By NEIL HARTNELL
Tribune Business Editor
THE Bahamas is at "a disadvantage" in dealing with international regulatory initiatives that appear designed to restrict its competitiveness, the Deputy Prime Minister said yesterday.
K P Turnquest told Tribune Business that the European Union (EU), in unveiling its 17-nation 'blacklist' on Tuesday, had admitted that economic considerations - namely the alleged erosion of its 28 members' tax bases - was driving its latest offensive.
While previous international initiatives had focused on anti-money laundering and counter terror financing concerns, Mr Turnquest said the latest EU and Organisation for Economic Co-Operation and Development (OECD) efforts were "more difficult" for the Bahamas to deal with as they were motivated primarily by economic and tax competition concerns.
"It's no longer about anti-money laundering and counter terror financing," he told the House of Assembly. "It's moving on to becoming economic considerations, the erosion of OECD members' tax bases, that's a bit more difficult for us."
Many executives within the Bahamian financial services industry have long viewed the OECD and EU initiatives as designed to drive this nation out of the sector by imposing ever-increasing bureaucracy and regulation upon it, while also pushing it towards introduction of a corporate income tax.
Asked whether the EU 'blacklist' was more about inhibiting the Bahamas' financial services competitiveness, Mr Turnquest told Tribune Business: "I want to be careful what I say in that regard because everyone is trying to interpret what I say and get signals from that.
"But it's fairly obvious, if you read through their justification for this naming and shaming, and justification for this listing, that it is obviously more and more about tax issues than any anti-money laundering issues.
"As they say in their own statement, it's about trying to avoid erosion of their own tax bases. From that perspective, it is an economic consideration that they seem to be taking; taking more interest in, and from that perspective we are obviously at a disadvantage."
Mr Turnquest said the Bahamas had no choice but to meet the EU's demands given that inclusion on the 'blacklist' could have undermined this nation's entire economic model, not just financial services.
He told the House of Assembly that a 'blacklisting' would likely have resulted in a further loss of correspondent banking relationships, which would have made it more difficult to conduct overseas transactions and restricted the flow of trade to the Bahamas.
Emphasising that the issue affected all Bahamians and residents, not just the financial services industry, Mr Turnquest said: "The OECD and its member states are deadly serious about the actions they intend to take when they talk about defensive measures....
"Obviously as a jurisdiction that derives a significant portion of its GDP from financial services, for an industry that employs a significant amount of our middle class and provides high salaries and profitable careers for our people, we have to do everything we possibly can to ensure we protect our reputation, and that we signal and act in a proactive manner to ensure we remain clear of any kind of blacklist, grey list or non-cooperative listing.
"The EU and its member states are telling us that failure to comply with what they consider to be best practices and transparency comes with consequences," Mr Turnquest added. "As an open economy, the consequences can be significant for us outside financial services.
"For instance, a large part of our economy is dependent on foreign direct investment. It's dependent on our ability to earn foreign currency to facilitate trade, to import and pay for the goods we consume, and commodities we use in every-day living, oil, gas. Everything, or most of what we consume locally, we need foreign currency to be able to trade.
"Part of the defensive measures they talk about is the issues with correspondent banking relationships and the de-risking threat that exists in this region. Unfortunately, the Bahamian dollar is not a tradable currency, so to effect transactions internationally, payments to vendors, we have to be able to do business through correspondent banking relationships.
"We want to be able to earn foreign currency, be able to import food, furniture and oil, the items we use on a daily basis freely and consistently, without obstruction and resorting to a black market and other nefarious acts to pay for these goods. This is about all of us, and we need to protect our financial industry and correspondent relationships."
"We can see our need to comply, and need to be proactive and transparent as as possible, and as our law permits, is vitally important not only to financial services but each citizen and resident in the Bahamas," the Deputy Prime Minister added.
"The reality is that while we value our sovereignty and ability to deploy the tax regime we employ, we have to be mindful of the changing environment and, as an open economy dependent on cross-border trade, we have to be mindful of the actions of the countries we trade with... and negotiate from a position of strength the most favourable terns we can."