The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas could have accomplished the twin goals of tax reform and reviving its financial services industry if it had introduced low-rate income and corporation taxes rather than VAT, one provider believes.

Paul Moss, head of Nassau-based Dominion Management Services, told Tribune Business that such reform would have enabled the Bahamas to shed its ‘tax haven’ image while simultaneously increasing government revenues.

He argued that with international investors willing to do business in jurisdictions with tax rates as high as 18 per cent, the Bahamas would have been able to re-position itself as a ‘low tax’ nation and avoid the “stigma” that the OECD/G-20 were constantly seeking to attach to international financial centres (IFCs).

Pointing to the regressive nature of Value-Added Tax (VAT), and its disproportionate impact on low income Bahamians, Mr Moss criticised the Government’s suggestion that its implementation had been a great achievement.

“I hear about VAT being such a heavy lift for the Government, but it’s the wrong taxation,” Mr Moss said. “We want to burden the poor and have them pay the brunt of it, while others do not have to bear the brunt.

“If we say the Bahamas is not a tax haven jurisdiction, and people agree to pay corporate and personal income tax, we are doing some heavy lifting.”

Mr Moss described this as a “holistic” approach that could have effectively ‘killed two birds (tax reform and financial service revitalisation) with one stone’.

He told this newspaper he knew of an oil company, which he declined to name, which was a $160 billion annual profit operation and domiciled in the Bahamas - yet it contributed zero tax dollars to the Public Treasury due to this nation’s tax system.

“It requires you [the Government] to understand how the world works, and the integration of your tax system with the world’s,” he added. “It’s a holistic thing and they missed an opportunity.

“I’m not sure whether it’s something they can’t see or generationally don’t understand. If the Bahamas is to be successful, if it is to rescue this industry, there’s no doubt that’s an issue we have to address - and we have to address it sooner rather than later.”

Mr Moss has consistently argued that the Bahamas should switch its financial services model from being a ‘no tax’ jurisdiction to one that makes it a ‘low tax’ jurisdiction, on the grounds that this is what today’s international investors are looking for.

One such ‘low tax’ nation is Barbados, which has successfully attracted much Canadian corporate and personal business via the ‘double tax’ treaty between the nations - which ensures profits and other revenue streams repatriated to the latter are taxed only at the lower Barbadian rate.

A long-time advocate for the Bahamas to also enter the ‘double tax agreement’ business, Mr Moss said becoming a ‘low tax’ nation would also provide some protection against the constant barrage of regulatory initiatives flowing from the G-20 and its forums, such as the Organisation for Economic Co-Operation and Development (OECD).

“They’re not going to stop,” Mr Moss said of the G-20. “This is a tea leaf that is very easy to read, and we miss the major for the minor; the big elephant of tax transparency.

“”The Bahamas has gone over and above all that is required of it, whether we’re talking about the 2000 ‘blacklisting’ or subsequent initiatives, but we still ourselves in problems because we do not see what is going on in the world.

“Until we’re smarter, we’re going to miss out. This industry is not growing. The Government is talking about a ‘blue chip’ jurisdiction, but what are they talking about? It can’t be this country.”

While praising the Government for computerising all aspects of company incorporation, Mr Moss said this was something the Bahamas should have had two decades ago.

“While helpful, we still have the stigma of being known as a tax haven,” he added. “We still have the stigma of not taxing people in this jurisdiction, we still don’t have double taxation agreements with other countries, and too many other countries view the Bahamas as ‘rogue’ in the sense that if their citizens are doing business in the Bahamas, that business must be subject to extra scrutiny.

“The financial services industry’s growth is anemic. We still don’t get it, and we aren’t getting it. Even though the Bahamas is a ‘no tax’ jurisdiction, international investors want to do business with countries that have taxes as high as 18 per cent.

“When we hold ourselves out as having no taxes, that doesn’t help us at all.”

While agreeing that the Bahamas was “on the right path” with online company incorporations, Mr Moss said this nation was still playing “catch up” with rivals such as the British Virgin Islands (BVI).

“We’re not doing the vast number of incorporations as in times past,” he added.

“One of the things that’s amusing to me but sad at the same time, is that wherever I go in the world, people refer to IBCs as ‘BVIs’. That is because BVI has done such a good job marketing itself.

“While we now have this tool, we must market it properly and make sure it’s sustainable.”