THE Prime Minister yesterday said the Bahamas has “no time to rest on our laurels”, given the European Union’s (EU) concerns over the absence of corporate income taxation.
Dr Hubert Minnis told the House of Assembly that the EU’s Code of Conduct group had written to the Government expressing concerns that this nation’s tax system did not comply with its ‘blacklisting’ criteria.
“The issue that has given the [Government’s] review group pause, and will now require focused consideration, is the OECD’s [really the EU] directive that jurisdictions should not facilitate offshore structures and arrangements aimed at attracting profits which do not reflect real economic activity in the jurisdiction,” said Dr Minnis.
“The Code of Conduct group has advised that the absence of a corporate income tax or a nominal corporate tax structure in the Bahamas is a matter of concern. Further, the lack of substance of some legal arrangements was highlighted.
“These matters have been the source of discussion, and are being reviewed to ensure that a plan of action is formulated to allow the Bahamas to remain off the OECD [and EU] blacklist that was recently published. We have solicited the assistance of financial sector professionals to assist in the effort of addressing all the issues noted.”
The Prime Minister said “there is no time to rest on our laurels”, confirming that the Bahamas has adopted the minimum four out of ‘15 actions’ to meet the Organisation for Economic Co-Operation and Development’s (OECD) Base Erosion and Profit Shifting (BEPS) initiative.
Dr Minnis added that the four actions selected 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.
He said the Bahamas had also received a formal invitation from the OECD to sign its Mutual Administrative Assistance in Tax Matters convention, with Deputy Prime Minister, K P Turnquest, and minister of financial services, Brent Symonette, now travelling to its Paris headquarters to sign on. This is a key move in ensuring the Bahamas is fully compliant with the OECD’s Common Reporting Standard (CRS) for automatic tax information exchange.
“The industry’s CRS guidance notes will shortly be presented to Cabinet for approval and will subsequently be released to the financial sector,” Dr Minnis said.
“There remains work to be done. There is no time to rest on our laurels. We must get back to work with the financial sector and civil society as we seek to chart a course which we hope will enable or financial sector not simply to survive but succeed.”
Dr Minnis also blasted the former Christie administration’s failure to reply to a March 2017 letter from the OECD inviting the Bahamas to sign on to join its BEPS ‘inclusive framework’.
“This letter of invitation remained unanswered based on the contents of the file,” he said, while criticising the Christie government for falling “woefully short” on its commitment to meet the OECD’s bilateral automatic tax information exchange standards.
Dr Minnis said just four of 43 such agreements had been completed prior to the general election, and added: “Despite the fact that the previous government signed the convention on a bilateral basis in 2014, they nonetheless failed to seek and to obtain the required number of bilateral tax exchange agreements with other countries, particularly members of the G-20 and European Union. “This was necessary to comply with the commitments given to the OECD in 2014. The files show that it was only in December 2016, more than two years after committing to do so, that letters were sent out addressed to 43 countries. By March 2017, only four bilateral agreements were reached. This was woefully short of the commitment given by the former government in 2014.”