The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas was yesterday urged to tell the European Union (EU) that “enough is enough” after this nation’s ‘blacklisting’ for allegedly being uncooperative on international tax matters was ratified.

John Delaney, the former attorney general, told Tribune Business that the 27-nation bloc’s continued use of “name and shame” tactics was more appropriate for dealing with “a rogue state” than a nation such as The Bahamas which has always been “largely compliant” and responsive to legitimate requests for regulatory improvements.

And Philip Galanis, who was an Opposition MP when blacklisting was first employed against The Bahamas some 22 years ago, blasted the EU for what he described as its “neo-colonial” approach in seemingly seeking to drive The Bahamas out of the international financial services market.

Arguing that the bloc seemed to be deliberately picking on small Caribbean territories who find it difficult to defend themselves, he argued: “It’s wholly unfair for the EU to have blacklisted us in the manner they have,” the HLB Bahamas accounting firm chief told this newspaper. “We have sought to meet virtually every request made of us.

“We have amended our laws, changed those regulations, tightened the process of compliance for Know Your Customer (KYC) and client compliance procedures, and stiffened money laundering and terror financing regimes, and yet the EU discriminates against the smaller countries of the Caribbean.

“I find that to be extremely duplicitous. That’s why this is so unfair. At some point this is why we have to, quite frankly, tell them to go to hell. We have to find a way to politely tell them to go to hell. At some point we have to find a way to say: Enough is enough.”

The EU council’s general secretariat, in seeking to justify The Bahamas’ inclusion on its ‘blacklist’ alleged that this nation had failed to satisfy deficiencies relating to “compliance actions and exchanges of information” over its economic substance regime.

These weaknesses were purportedly identified at a meeting of the Organisation for Economic Co-Operation and Development’s (OECD) “forum on harmful tax practices”, whose work overlaps with that of the EU. “At the Forum on Harmful Tax Practices meeting, The Bahamas was given two recommendations with regard to the effective implementation of substance requirements,” the EU report asserted.

“Based on the information provided by the jurisdiction on whether/how they have addressed the deficiencies identified in the monitoring areas concerned (compliance actions and exchanges of information), the group considers that The Bahamas has not fulfilled its commitment and recommends to include this jurisdiction in the EU list of non-cooperative jurisdictions for tax purposes...

“The Bahamas facilitates offshore structures and arrangements aimed at attracting profits without real economic substance by failing to take all necessary actions to ensure the effective implementation of substance requirements.”

Zbyněk Stanjura, the Czech minister of finance, said in an accompanying statement: “Fair taxation of businesses benefits all of us. This is why the EU and international partners share a common interest in fighting tax base erosion and profit shifting.

“I believe all 12 countries on the list will deliver on their commitments and carry out the necessary reforms in the field of taxation as soon as possible, so that they can be deleted from this list when we will next revise it in six months’ time.”

However, it was not only The Bahamas that was distinctly unimpressed by the EU’s action and listing. Oxfam, the international anti-poverty group, blasted the fact that the EU’s member states such as Luxembourg got a free pass even though they offer similar products, services and tax regimes.

“How can anyone give this list any credibility? Bermuda is one of the world’s worst tax havens with its zero corporate tax rate. Yet the EU took it off the list after it made a few woolly promises to reform,” Chiara Putaturo, Oxfam EU’s tax expert, said. “To add insult to injury, major European tax havens like Luxembourg are not on the list because all EU countries receive an automatic free pass.”

Mr Delaney, meanwhile, told this newspaper it was “truly unfortunate” that, after 22 years, the EU and other agencies continue to employ so-called ‘blacklisting’ tactics against The Bahamas when “a more constructive and diplomatic approach” would be better at securing any legitimate financial services-related objectives they have.

“The fact is that The Bahamas has been most responsive on all that time in engaging with all the agencies, the OECD, Financial Action Task Force (FATF), Financial Stability Forum in its initial incarnation, and then the EU came along,” he added. “The Bahamas has been fully engaged and responsive, and continued to be responsive as these standards evolved.

“It’s not as if they’re dealing with a rogue state. They’re dealing with a largely compliant and fully engaged member of the international community of nations. That the EU should continue these tactics of blacklisting is truly most unfortunate. To be concise, it is name and shame. It is as blatant as that unfortunately.”

Nevertheless, both Mr Delaney and Mr Galanis agreed that The Bahamas must do what is required - but within both the law and reason - to escape the EU blacklist within the shortest possible time given the reputational risk it poses to the financial services industry and wider Bahamian economy. It also threatens to subject transactions with EU individuals, entities and institutions to greater scrutiny, and thus increase the time and cost involved with such dealings.