By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
The Bahamas was yesterday urged not to “capitulate” over its financial services industry, with one practitioner refuting the former prime minister’s belief that the sector is beyond “salvaging”.
Paul Moss, president and owner of Dominion Management Services, told Tribune Business that Hubert Ingraham seemed “not to want to fight” for the sector’s survival, based on comments made to the media.
Mr Ingraham was reported as saying that the Bahamas had lost its traditional private banking business as a result of international regulatory pressures, and enforced legal reforms, and that this nation had yet to ‘see the worst’ in terms of the sector’s shrinkage.
But Mr Moss, who is one of the few Bahamian owners in the industry, said that such ‘defeatist’ talk reflected the lack of clear thinking within government that was necessary to reposition financial services to cope in the new global realities.
He agreed that Mr Ingraham was right when it came to the Bahamas’ pre-2000 financial services model, which was based on client anonymity and tax avoidance, and on the need to better diversify the national economy.
“What he’s saying is correct in terms of finding other industries,” Mr Moss told Tribune Business. “But this financial services industry can be salvaged, and be a part of this, but I’m not finding anyone talking the language that shows they understand how to do this.
“His [Mr Ingraham’s] response is exactly what the attitude has been all along; to get out of it. That’s how we’ve conducted ourselves; exactly how he talked.
“His observation on the need to diversify the economy is correct, but not at the expense of financial services.”
Mr Moss again reiterated his previous plea for the Bahamas to switch from a ‘no tax’ to a ‘low tax’ model in terms of income and corporate taxes, arguing that this would help to shed the ‘tax haven’ perception and give the industry greater legitimacy.
“We have an opportunity to lead, but we don’t want to do that,” he told Tribune Business. “It’s not the end of the sector. Absolutely not. I still believe the sector can be salvaged.”
Mr Moss said the “end game” for the G-20 and OECD nations was full tax transparency and information exchange, in the belief that this would prevent their citizens and companies from avoiding due taxes in their home countries.
“We have to change the model; no doubt about it,” he added. “But we missed a golden opportunity when we went for VAT as opposed to a low corporate and income tax. It doesn’t make sense.”
Adopting a ‘low tax’ model would “let the international community know this is a place where people do not come to dodge tax”, Mr Moss said, while agreeing that the Bahamas also needed to encourage high net worth financial services clients to follow their assets here by making it their primary domicile.
Tax compliance certificates could also be issued to prove these persons were legitimate payers in the Bahamas, he added, thus enabling them to avoid ‘double taxation’ in their home jurisdictions.
“We have to be in competition; tax competition,” Mr Moss told Tribune Business, “and be in the game where we offer these things. We have to do it.
“I’m not sure why Mr Ingraham is talking that stuff. Maybe he’s recognised he had a hand in the decline of the industry, but he seems not to want to fight. He’s not even offering to fight; he simply wants to give it up.
“That’s not the way. You ought not to give up what you believe in. You ought to fight and reinvent yourself, and that is through tax competition and transparency,”he added.
“We can either wait for it to happen in five to 10 years, or lead and let everyone follow us. There must be new visionary leadership on it, and so far I’m not sure I’ve seen it out there.”
Mr Ingraham said the passage of the 2000 legislative package to get the Bahamas off the Financial Action Task Force’s (FATF) ‘blacklist’ had only delayed the inevitable, and merely bought the nation some time, before its financial services industry contracted sharply.
Mr Moss acknowledged that recent history showed developed nations would maintain constant regulatory pressure on the Bahamas and the financial services industry.
Yet, continuing to argue that it could be countered, he said: “We have to say the Bahamas is a tax jurisdiction, and that if you come here you will be taxed.
“That is the end game. We have to do that. They want to know that if there are international residents in the Bahamas and they are paying tax, it will be recorded.”
Mr Moss continued: “That is the more optimistic attitude and approach. He’s [Mr Ingraham] an old warrior in the trenches, and that’s hurt him.
“We’ve never really had people in government who understand financial services. We have to change the model, and it can’t be that if you come to the Bahamas, you pay no taxes. It makes no sense.”
Comments
banker 7 years, 8 months ago
Moss is demented. It is over. I am in the financial services industry, and it is over for the Bahamas. The only way to save yourself, is to train up and parlay your bank experience into something that bigger banks will pay good money for. For me, I saw the signs that regulatory practices were going to be a huge part of the future, and that is where I did my MBA. That is where I got my iron rice bowl that never empties. But others were not so lucky. Portfolio managers are in danger as the book of business decreases. Private wealth management is all but dead except for dodgy jurisdictions and folks from Latin America, where tax evasion is a necessity and the national sport.
What Moss doesn't understand, is that we do not have the infrastructure to do modern financial services. We do not have access to the modern tools that High Net Worth Individuals demand. We do not have the tax expertise to manage family offices that transcend multiple jurisdictions. We do not have the professional lawyers who know international financial law inside out. We do not have lawyers that newcomers can trust. Every new client is seen as a piece of fresh meat to exploit to the max, and savvy High Net Worth Individuals can spot the degraded charlatan Bahamian lawyers a mile away. Our fee structures go back to Biblical times, and our own laws are deficient (ask Izmirlian about our bankruptcy laws).
Quite simply, the days of hiding money offshore are over, and our financial services have been too late recognising this, and now we are so far behind the eight ball, that we cannot catch up. It is too late. The fruit has died on the vine, and it ain't ever coming back.
observer2 7 years, 8 months ago
Banker, you are correct.
I will add that the biggest eminent threat to the financial system is the "semi-licensed" web shop industry which is running a parallel banking system.
At the webshops you can "deposit" and "withdraw" funds, open accounts etc. and through loosely affiliated entities they are providing loans and participating in the real estate industry.
Through BoB they have access to the wider local banking system and the international correspondent banking system. Canadian banks are attempting to quarantine themselves from the gambling industry but this is not possible as banks are the viens and arteries of the financial system.
Ingraham is absolutely correct, it is only a matter of time before more correspondent banks pull out of the jurisdiction because of thier inability to detect money laundering on downstream clients.
Meanwhile the Central Banks lacks the independence to shut down BoB which has been operating in breach of capital requirements for years. The longer this is allowed to continue the harder the fall when it occurs. Just remember the 2008 global financial crises when Lehman Brothers went bankrupt and the entire financial system would have collapsed if it was not bailed out by the US governments.
Through Resolve, a labrinth of government deposits, letters of support and new government employees being forced to bank at BoB the fix is in.
banker 7 years, 8 months ago
Totally concur.
By the way, Resolve is operating by picking the low hanging fruit. Now that it has dried up, it will need a capital infusion from the government to keep operating. And that is code for saying that the charade will be maintained and taxpayer money will end up footing the bill and bailing out Resolve and ultimately the PLP grifters who raped the bank aided by political patronage and the bank itself. Once again, the lowly Bahamian taxpayer bends over and pays to enrich the kleptocrats.
Totally agree that the webshops will be the failed linchpin that destroys our financial system. Een long now.
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