By NEIL HARTNELL
Tribune Business Editor
The world’s most powerful nations were earlier this year urged to pressure the Bahamas into agreeing to the multilateral approach for automatic tax information exchange, something it has so far resisted.
The request was contained in an April 2016 report to the G-20 nations’ finance ministers by the Organisation for Economic Co-Operation and Development’s (OECD) secretary-general, who said it “seems time” for all nations to adopt the multilateral approach.
The Bahamas was identified in the report as one of just 15 nations that had either not signed, or shown no interest in signing, the multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAC) - a protocol that would assist with the implementation of a multilateral approach.
Of the 15 ‘recalcitrants’ identified, only Panama is a larger international financial centre (IFC) than the Bahamas, which may provide a clue to why these two nations were singled out as the victims of a concerted international attack earlier this year.
In what amounts to a thinly-veiled call for such pressure to be applied, the OECD’s secretary-general wrote: “As regards the multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAC), almost 100 countries and jurisdictions have already signed or are participating in this instrument, with only a few countries of relevance having not yet signed, including Panama.
“It seems it is time for all countries to sign the Convention. This is especially the case for those which have committed, or should commit, to automatic exchange of information.
“Out of the countries committed to AEOI, or that have been asked to commit, only 15 have not signed nor expressed interest in signing the MAC.”
Apart from the Bahamas and Panama, the 15 also includes the United Arab Emirates, another nation that the OECD has expressed public concerns about when it comes to its chosen path to implement the Common Reporting Standard (CRS) - the global benchmark for automatic tax information exchange.
The others named in the report were Antigua and Barbuda, Bahrain, Brunei Darussalam, Dominica, Grenada, Kuwait, Malaysia, Qatar, Samoa, Saint Vincent and the Grenadines, Trinidad and Tobago, and Vanuatu.
Recommending the action that the G-20 should take against the Bahamas and others, the OECD secretary-general’s report said: “The G-20 should reaffirm the need for the identified countries and jurisdictions to commit to the CRS without further delay.
“Countries should now sign the multilateral Convention on Mutual Administrative Assistance in Tax Matters, noting that only sovereign states can legally sign this instrument, as well as the Competent Authorities Agreements for the CRS without further delay.”
The G-20 is formed from the world’s most powerful countries, including the US, the UK, China, Russia, Australia and, of significance when it comes to tax matters, the likes of France and Germany.
The Bahamas, which yesterday moved to enact legislation that will give effect to its CRS and automatic tax information exchange commitments, has already been given an indication of what such ‘pressure’ looks like.
For it was the victim of “a very well-organised attack”, which began with The Economist magazine portraying this nation as a non-cooperative jurisdiction that was undermining the global battle against “tax dodgers”.
This was swiftly followed by the European Union (EU) ‘red flagging’ the Bahamas on two of three criteria related to tax avoidance, and culminated in the ‘leak’ of 1.3 million documents - containing details on some 175,000 Bahamas-domiciled entities - from the Companies Registry.
The anti-Bahamas media offensive appeared designed to force, or bounce, the Bahamas into abandoning the bilateral approach to CRS implementation - something that would allow this nation to exchange tax information automatically with those that approach it - rather than with all-comers.
Hope Strachan, minister of financial services, previously acknowledged that while the OECD would clearly prefer all nations, including the Bahamas, to adopt a ‘multilateral’ approach to CRS implementation, the Bahamas had “made our position known since 2014”.
To suddenly change this stance now, she added, threatened to undermine the Bahamian financial services industry and cost it business.
“If you think about how people do business, and how businesses operate, you cannot just decide today or tomorrow to change course, as that has a lot of implications for people,” the Minister told Tribune Business.
Pointing out that the Bahamas’ approach to implementing the CRS global standard was agreed prior to her becoming minister of financial services, Mrs Strachan said: “We consulted widely with the industry, looked at our tax regime, all aspects of how the jurisdiction is managed, and determined which approach was safer for us.”
The OECD had itself provided, and approved, the bilateral approach for implementing the global standard on automatic tax information exchange, she added.