The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Opposition’s leader yesterday slammed the Government’s failure to secure The Bahamas’ escape from the European Union’s (EU) tax blacklist almost two years after it pledged to resolve all concerns.

Michael Pintard, while committing the Free National Movement (FNM) to “stand with” the Davis administration against “the arbitrary rules” and double standards imposed on nations such as The Bahamas, accused the Government of failing to live up to promises of securing this nation’s exit from the 27-nation bloc’s listing.

In particular, he referred to the three letters signed by Prime Minister Philip Davis KC over a six-week period between December 15, 2021, and January 26, 2022, pledging that The Bahamas will resolve the EU’s issues over purported deficiencies in its “economic substance” and tax reporting.

“After committing in writing to the EU from as far back as December 2021, and after earnest promises and blame shifting in October 2022, the Prime Minister and his boastful Attorney General [Ryan Pinder KC] still have not been able to get The Bahamas off the EU’s tax blacklist, referred to formally as the EU ‘list of non-cooperative jurisdictions for tax purposes’,” Mr Pintard asserted.

“Two years after the Prime Minister and the Attorney General promised to take the necessary corrective action, the EU published an updated blacklist that once again included The Bahamas as one of 16 countries. Our listing was partly due to what the EU said was a failure of The Bahamas to ‘take all necessary actions to ensure the effective implementation of substance requirements’.”

Mr Pintard’s comments threaten to re-ignite the so-called ‘blame game’ over whether the current or former Minnis administration is responsible for the EU blacklisting and to what degree. The Government yesterday accused the EU of failing to consider “many of the reforms” implemented by this nation in refusing to remove The Bahamas in its latest review.

The Ministry of Finance, in a statement, said the 27-nation EU had decided to keep The Bahamas on its now-16 strong list of non-cooperative jurisdictions on the basis of outdated information.

It explained that the EU determined not to delist The Bahamas based on an April 2023 report from the Organisation for Economic Co-Operation and Development’s (OECD) Forum on Harmful Tax Practices, which did not include or consider the reforms implemented by this nation to address the European concerns.

The EU takes its cue from the OECD Forum on economic substance issues, which lie at the heart of the former’s decision to brand this nation as non-cooperative. The bloc’s determination to keep The Bahamas on that list was taken ahead of the OECD Forum’s meeting later this month, when this country’s efforts to cure its alleged deficiencies will be reassessed.

The Ministry of Finance, saying it remains “cautiously optimistic” of a favourable review at the OECD Forum’s upcoming meeting, explained that such an outcome will work to The Bahamas’ advantage when the EU next reassesses its own listing in February 2024.

“The EU’s determination was based on the recommendation of the OECD’s Forum on Harmful Tax Practices meeting held in April 2023 before many of our reforms for economic substance were implemented,” the Ministry of Finance added. 

“The Forum will meet again at the end of this month. The Government of The Bahamas is cautiously optimistic for a favourable review by the Forum. A favourable review by the Forum at the end of month will be considered by the EU in their February 2024 meeting.

“The Government of The Bahamas has, and continues to do, everything in its power to address the compliance with the economic substance regime.”

Mr Pintard, meanwhile, yesterday pledged: “The Opposition will continue to stand with the current administration in any effort to point out and stand up to the sometimes unfair and arbitrary rules and conditions placed on small sovereign nations such as The Bahamas.

“We are often subject to different standards than larger countries concerning tax and finance matters. We will continue to support the Government in all efforts to combat these instances where appropriate. 

“However, we also appreciate that as a country, we have made commitments and signed on to protocols that require us to maintain established globally accepted protocols around taxation, economic substance and tax information exchange. We expect the Davis administration to live up to its word when it says it will preserve the reputation and integrity of the country as a credible international financial jurisdiction.”

However, he then added: “After two years of blaming the former FNM administration and committing to fixing the issue, the Davis administration still has not accomplished what it said it would complete 20 months ago in December 2021. The PLP has run out of excuses and run out of time. The failures are mounting.”

Mr Pinder previously blamed the Minnis administration’s “fundamentally flawed” approach to complying with the EU’s economic substance demands for landing The Bahamas on the bloc’s blacklist. “They had three-and-a-half years to put in place a compliant regime of economic substance reporting and failed to do it,” he asserted in 2022.

“They failed the country. They failed the financial services industry, and they really should be ashamed of themselves now trying to make this issue political since it’s squarely on their feet. We were notified of the non-compliance late last year [2021].

“We gave our assurances that we would try to work with the EU. Clearly, with a fundamental flaw, it takes some time to fix and we were just unable to get over all of the hurdles in time [to address and avoid] the non-compliant rating. So what we’ve been doing is we’re going to have to put in place a new portal, a new reporting system to be compliant.”

However, Kwasi Thompson, former minister of state for finance, alleged the Minnis administration had already approved plans to address the EU’s concerns.

“The former FNM administration approved enhancements to the economic substance reporting system prior to the 2021 election, which this current administration was advised by the technical adviser to follow through with to ensure that The Bahamas received a favourable rating by the international taxation standard setters. Why did the Government not proceed with the former administration’s planned upgrades which were approved by the technical staff?” the ex-minister said.

This newspaper understands that a New Zealand company, which created the original electronic portal, had been re-engaged by the former administration to make the necessary upgrades and address the EU’s concerns. However, well-placed sources have questioned whether the work was completed or brought to a conclusion under the Davis administration.