By NEIL HARTNELL
Tribune Business Editor
THE Bahamas "must rid itself of the 'tax haven' label", a senior financial executive said yesterday, after it escaped any further correspondent banking losses at the European Union's (EU) hands.
Tanya McCartney, the Bahamas Financial Services Board's (BFSB) chief executive, told Tribune Business that this nation needed to take "policy actions" that would enhance its "brand" after avoiding inclusion on the EU's 17-strong 'blacklist'.
Conceding that inclusion would have increased the Bahamas' "risk profile" among the international financial and business community, she added that this nation needed to "get beyond the threat of blacklists" to instead focus on growth and reforming its business model.
Ms McCartney said that while reform should not be driven by outside pressures, she hoped that the EU 'blacklist' and related OECD initiatives would "help move the dialogue along" on whether the Bahamas' current taxation model was suitable for the financial services industry's future needs.
Declining to say whether the EU/OECD offensives were pushing the Bahamas towards introducing a corporate income tax, she said this was a discussion the Bahamas needed to have in its own interests and on its own terms.
"We never want to be on any adverse listing," Ms McCartney told Tribune Business, after Hurricane Irma's devastation spared the Bahamas' the EU's wrath (See other article HERE).
"Industry worked closely with the Government to ensure steps were taken to avoid being on any list, and the Government had given an indication to us that they had managed it adequately and thought we would avoid any listing. I guess that's evidenced today."
The BFSB chief executive indicated that the EU's action was unlikely to be the last such initiative faced by the Bahamas, and warned: "The risk of these adverse listings always looms in this environment.
"We have to be in a state of continual improvement, and ensure we're always aligned with international standards. The work doesn't stop. We know what the focus is. The focus is on tax transparency and co-operation, and the need for us to rid ourselves of the perception and label of being an 'offshore tax haven'.
"We need to ensure policy actions are taken to get us out of this category. From my perspective and the industry's perspective, we are committed to ensuring policy positions are taken to reposition and remove this 'tax haven' perception that continues to bedevil us as an international financial centre (IFC)."
Apart from reputational damage, Ms McCartney said inclusion on the EU's 'blacklist' could have resulted in a further loss of correspondent banking relationships for the Bahamas due to a higher "risk profile".
Financial institutions in this nation have experienced the severance of relationships with foreign counterparts, due to global 'de-risking' trends, and a 'blacklisting' could have both exacerbated and accelerated this problem.
"An increased risk profile would impact 'de-risking' and just not be good for our brand," Ms McCartney told Tribune Business. "It's not good for your brand to be on any of these lists, and the main impact would have been reputational risk and an increased risk profile that could impact correspondent banking relationships."
She added that the financial services industry would continue to work with the Government to "ensure our reputation remains intact" and also begin dialogue on potential tax reform.
"Where you don't have corporate income tax is something that is looked upon unfavourably," Ms McCartney said of the EU/OECD. "I'm not going to say the criteria is pushing us to look at that, but we as an industry have been asking for discussions on this, and a review of the tax structure, outside of the EU listing and OECD processes."
The BFSB previously commissioned a study by Deloitte & Touche's UK arm that benchmarked the Bahamas' tax structure against rival IFCs "to see where we stand", and lay out possible policy options for reform.
"We looked at this in particular as a way to enter into double taxation agreements, to enter into investment treaties, and hopefully this [the EU listing] will help move that dialogue along," Mr McCartney told Tribune Business.
"We've talked to successive administrations on it, and continue to do so to ensure policy positions are taken so we can compete. We need to get beyond the threat of blacklisting."
Ms McCartney added that the entire economy and society needed to be involved in any tax review, emphasising that discussions could not involve the financial services industry alone.
"We're not asking for new taxes to be implemented," she added. "We're saying we have to improve efficiency in the existing tax structure, and what can we do in amending the framework. Is there an opportunity to reform Business License fees?
"We're asking for a serious dialogue with a view to determining policy positions on the way forward. We need broad stakeholder dialogue on this question of tax reform and review of the tax system. We believe we're in an environment where that has to happen."