By NEIL HARTNELL
Tribune Business Editor
A Cabinet Minister has pledged that the Bahamas will no longer be "behind the game" on financial services compliance, adding: "The days of not playing ball are over."
Brent Symonette, minister of financial services, trade and industry and Immigration, told Tribune Business that the Bahamas had no choice but to be fully compliant with international regulatory standards and best practices.
He emphasised that this nation could not regard itself as "an archipelago all by ourselves", and had to be part of the international community by embracing reform and change as "the goal posts move".
Mr Symonette also hit out at the former Christie administration for failing to deal with the Organisation for Economic Co-Operation and Development's (OECD) Base Erosion and Profit Shifting (BEPS) initiative, despite the financial services industry raising the matter with it.
The Bahamas now has to state a "definitive position", outlining how it will comply with BEPS, by December 2017, and Mr Symonette said it was "par for the course with the former administration" to leave key global initiatives facing the financial services industry for the Minnis government to deal with.
"This is all part of avoiding any blacklisting," the Minister told Tribune Business of recent BEPS consultations with the industry, "so that we're ahead of the game, not behind the game and playing catch up.
"We need to be in full compliance, and let the OECD know how we intend to do it, when we're doing it, and to build credibility by doing what we say we're going to do."
Tribune Business last week reported on the dilemma facing the Bahamas in trying to meet minimum BEPS' standards, which require it to adopt four out of '15 actions' listed by the OECD.
The four standards that the Bahamas will likely select, according to a Bahamas Financial Services Board (BFSB) statement, 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.
However, 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.
As a result, and with the OECD and its G-20 and European Union (EU) members threatening 'blacklistings', Tribune Business understands there is significant concern over how the Bahamas will comply and whether it will be forced to adopt a corporate income tax.
Brian Moree QC, senior partner at McKinney, Bancroft & Hughes, told Tribune Business that the Bahamas would "have to assess carefully future tax policy" as a result of BEPS, agreeing that it may require implementation of "new methods of corporate tax".
"I read with interest the comments of the Minister of Finance with regards to BEPS, and the impact that it may have on our current tax platform," Mr Moree said, responding to K P Turnquest's confirmation that the Bahamas "may have to look at" a corporate income tax.
"It does seem to me that BEPS will require the Bahamas to carefully consider its future tax policy, which may involve the introduction of new methods of taxation, particularly with regard to companies.
"This would significantly affect a 'no tax' platform, transforming it to a 'low tax' platform, and this may even take the whole issue of tax even further. It seems to me the Europeans are watching our position very carefully, and important decisions have to be made in the next few weeks."
Mr Symonette, meanwhile, suggested that "the future of the financial services industry" was "interlinked" with the Government's other plans to liberalise and deregulate the Bahamian economy, including the planned accession to full World Trade Organisation (WTO) membership (see other article on Page 1B).
He added that the Minnis administration's goal is to "fulfill our obligations, live up to our obligations and get ahead of our international obligations", with the Government now awaiting financial services industry feedback on BEPS following the meeting with government last week.
"The days of not playing ball in the international financial community are over," Mr Symonette told Tribune Business. "We have to be be compliant and fully transparent.
"The goal posts in the world are moving, and we cannot pretend to be an archipelago all by ourselves."