By NEIL HARTNELL
Tribune Business Editor
The Bahamas is aiming to start automatic tax information exchange agreement negotiations a “full year” before it has committed to implementing the new global standard, a Cabinet Minister said yesterday.
Hope Strachan, minister of financial services, indicated that acting to meet its Common Reporting Standard (CRS) obligations ahead of schedule was the best way for the Bahamas to respond to “the very well-organised” attack now being mounted on its financial services industry.
Acknowledging that it was “crucial for us” to meet the timelines leading up to the Bahamas’ CRS implementation in 2018, Mrs Strachan expressed hope that the necessary enabling legislation, and accompanying regulations, would be brought to Parliament before year-end.
Once that was passed into law, the Minister said the Bahamas would seek to begin negotiations - on a bilateral basis - with countries wanting to automatically exchange tax information with it in early 2017.
“It is crucial for us to do it,” Mrs Strachan told Tribune Business of the need for the Bahamas to meet its CRS commitments. “The Task Force that is actually dealing with this, they are focused and have worked extremely hard to produce that legislation.”
The Task Force, which is effectively a private-public sector partnership (PPP), is led by the Attorney General’s Office and Ministry of Finance, the two government ministries that have primary responsibility for financial services regulation.
The draft legislation, and accompanying regulations, guidance notes, Tax Information Exchange Agreements (TIEAs) and relevant treaty instruments, are due to be released for industry consultation next month.
“When it comes to the legislation, we want to make sure we ‘dot the i’s’ and ‘cross the t’s’, and have regulations at the same time as the guidance notes,” Mrs Strachan told Tribune Business.
“We don’t want to leave anything to chance, and hopefully we will have that in place in time for the year-end. We’re saying to ourselves: End of the year, let’s have the legislation completed.”
Achieving that milestone would then allow the Bahamas to start negotiations with other countries desiring automatic tax information exchange agreements well before the 2018 deadline it has agreed for CRS implementation.
“That’s my hope, January,” Mrs Strachan said of the launch of negotiations, adding that the Bahamas was putting together “a team” for this purpose. “We will have a full year to do negotiations and work towards it.”
The Bahamas’ strategic response to the growing international pressure is thus to get ahead of the curve, with ‘offense the best form of defense’.
Such an approach has been privately advocated to Tribune Business by several financial services industry professionals, who have suggested that the Bahamas not wait until 2018 to start automatic tax information exchange talks.
They, too, have argued that the Bahamas ‘get ahead of the curve’ by starting CRS-related talks now with at least 40-50 countries, especially with the EU member states, who would have to be given ‘participating jurisdiction status’.
This would both show that the Bahamas is serious and ‘kill two birds with one stone’, given that it would help to address both Organisation for Economic Co-Operation and Development (OECD) and European Union (EU)concerns.
The Government, based on Mrs Strachan’s comments, appears to have taken this advice on board, as the Bahamas and its financial services sector comes under the most sustained, public international pressure experienced since the 2000 ‘blacklisting’.
Mrs Strachan acknowledged that the Bahamas 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.
“I call it attack because when you have forces from every sphere coming at you, and it’s done in a very organised and strategic way, and all seem to have the same agenda, it has to be an attack on us,” Mrs Strachan told Tribune Business.
She said that while the Bahamas’ bilateral approach to implementing the CRS was the ‘peg’ or ‘hook’ for this onslaught, those attacking this nation likely had broader, more sinister objectives.
“The OECD and the bilateral approach is the issue which they’re sort of hanging their hat on,” Mrs Strachan added. “I personally think the ultimate objective is to put us out of the financial services business.”
The anti-Bahamas media offensive to-date appears 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.
While the OECD would clearly prefer all nations, including the Bahamas, to adopt such a ‘multilateral’ approach to CRS implementation, Mrs Strachan said 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.
“To come back and vilify us for choosing this route seems very disingenuous,” Mrs Strachan said. “It’s beyond understanding why we are being attacked this way. It’s very well organised.”