-owned businesses in the international financial services sector, told Tribune Business that while it was a promising development he remained sceptical that any good will come from it until the UN and smaller nations “show they’re not going to be bullied” by developed countries.

“It quite possibly could be the answer so long as the UN is not hijacked by some old OECD players,” he said. “If this could be on the basis of one country, one vote, that would be great but it remains to be seen. Obviously the EU and OECD are biased in their approach to this whole issue, and everything they do and recommend is against international financial centres (IFCs).

“This will certainly be a welcome sight because we spread it across all the countries who potentially have an equal say in what happens. What happens today is that the OECD and EU force us to change our laws, and we all go marching down to the gallows to change them.

“But if the UN operates as it should be, and countries have their own impact, perhaps we’d get a fairer approach as opposed to being forced to change our laws. I’m not confident in that. There has to be some demonstration by the United Nations (UN) to show they’re not going to be bullied themselves. I’m not confident till I see that.”

International reports said the vote on a UN tax mandate was heavily opposed by the US and major developed countries, which are reluctant to lose control of a global tax policy debate they have dominated for decades to the detriment of The Bahamas and other IFCs.

While there is merit to Mr Moss’ concerns, he added: “It does represent progress; there’s no question. When you look back 22 years to when we were first blacklisted, there’s now some light on the horizon. But we have procrastinated and missed the mark by not forming our own alliance against the OECD and EU.

“This may be an opportunity for IFCs to get together and form a group so that when this happens they will be united, and there will be more IFCs than the G-7, so we will have a substantial say in what goes on. Whenever we have been blacklisted we have ended up changing our laws, even if it goes against our constitution. It doesn’t matter to us; we change it.

“We’re too late in standing up, but I’m not sure it’s too late in allowing the UN to have a stab at it. Everyone wanted to fight it their own way, deal with it their own way, and at the end of the day we played right into their [OECD and EU] hands. It was divide and conquer.”

The UN resolution was presented by African nations, with those countries wanting an international agreement on measures such as a floor for corporate tax rates, so countries cannot undercut one another, and forcing multinationals to report how much tax they pay in each country.

António Guterres, the UN secretary general, now has to write a report on the problems in the global tax system. “History was made today. We commend UN members on their bold action today to move rule-making on global tax into the daylight of democracy at the UN,” said Alex Cobham, chief executive at the Tax Justice Network, in a statement.

“The inter-governmental discussions next year will be crucial in setting the path for this new era of international tax. It is vital that countries in each region of the world follow the African leadership that underpinned this success, and engage together to generate common positions on an ambitious agenda.”