The Tribune

A former finance minister says the recent OECD-inspired media onslaught against the Bahamas is akin to an “unofficial blacklisting” of its financial services industry, describing the situation as “a new form of international colonialism”.

James Smith, also an ex-Central Bank governor, told Tribune Business that the well-co-ordinated, intense nature of the offensive against the Bahamas suggested more was at stake than just this nation’s chosen approach to implementing the global standard for automatic tax information exchange.

He branded the sudden opposition to the Bahamas planned bilateral implementation of the Common Reporting Standard (CRS) as “ridiculous”, given that the OECD had itself allowed countries to select either this or the multilateral approach.

“On the surface, it seems to be a well-designed and targeted attempt to unofficially blacklist the Bahamas as if it’s collaborating with wealthy people to help them escape taxes,” Mr Smith told Tribune Business.

“I don’t know what is driving it. I see earlier reports guessing that the focus is that the Bahamas opted to go the bilateral approach, as opposed to the multilateral route, for CRS, which is ridiculous, given that we were given that option. It seems more than that.”

Mr Smith’s comments came prior to public interviews given by Pascal Saint-Amans, the OECD’s tax policy head, in which he threatened that the G-20 would place the Bahamas on a ‘blacklist’ in 2017 if it did not bow to the multilateral CRS approach.

The Spanish newspaper, El Mundo, quoted Mr Saint-Amans as saying: “If the Bahamas continues, go to the blacklist of the G-20.”

The ‘blacklist’, according to the Spanish newspaper, will feature those who do not meet the so-called ‘international standard for fiscal transparency’, which has likely been developed by the Organisation for Economic Co-Operation and Development (OECD) itself.

“For now it is the case of the Bahamas, which is one of the countries that refuse to sign the multilateral agreement on automatic exchange of information,” Mr Saint-Amans was quoted as saying, pointing to the more than 100 countries who have agreed to implement the latter approach to the CRS.

Mr Saint-Amans also poured scorn on the likelihood of the Bahamas meeting its commitment to implement the CRS standards for automatic exchange of tax information by 2018.

“It is now looking like the Bahamas will not meet its commitment, and will not be able to implement it,” Mr Saint-Amans was quoted as saying by the website, taxnotes.com.

His comments echo the broadside launched against the Bahamas by The Economist magazine, which accused the Bahamas of being an unco-operative nation that was singlehandedly undermining the global war against so-called ‘tax dodgers’.

That was quickly followed by last week’s ‘leak’ of some 1.3 million documents from the Registrar General’s Companies Registry, providing annual returns, plus director/officer and shareholder details, on some 175,000 Bahamas-domiciled entities.

The group behind the so-called ‘leak’ of information that is theoretically accessible to the public, the International Consortium of Investigative Journalists (ICIJ), also took a similar line to The Economist in attacking the Bahamas’ chosen approach to CRS implementation.

It thus appears that the OECD, having initially using surrogates both inside and outside the media to pressure the Bahamas, and say what it could not say publicly, has now broken cover in a bid to force, or ‘bounce’, the Bahamas into the multilateral approach.

Mr Smith, meanwhile, suggested that the Bahamas was being targeted because it was a relatively large international financial centre (IFC) seemingly more vulnerable to a concerted international attack than many of its competitors.

While the likes of the Bermuda and the Cayman Islands (via the UK), and Hong Kong (through China), enjoy significant ‘protection’, the Bahamas has no such ‘cover’ as an independent sovereign state.

Mr Smith added that Panama, a larger IFC than the Bahamas but also an independent state, was the first to be targeted via the so-called ‘Panama Papers’ leak. With the Central American country now forced into line, the OECD and its acolytes have now turned their attention to the Bahamas.

“You start with Panama, which is larger than the Bahamas, and they will probably be going after someone else after the Bahamas,” he said.

Mr Smith also hit out at what he described as “a very disturbing trend” in relation to the Companies Registry ‘leak’.

He effectively accused the Europeans of hypocrisy, suggesting that organisations such as the ICIJ were applauded for “obtaining” confidential information and sharing it with the world, yet they were quick to scream “violation” when it happened to them.

“This different standard, it’s a new form of international colonialism,” Mr Smith told Tribune Business. “They [the OECD] make the rules from the centre, and you follow them.

“It goes back to the early 2000s, when the OECD guys were sitting around the table with not political or international standing, making rules that adversely affected the economies of small countries who were not represented around the table. That’s the colonial mindset.”

Many in the Bahamian financial services sector and government circles would privately agree that the latest OECD onslaught smacks of neo-imperialism, especially given that it appears to be changing ‘the rules of the game’ specifically for the Bahamas.

However, they would likely equally agree that the Bahamas cannot afford to take on and resist the G-20, whose members are the world’s most powerful developed countries, given the damage that could be inflicted on the financial services sector and wider economy.

Therefore, some kind of negotiation and compromise with the OECD over its latest demands appears inevitable, given that the Bahamas has to escape the consequences of ‘blacklisting’ at all costs.

Mr Smith, though, argued that the OECD-G-20 attacks appeared to be based on a fundamental misconception - namely that the fiscal woes of their own member states will be cured by driving ‘offshore’ assets back home.

“There’s this misconception that the Bahamas and other IFCs are holding trillions of dollars,” he told Tribune Business.

“It goes back to 2000, when this initiative came out under ‘harmful tax competition’. It went beyond tax harmonisation in Europe to the heart of putting IFCs out of business under the mistaken belief that in the process they would eliminate many of the deficits they are running.

“First, I am not sure there are enough assets out there to do that, and secondly, are these deficits produced by their own domestic policies? IFCs become quite the scapegoat.”

Mr Smith suggested that by “trying very hard to meet international standards, and in some cases exceeding them”, the Bahamas may have mitigated the fall-out from the Companies Registry ‘leak’.

He suggested that as a result of the Bahamas’ efforts over the past decade, the financial services industry was likely to be attracting largely tax-compliant business.