By NEIL HARTNELL
Tribune Business Editor
THE Bahamian financial services industry will serve as a ‘watchdog’ to ensure this nation does “not go beyond what’s required” to escape Europe’s ‘blacklist’, a senior executive said yesterday.
Tanya McCartney, the Bahamas Financial Services Board’s chief executive, told Tribune Business that the sector was keenly aware of the need to “strike a balance” between meeting the European Union’s (EU) demands and maintaining its competitiveness.
With the 28-nation EU’s demands of the Bahamas well-known, Ms McCartney said it was now critical for the financial services industry to work closely with the Minnis administration to determine the best strategy for ensuring the country was de-listed.
Emphasising that the Bahamas was “not alone”, or the sole “victim” of an initiative with global reach, the BFSB chief executive pledged that the sector would “do the necessary research” and benchmarking to ensure its response did not exceed requirements.
“BFSB, as an advocate for industry, is going to ensure we do the necessary research such that any steps we take allow us as a jurisdiction to remain competitive,” Ms McCartney told Tribune Business. “These rules do not apply to us in isolation.
“Any country that participates in BEPS is going to have to take steps to put in place country-by-country reporting for multinational companies. I’m sure the required benchmarking is being done, but once we have had a chance to look at the proposed legislation in detail, BFSB will provide feedback if we’re going beyond what’s required.
“We know we need to strike a balance between complying with international requirements and creating an environment for this business to grow.”
Ms McCartney was speaking as fears grew among some financial services executives that the Government’s proposed legislative reforms, designed to secure ‘delisting’ from the EU’s ‘blacklist’, might cost the Bahamas a significant portion of its current financial services business - especially that tied to International Business Companies (IBCs).
A key attraction of Bahamian-domiciled IBCs is their minimal reporting requirements, but K P Turnquest, the Deputy Prime Minister, yesterday warned that planned legislation might require “all IBC-type entities to submit statutory financial accounts”.
The Multinational Non-Resident Entities Financial Reporting Bill, named in Parliament yesterday, appears to be the centrepiece of the Government’s ‘blacklist’ response, but it is unclear whether its accounting/reporting mandate will apply to all IBCs or just those entities that are part of multinational corporate structures.
Carl Bethel QC, the Attorney General, previously said the Bill would impose ‘country-by-country’ reporting of profits and losses on Bahamian entities that are part of a multinational company’s corporate network, once the latter’s consolidated annual revenues are above a certain threshold.
This financial information would then be passed to the Bahamas’ ‘Competent Authority’, the Ministry of Finance, which would then share it with tax authorities in the relevant countries where these multinationals have physical operations. The ultimate goal is to ensure such corporations pay due taxes in the countries where they are generated.
The EU’s demands on this issue are directly linked to the Base Erosion and Profit Shifting (BEPS) initiative, which is being driven by the Organisation for Economic Co-Operation and Development (OECD), and has the same objective of preventing tax avoidance by multinational corporations using the likes of IBCs as passive ‘fronting’ vehicles. Compliance with BEPS is one of the three criteria being used by the EU to determine whether countries are cooperative in the fight against tax avoidance, but Ms McCartney yesterday warned the Bahamian financial services industry from ‘rushing to judgment’ until it saw the Government’s planned reforms.
“We’re working very closely with the Government to develop an action plan to ensure we do what is required to address the concerns raised by the EU,” she told Tribune Business. “We have to continue to work hard to get off the list in the shortest possible time, and that’s what we’ve committed to doing and helping the Government to achieve that.
“I don’t think we should be concerned until we see what the Government is proposing..... We need to be briefed by the Government, and then look at what they’re proposing, look at the impact and then provide feedback on how to mitigate any fall-out.”
Ms McCartney said the BFSB’s International Initiatives Working Group would assess the proposed legislation, adding that the Bahamas already knew ‘what’ the EU wanted and now needed to work out ‘how’ best to comply without undermining the competitiveness of the financial services industry and wider economy.
“We know what the EU expects; there’s no uncertainty as to what’s required of us,” she said. “The EU has made it very clear what’s required of us, and we have to do that by the end of this year.
“How we take these steps is what the private and public sectors have to work on. There’s no uncertainty on what we have to do. The Government is committed to do what it has to do, and the industry has to provide feedback on the recommendations and how we can mitigate any negative impact to industry based on our responses.
“The reality is the Bahamas is not alone in this. It’s not as if we’re a victim, the only country asked to implement these measures,” Ms McCartney said. “This is a worldwide initiative, and the Bahamas can benchmark against what other jurisdictions have done.
“We’re not alone in this. Sometimes it seems as if these rules only apply to us, but that’s not the case.”
Ms McCartney revealed that the BFSB has been fielding calls from Bahamian and international financial services providers concerned about the EU ‘blacklisting’, its potential impact and what it means for this jurisdiction.
She added that such calls were being dealt with on “a case-by-case basis”, and said the BFSB was working with the Government to set up an industry-wide briefing for this week so Bahamian financial industry players understood “the way forward”.