Bahamas Urged: ‘Avoid’ Eu Blacklisting Threat


Tribune Business Editor


The Bahamas was yesterday urged to take all necessary measures to “avoid” being placed on a European Union (EU) financial services ‘blacklist’, after this nation received two ‘red flag warning’ scores.

The EU, in rating 81 different jurisdictions for their co-operation on tax matters, last week ‘red flagged’ the Bahamas and nine other countries - mainly its fellow international financial centre (IFC) rivals - for having either no, or a zero rate, corporate income tax.

The Brussels-based EU Commission also placed a ‘red flag’ against the Bahamas when it came to transparency and the exchange of tax information, although on the third and final criteria - the existence of a ring-fenced preferential tax regime - this nation received a clean bill of health.

The EU, though, made clear that the ‘scorecard’ is merely the first stage in efforts by itself and its member states to create a ‘shortlist’ of nations who will be considered for inclusion on a “list of tax and secrecy havens” set to be published at end-2017.

Countries that make the final ‘blacklist’ will be subjected to EU financial sanctions and penalties, such as ‘withholding taxes’ and the removal of tax deductions.

Given the great reputational and practical damage that such a ‘blacklisting’ could inflict, senior members of the Bahamian financial services industry said this nation would need to “engage” the EU and satisfy its concerns prior to 2017.

Michael Paton, a former Bahamas Financial Services Board (BFSB) chairman, told Tribune Business that this nation’s priority was to avoid any EU ‘blacklisting’ come next year.

He suggested that its primary concern was the exchange of tax information, meaning that the EU initiative was inextricably bound up - and linked - to the OECD’s global Common Reporting Standard (CRS) drive.

The Bahamas has committed to implementing the CRS’s automatic tax information standard on a bilateral basis come 2018, and Mr Paton indicated that fulfilling this obligation and associated timelines may also help to satisfy the EU.

“We are now on a scorecard, which means that the EU wants to negotiate with the Bahamas on tax transparency and the exchange of information,” Mr Paton said.

“We have to see how that plays out, and what the Bahamas has to do to avoid being on the EU ‘blacklist’ in 2017.

“I expect that in the next 12 months, we will need to sit down with the EU and figure out how to move forward, not be on their ‘blacklist’ and meet their requirements. As a jurisdiction, I don’t think we want to be on an EU ‘blacklist’ at the end of 2017.”

Acknowledging that the EU’s latest bout of sabre-rattling is “a concern”, Mr Paton added that the Bahamas could ill-afford to expose itself to unknown financial sanctions and penalties.

“We have to take it seriously and deal with it appropriately,” he told Tribune Business of the EU’s so-called ‘scorecard’. “In the interim period, we have to move forward on the CRS and engage in conversations with the EU.”

Mr Paton added that he already saw the necessary commitment from the Government to avoid such an outcome, and emphasised that the Bahamas “will end up in a good position” as long as it delivers on its promises to implement CRS and other international standards.

The EU’s initiative, though, threatens to further increase the pressure on the Bahamas and its financial services sector given that it coincides with the Organisation for Economic Co-Operation and Development’s (OECD) latest offensive against this nation.

The OECD, which represents the G-7 and G-20 groups of the world’s most powerful nations, appears to have endorsed - and may even have encouraged/instigated - the publication of an article in The Economist magazine on September 201 that accused this nation of being a ‘haven’ for “tax dodgers”.

The article appears to have been the first salvo in a campaign to try and force, or bounce, the Bahamas into abandoning its preferred ‘bilateral’ approach to CRS implementation - something that was approved by the OECD itself - in favour of a ‘multilateral’ approach.

And Tribune Business can reveal that further media pressure is imminent, with more negative articles about the Bahamas and its financial services industry set for international publication in the coming days.

This newspaper was alerted by multiple industry contacts to the recent presence in Nassau of a Dutch journalist, said to have played a role in the recent ‘Panama Papers’ revelations.

Sources said the journalist had attempted to obtain an interview with the Bahamas Financial Services Board (BFSB), but had been turned down, while questions submitted to the Ministry of Financial Services had yet to be answered.

While no one knows the journalist’s precise assignment, the assumption is that he was in Nassau to “paint an unflattering narrative of the Bahamas” similar to The Economist article - with publication of his piece possibly occurring as early as this week.

Tanya McCartney, the BFSB’s chief executive, acknowledged to Tribune Business that the BFSB was “aware” of the journalist’s presence, although she declined to go into further detail.

She added that the EU initiative, and its implications for the Bahamas, were being reviewed by the BFSB and wider private sector in order to present potential policy recommendations to the Government and determine how this nation should respond.

“Change is constant, and we have to reinvent and adapt where necessary,” Ms McCartney told Tribune Business.

“Concern is not a response we ought to have. What we ought to do is reposition the sector to maintain our position as a transparent, compliant and co-operative financial centre.

“The Bahamas is a responsible IFC, and we’re going to do whatever is required to ensure we achieve international standards.”

Tribune Business sources have suggested to this nation that the best defence may be to ‘take the offensive’, and not wait until 2018 to start automatic tax information exchange talks.

They have suggested that this nation ‘get ahead of the curve’ by starting CRS-related talks now, especially with the EU member states, who would have to be given ‘participating jurisdiction status’ under the CRS.

This would both show that the Bahamas is serious and ‘kill two birds with one stone’, given that it would help to address both OECD and EU concerns.

Tribune Business was told that an EU ‘blacklisting’ was the last thing the Bahamas needed, given that it would exacerbate the ‘de-risking’ environment and potentially lead to this nation losing more correspondent banking relationships.


observer2 2 years, 1 month ago

Black listing here we come...no income tax, no estate tax, no automatic exchange of information treaty, state of the art corporate, foundation and trust laws all design to obfuscate beneficial ownership, corporate directors, corporate shareholders, no register of beneficial owners, 400 to 600 web shops with no KYC, slow judicial system, foreign lawyers can't practice in the Bahamas, corrupt government, Chinese all over the place, custom duties....put on your seat-belts.


Economist 2 years, 1 month ago

For years some have been telling the government to implement a low corporate tax with a high threshold (so that it will not be required of small businesses with net profits of one to five million). The multinationals (banks, industrials in Freeport, hotels etc.) would, if they made over that sum have to pay tax to The Bahamas.

By entering into a Double Taxation Treaty with the other countries, the payment, by these multinationals, would not cost them anything as it would be deducted from the amount that they would have to pay to their home government.

The benefit would be to get The Bahamas off this kind of 'blacklist', or 'redflag', AND they would be paying tax in The Bahamas, where they made the profit.

A "win win" situation.


banker 2 years, 1 month ago

That reasonable move would require Bahamian lawyers to learn the tax codes of other countries, and they would resist that. Also it would open up the Bahamian legal system to foreign tax lawyers, and again they would resist that. So the win-win situation will never happen. Our financial services, like our country, will die on the vine.


Economist 2 years, 1 month ago

Believe it or not, this came from a Bahamian Lawyer!


banker 2 years, 1 month ago

Amazing. The double taxation treaty is why Barbados gets all Canada's business.

Then again, it could actually mean more international business for Bahamian lawyers.


killemwitdakno 2 years, 1 month ago

All it took was claiming to tax 1% . Would have staved these and finally given us , the people, something for the trouble.


The_Oracle 2 years, 1 month ago

This is the result of having the Lawyers and politicians enmeshed for more than 40 years, They've finally outsmarted themselves! Always finagling, scheming and finding ways around rules, domestic or international, with a hand on the political power for protection/manipulation, never thinking about long term consequences. The Economist is right, and by Signing the EU-EPA the Bahamas will be opened up in short order. If not, more sanctions by WTO etc. The Banker is right, in that the "establishment" (old and newer) will resist and refuse to believe change can be forced. Maybe it is what is required to flush out the last of the Nassau Rats. Maybe we will just fail. I see no moves being made to avert failure, I just see more pillaging, more retreating.


BahamaPundit 2 years, 1 month ago

Also, double tax treaties are a good area of specialization for a law practice. It would actually open the door for Bahamian lawyers to make more money, so I don't believe it would be resisted. Adding legislative complexity to a government system can only mean more demand for legal expertise.


The_Oracle 2 years, 1 month ago

I agree on the potential for the legal fraternity, however our presence at these conferences and treaty negotiations have been haphazard at best, including the firing of the Bahamas negotiating contingent, replaced by Two People! (Raymond Winder and Zhivargo Laing) Apparently too much information was being "leaked" into the public domain. How strange. Perhaps this is where Christie learned his "Chinese negotiation strategy!)
All this aside the 5 year "switch sides" debacle that leaves the country in the lurch every time. Lack of continuity is our strong suit.


killemwitdakno 2 years, 1 month ago

Was blacklisted before for moving forward with their orders, what's the difference?


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