The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

FINANCIAL and legal executives yesterday slammed The Bahamas’ continued inclusion on national blacklists of European Union (EU) member states as “crazy” and “bizarre” given its recent delisting by that bloc.

John Delaney KC, the former attorney general, told Tribune Business that the separate decisions by both France and the Netherlands to keep The Bahamas on their own tax blacklists for the whole of 2024 - despite the EU’s late February decision to remove this nation from its own - further exposed how “arbitrary” such tactics are.

Both states are members of the 27-nation EU, but the bloc’s determination that The Bahamas had rem- edied alleged deficiencies in its ‘economic substance’ reporting regime and was worthy of removal has made no impact on France or the Netherlands’ national policies.

Indeed, according to a note from Deloitte & Touche’s French affiliate, France decided on February 17, 2024, to maintain The Bahamas as one of five jurisdictions subject to full defensive measures - including punitive withholding taxes on payments such as interest, dividends and royalties - for the whole of this year with that decision to only be reviewed come 2025.

The French move was decided just three days BEFORE the EU resolved to delist The Bahamas on February 20, 2024. As for the Netherlands, the decision to maintain The Bahamas’ blacklisting was taken on December 29, 2023, and also remains in effect without change for a whole year.

“Inclusion of a jurisdiction on the Dutch blacklist applies for the entire calendar year 2024 with an annual revisit of the list effective the following calendar year,” one Dutch accounting firm said. Those jurisdictions targeted are ones with no or a low rate corporate income tax of 9 percent or less, which means The Bahamas’ plan to implement the 15 percent minimum global corporate tax rate may be of some help.

However, in the meantime, The Netherlands will impose similar measures to France via withholding taxes at a 25.8 percent rate, controlled foreign company rules and other strictures designed to discourage business with The Bahamas and other low-tax states.

While national blacklistings are less comprehensive and impactful than those imposed by multinationals, such as the EU and Organisation for Economic Co-Operation and Development (OECD), they nevertheless pose a reputational risk and undermine the ‘ease of doing business’ with entities and individuals from those nations by adding to the cost and time associated with financial transactions.

“It entirely shows how arbitrary the unilateral as opposed to the multilateral blacklisting is,” Mr Delaney told Tribune Business of France and The Netherlands’ actions. “In fact, in my view, the multilateral blacklistings leave a lot to be desired.

“The unilateral blacklistings have a degree of opaqueness to them. It’s incredibly unfair for the affected countries. It’s incredibly unfair and disruptive for the financial centres that are affected, in a very significant way impacting their international trade and commercial affairs.”

Mr Delaney said the French and Dutch moves highlighted the need for the United Nations (UN) or some other body to take over governance of global tax matters and policy from the likes of the EU/OECD and their individual members, which have dominated the issue since the 1990s. The Bahamas is among the nations spearheading such a push presently at the UN.

“Bodies like the UN need to intervene in this sort of field to regulate this sector,” he added, “given the adverse impact it has on jurisdictions such as ours, both from a market perception perspective and a cost point of view in terms of countries responding to it with administrative adjustments to meet whatever the requirements or demands are.”

The former attorney general said it was “particularly troubling” that blacklisting initiatives always single out small, vulnerable international financial centres (IFCs) and never include or scrutinise developed countries such as G20, EU and OECD members.

Paul Moss, president of Dominion Management Services, told Tribune Busi- ness it was “incredible”

and “bizarre” that France had blacklisted The Bahamas for the whole of 2024 despite being among the nations that, just three days later, decided to remove this country from the EU version.

“It just shows you the double standards,” he argued. “It does show that it’s all arbitrary. You have to ask yourself whether they are serious about the impacts of blacklisting other than to destroy The Bahamas’ ability to participate in financial services.

“Clearly it’s very arbitrary for France to have taken this position. They have agreed to take us off the EU list, delisted those countries, but then say this is our list and we’ll keep you on. It’s crazy. It shows you these entities are not serious. This will certainly have an impact on those persons who do business with France. They do whatever the hell they want. It’s amazing to me.”