By NEIL HARTNELL
Tribune Business Editor
The Bahamas missed “a golden opportunity” to get ahead of its competitors when it elected to implement Value-Added Tax (VAT) instead of a ‘low rate’ corporate /income tax regime, a financial services provider said yesterday.
Paul Moss, Dominion Management Services’ president, told Tribune Business that the Bahamas now faced having such reforms imposed on it by outside pressure, rather than adopting them of its own free will and becoming a market leader.
Warning that this nation will continue to face unrelenting pressure from the likes of the European Union (EU) and OECD, Mr Moss said the Bahamas would have to adapt to a “tax transparent” environment whether it liked it or not.
“We have to be seen to be doing certain things,” he told Tribune Business. “It’s no good for us to be resolute and be forced into doing concessions that outside countries would like us to do.
“We should have implemented a corporate and income tax regime for ourselves, not the EU, and not be forced to do so. One thing is certain. There’s going to be a lot more pressure coming on the Bahamas to change the way we do business.”
Mr Moss added that the Bahamian financial services industry’s needs, and the potential threats to it, were not well understood by the nation’s political leaders.
“The danger I see is that because we have leaders that do not understand the industry, they will succumb to pressure,” Mr Moss told Tribune Business.
“The pressure is not going to let up, and if we have leaders who refuse to be proactive, we’re clearly going to be playing catch up and we will have people shaking our cage on how we’re going to respond. They know we’re going to have knee jerk reactions.”
Mr Moss was speaking after the EU gave the Bahamas two ‘red flag warning’ scores while rating 81 different jurisdictions for their co-operation on tax matters.
The Bahamas and nine other countries - mainly its fellow international financial centre (IFC) rivals - were ‘red flagged’ 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.
The EU’s renewed sabre-rattling 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.
“This is a tax competitive world, but we can’t compete when we say we’re not going to change our tax system,” Mr Moss told Tribune Business. “It’s not going to work.”
He has in the past argued that the Bahamas should switch from its ‘no tax’ platform to one that is based on a ‘low rate’ corporate/income tax, on the basis that such a move would give this nation extra legitimacy, and help to attract companies to domicile and do business here.
“We need to do it,” Mr Moss reiterated. “It’s really a shame that we would do so because of the pressure coming from these people, as opposed to doing it for our own selves.
“We had an opportunity when we brought in VAT to have a true look at our tax regime, which should have included corporate tax for companies.”
Mr Moss said the EU and OECD were delivering a message that “there’s no place to run”, and added: “The world is not going to stop until it has tax transparency, and the Bahamas has to recognise that it has to get into a competitive tax regime and be part of it.”