Bahamas 'Done Everything Possible' To Avoid Blacklist


Tribune Business Editor


THE Deputy Prime Minister believes the Bahamas has "done everything we could possibly do" to escape the European Union (EU) 'tax haven' blacklist that will be issued tomorrow.

K P Turnquest told Tribune Business that the Minnis administration "has no reason to think" this nation will be deemed a 'non-cooperative jurisdiction', given its efforts to comply with multiple international regulatory initiatives. "We have done everything that has been asked of us, and we believe we have done everything we could possibly do at this point," he said, referring to the Organisation for Economic Co-Operation and Development's (OECD) latest tax transparency drive.

The OECD's Common Reporting Standard (CRS) forms one of the foundations for the EU 'blacklist', and Mr Turnquest said the "compendium" of Bills set to be debated by Parliament this week will enable the Bahamas to adopt the multilateral approach for automatic tax information exchange.

"That will give us the legislative authority to do what we need to do in terms of automatic information exchange," he added. "That's the last thing we need to do."

Mr Turnquest said that once those Bills are passed into law, himself and Brent Symonette, minister with responsibility for financial services, will have the legal authority to travel to San Marino on December 11-12 to sign the Mutual Convention on Administrative Assistance in Tax Matters - thereby committing the Bahamas to the multilateral automatic information exchange approach. "We have signalled our co-operation with the OECD, and have been very proactive in demonstrating that," Mr Turnquest told Tribune Business.

"We have no reason to believe there's any reason for putting us on a non-cooperative listing. I'm fairly confident we will not be. All things being as equal as they can be, I don't expect to be on that list..... I think we're good."

International media reports last week suggested that the EU had cut its potential 'blacklist' from 92 countries to just 20, with states such as Panama, Tunisia, Serbia, Armenia, the Cook Islands and the Marshall Islands said to have been included in a November 21, 2017 draft.

There was no mention of the Bahamas, or its likely fate, but the recent 'Paradise Papers' revelations - which followed the 'Panama Papers' variety of a year earlier - have created fresh impetus for the EU and its 28 members (still including the UK) to advance their crackdown on so-called 'tax havens'.

While the 'Paradise Papers' largely disclosed legal tax avoidance/mitigation strategies by multinational companies and high net worth individuals, their publication only increased public pressure for governments to combat practices viewed as deepening poverty and inequality, and depriving governments of much-needed tax revenues.

Ryan Pinder, the former financial services minister, while slamming the EU's blacklist tactics as "archaic", warned that inclusion could result in Bahamian financial institutions and their clients suffering loss of European market access and having transactions impeded.

"I think that blacklists are a thing of the past, and should be regarded as a thing of the past," he told Tribune Business. "It's a 'name and shame' game, and unfortunately the EU wants to continue to use it as a platform to 'name and shame' countries.

Despite his opposition to the EU's methods, Mr Pinder acknowledged that the fall-out from inclusion on its 'blacklist' would go beyond mere reputational impact by having an adverse effect on the Bahamian financial services industry and wider economy.

"There's a real, substantial impact to blacklistings," he warned, "as they give a negative name to a country." Mr Pinder said his chief concern was for the "custodial and correspondent banking relationships" that Bahamian institutions enjoyed with their counterparts in the EU and elsewhere, as the latter may "rush to judgment" on this nation if it is listed.

"If we start to have challenges with custodial and correspondent banks in Europe, there will be a significant impact - not only on financial services, but all sectors of the country," Mr Pinder said.

He added that it was "hard to say" whether the Bahamas would escape the EU listing, given that "the determinants are going to be more subjective than objective".

The EU has yet to reveal what sanctions/counter-measures it plans to deploy against 'blacklisted' nations, and concerns are already being expressed that the UK will 'protect' Crown dependencies such as Bermuda, the Cayman Islands, British Virgin Islands (BVI) and Turks & Caicos - who just happen to the Bahamas' main international financial centre (IFC) rivals in the region.

UK media reports have also suggested that territories devastated by Hurricanes Irma and Maria, which include BVI and Turks & Caicos, will be given more time by the EU to fall in line. The Bahamas, as an independent sovereign nation that largely avoided the two 'super storms', will enjoy neither of these benefits.

Mr Turnquest, besides expressing confidence that the Bahamas will not be named on the EU list, said the Government had also proposed ways for the Bahamas to comply with the OECD's Base Erosion and Profit Sharing (BEPS) initiative without this nation implementing a corporate income tax.

Compliance with BEPS is one of the three key criteria being employed by the EU to determine whether a nation merits inclusion on its 'blacklist', and Mr Turnquest said the Government had already confirmed to the OECD that the Bahamas will meet the 'minimum standard' it is demanding.

"We are looking at, and suggesting, some ways we may be able to provide the information they are requesting even in the absence of having a corporate income tax," the Deputy Prime Minister told Tribune Business.

"We are being very proactive, and are having an open dialogue with them [OECD]. We are already compliant and have committed to the minimum BEPS standard, complying with four of the 15 actions."

Tribune Business previously reported that BEPS compliance had created both uncertainty and concern within the Bahamian financial services, given that it seemed to require that this nation implement a corporate income tax.

The four standards that the Bahamas will likely select are: (Action 5): Countering Harmful Tax Practices; (Action 6): Treaty Shopping; (Action 13) Transfer Pricing Documentation and Country-by-Country Reporting; and (Action 14) Dispute Resolution.

Financial services industry sources told Tribune Business that compliance with Action 5 was especially problematic for the Bahamas, given that BEPS is designed to counter tax avoidance by large multinational companies.

The OECD considers a corporate tax rate of 10 per cent or less to be a 'harmful tax practice', but the Bahamas - with no income taxes of any kind - has an effective corporate tax rate of 'zero' because it simply does not have this system.

The Government's confidence comes despite Oxfam, the non-governmental organisation (NGO) dedicated to poverty eradication, producing a report last week that said the Bahamas would be included on the EU's 'blacklist' if the latter applies its criteria "objectively".

It argued that the Bahamas had failed two meet two of the EU's three 'blacklisting' criteria, namely 'fair taxation' and compliance with anti-BEPS measures, while conceding that it did meet 'tax transparency' requirements through the CRS.

While the Bahamas' move to meet BEPS' minimum standards might meet one of the EU's criteria, this still leaves open 'fair taxation'. The latter was defined by Oxfam as having "no harmful preferential tax measures" and not offering structures/arrangements "aimed at attracting profits which do no reflect real economic activity in the jurisdiction".

Many observers will argue that 'fair taxation' is a concept in the eye of the beholder, and that this undermines the sovereignty of jurisdictions such as the Bahamas to introduce a taxation system that works for them.

The Oxfam report said a 0 per cent corporate tax rate was only an "indicator", and only those countries offering 'offshore structures' as well should be looked at for inclusion by the EU. It identified the Bahamas as one of 14 nations with no corporate or income tax, and based its analysis on whether "profits in a jurisdiction are out of balance with real economic activity".

Using this determinant, Oxfam argued that the Bahamas failed the EU's 'fair taxation' criteria. It pointed out that the Bahamas' balance of services trade with the EU was equal to 219.9 per cent of this country's GDP, based on European data.


DDK 2 years, 4 months ago

They will never ease up on their demands. Enough is never enough. They keep moving the goal posts.


Socrates 2 years, 4 months ago

what a show they made of us.. first they said choose option A or option B and either way we will consider you to be in compliance.. then later, no.. its only if you choose option A we will consider you in compliance.. since our first choice was option B, we were left scrambling to comply with option A.. we were played by OECD.. now they have let us know indirectly we should have at least 10% income tax.. watch out bahamas, its coming..


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