The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Attorney General yesterday warned that the failure to develop sufficient Bahamian professional expertise on tax matters has left this nation’s financial services industry “vulnerable’.

Ryan Pinder KC, addressing the Nassau Conference on ways to “future proof” the sector against emerging threats and challenges, voiced disappointment that many tax advisory posts will be filled by expatriate specialists due to The Bahamas’ failure to develop adequate local capacity.

Urging the industry to “get out on the road” and identify new markets and opportunities, he pointed to likely upcoming changes in UK tax laws that will impact foreign millionaires and billionaires as one such possibility to attract the high net worth clients that have formed the Bahamian financial services industry’s core market.

Pointing to the ever-changing international financial services regulatory landscape, Mr Pinder said Brazilian legislative reforms that eliminate tax advantages from holding investments in offshore funds have undermined the Investment Condominium or ICON product that gave this nation “ten years of prosperity” in that South American market.

“It is now time to innovate again,” Mr Pinder asserted. “We now must identify markets that are experiencing disruption. That allows for us to continue to innovate and fill a void to attract new business. I see an opportunity in a country that is familiar to The Bahamas for many years, the United Kingdom.”

This is the UK’s plan to scrap the tax concessions offered to around 68,000 so-called “non-domiciled” persons. These are persons who, for UK tax, are treated as resident but have their permanent home in another country.

However, they now face having to pay millions of pounds in tax as a result of the UK government and opposition Labour party’s plans to scrap a tax break that enabled them avoid paying tax on their overseas income for 225 years. The change is due to take effect from April 6, 2025, and will have a major financial impact for the high net worth individuals that it catches.

Arguing that The Bahamas is well-positioned to capture a share of this market, especially following reforms to its permanent residency regime that allow persons to qualify by purchasing either a $1m property or “zero coupon” $1m bond from the Central Bank with a ten-year term, Mr Pinder said: “They will be looking at their resident status, their wealth structures and evaluating what changes are going to be required....

“We must determine what other product reforms may be needed, and how we can leverage our current toolbox. Like we did before, solutions and products must be developed jointly between The Bahamas Government, the Bahamian financial services industry and the London legal community.

“We as a country, and particularly the industry, must invest in travelling to London, meeting with practitioners and working to attract that business to The Bahamas. This is one opportunity where we can put our proven formula at work and open a new marketplace of clients and business,” the Attorney General continued.

“Yes, this could be a residence opportunity, but it is also a wealth plan restructuring opportunity for us. In fact, some trustees have indicated they are already seeing trust restructurings into The Bahamas because of anticipated changes to the UK non-domicile regime. We must be alert, creative and aggressive, all in the spirit of innovation.”

Mr Pinder said the aggressive pursuit of new clients and markets “seems to have waned in recent years, but we must recommit to investing ourselves in the effort to identify new opportunities”. He added: “Some worked out, some did not, but I remember when we decided to go the industry went with a substantial presence and collectively worked on potential products and opportunities.

“Industry must get out on the road, travel and help identify opportunities in new jurisdictions..... Collective commitment to new market investigation and analysis is a fundamental component to future proofing our financial services industry.”

Noting the tax-driven changes caused by initiatives such as the Organisation for Economic Co-Operation and Development’s (OECD) Base Erosion and Profit Sharing (BEPS) drive, Mr Pinder added: “Although we have been working our way through these reforms for the last few years, we have not seen our industry professionals develop the necessary expertise in taxation that is required to ensure that it is future proofed.

“We see the evidence of this with the frequent advertisements for tax professionals by accounting firms, law firms, financial services institutions,and, frankly, even government. Most of these posts will be filled by non-Bahamians which is not conducive to developing domestic expertise.

“I encourage the industry to invest in yourselves and your expertise in taxation. In this environment not being competent in taxation leaves the financial services industry of The Bahamas vulnerable.” Mr Pinder also warned the private sector to stay abreast of reforms proposed by the Financial Action Task Force (FATF) surrounding trusts and their beneficial ownership which could trend towards a trust register.

“The Government does not have an intention on the creation of a trust register, but recommendation 25 guidance by the FATF is telling where they would like the industry to go. I have requested external legal opinion on the scope of the requirements, especially as it pertains to our trust industry, and any recommended legislative amendments that will be required,” he added.

“We will have further consultation on this in the near future. However, you and your institutions should become knowledgeable and monitor these revisions and guidance in real time. I understand some of our regional competitors are discussing internally the implementation and even a trust register.”

Looking forward, the Attorney General added: “One thing about our industry: If there is anything that is constant it is change. We are vulnerable to external legislative changes, regulatory changes, changes imposed on us, and it leaves us vulnerable and living in a state of anxiety. We have succeeded through this over the years.

“Yes, it takes a lot of work, it takes co-operation and foresight. It requires policy commitment, transformative innovation. Our charge is to keep at it, to think outside the box, share ideas, embrace innovation and progressiveness.

“I have the confidence in the collective ‘us’ that it can be done, so coming out of this conference I think the commitment should be to have all hands on deck, discover the innovation we need, and let’s collectively just get it done by making the investment in the industry, both personal investment and institutional investment, supported by government and regulatory leadership.”