By NEIL HARTNELL
Tribune Business Editor
The FNM’s deputy leader has branded the latest threats to the Bahamian financial services industry as “a very serious matter”, describing the situation as “the strong preying on the weak”.
K P Turnquest, speaking ahead of last night’s election results, told Tribune Business that an FNM government would seek to balance the Bahamas’ best interests with the Organisation for Economic Co-Operation and Development’s (OECD) demands over the Common Reporting Standard (CRS).
OECD officials, visiting the Bahamas prior to the general election, warned that this nation could again be ‘blacklisted’ amid international perceptions that this nation will not meet its automatic tax information exchange obligations by the September 2018 deadline.
The OECD and its members have ratcheted up the pressure for the Bahamas to switch its approach to implementing the CRS, the global standard for automatic tax information, from its chosen bilateral route to a multilateral method.
This would require the Bahamas to negotiate with all-comers at once, rather than individual countries on a nation-by-nation basis, but the intensifying international pressure means one of the key issues facing the incoming administration - and something that will require a quick decision - is whether to change the CRS approach.
Mr Turnquest told Tribune Business that the FNM had met with OECD representatives while in Opposition, and was aware of the organisation’s concerns.
He emphasised that a Hubert Minnis-led administration would “promote and protect” the Bahamian financial services industry, and “not destabilise the financial system in the Bahamas” in addressing international concerns.
“Obviously it’s a very serious matter that we take very seriously, and we’re going to have to develop a strategy and see how best we can accomplish a middle ground to the satisfaction of both parties,” Mr Turnquest said of the OECD and CRS pressures.
“We’ve had discussions with the Bahamas Financial Services Board over the years with regard to the need to innovate and create new products that are 100 per cent compliant with the regulatory bodies.
“We believe we have to unleash that creativity and find new niches for our providers. We’re very open and facilitative to the industry.”
Mr Turnquest said an FNM administration would be guided by the private sector in its policy response to the CRS pressures, which have been complicated by the refusal of European Union (EU) member nations to enter into automatic tax information exchange agreement negotiations with the Bahamas on a bilateral basis.
This, in turn, potentially exposes the Bahamas to being included on a so-called EU blacklist of countries considered ‘non-cooperative’ on tax matters, which is supposed to be published before year-end 2017.
The Bahamian financial services industry’s priority is to avoid inclusion on any ‘blacklist’, and Mr Turnquest pledged that an FNM administration “will be very aggressive in promoting the industry and protecting the gains made over the years”.
He added: “We believe there is value in offshore business, and we have to work with other jurisdictions to ensure it is protected and these threats that continue to come are addressed properly and comprehensively.”
Mr Turnquest then accused the OECD of ‘changing the rules of the game’ with respect to the CRS, having approved the ‘bilateral’ approach to implementation only to turn around and pressure the Bahamas into switching to the multilateral approach.
“The goal posts continue to be moved in terms of compliance issues,” he told Tribune Business. “That’s the problem we’ve had over the years. They have to be clear what the regulatory requirements of us are.
“They [the OECD] need to be more clear as to where they see this road ending, in terms of acceptable rules, so that we and other international financial jurisdictions can determine how we best fit into that model and adapt our local regulations to meet the standards they’ve set.
“No business can continue with a constantly evolving set of standards. There must be some period of consistency. They [the OECD] have to stop themselves. Otherwise the world will see it for what it is: Unfair competition, and the strong preying on the perceived weak.”
The OECD representatives who visited the Bahamas warned that this nation must “take quick action” to avoid being ‘blacklisted’.
Monica Bhatia, who leads OECD’s Global Forum secretariat, said the Bahamas was perceived as “the last tax haven standing” and an “outlier” because it was the sole financial centre of any significance to persist with the bilateral approach to CRS implementation.
Tribune Business sources present at the seminar with the OECD said the body had cleverly modified its arguments, and objections, regarding the Bahamas’ choice of the bilateral implementation route.
Given that it had previously approved the ‘bilateral’ route as an option, the OECD knows it is open to charges of ‘hypocrisy’ and ‘goal-post moving’ if it simply demands the Bahamas goes multilateral.
Instead, its officials argued that the Bahamas had left it too late to use the bilateral approach to meet its automatic tax information exchange commitments by the September 2018 deadline.
The OECD’s presentation to the Bahamian financial services sector was described as “dripping with sarcasm” by one observer, who said it employed the theme: ‘Why are you always the last guys to comply?’
Its representatives employed the analogy of a high-rise building to describe the Bahamas’ situation, saying that all other countries were taking the elevator to the top via the multilateral approach, and this country was the only one using the stairs.
Several financial industry sources, speaking on condition of anonymity, told Tribune Business that given the EU’s stance and the pressing compliance deadline, combined with this nation’s bilateral ‘isolation’, the Bahamas was unlikely to be able to “hold out”.