The Government has presented the European Union (EU) and OECD with the draft Bills designed to address their concerns over The Bahamas' ability to combat corporate tax evasion.
The Ministry of Finance, in a statement yesterday, said KP Turnquest, deputy prime minister, together with Carl Bethel QC, the attorney general, and Brent Symonette, minister of financial services, met senior EU and Organisation for Economic Co-Operation and Development (OECD) officials last week in a bid to ensure The Bahamas avoids any so-called "watch list".
Mr Turnquest, while pledging that The Bahamas will meet the December 31, 2018, deadline to comply with both organisations' anti-tax evasion demands, called on both the EU and OECD to account for the short timeframe that countries have to implement the necessary reforms.
He was also said to have "stressed that the constant threat of black or grey listing is a major constraint to economic development, and has repercussions that are felt well beyond the financial services industry".
The EU and OECD initiatives, which are heavily linked, aim to combat tax evasion and avoidance by multinational corporations that they believe are eroding the tax bases of their members.
In particular, The Bahamas' Commercial Entities (Substance Requirements) Bill is designed to address the EU's demand for all nations to impose 'economic substance' regimes that effectively require companies to have a physical presence - and do 'real business' - in a jurisdiction.
It wants corporate profits, revenues and assets to be taxed in the jurisdictions where they are generated. They are thus aiming to prevent companies, especially multinational corporations, from exploiting gaps in tax types, rates and rules to artificially shift profits from jurisdictions where they are generated to low or 'no tax' jurisdictions, thus lowering their tax bill.
The EU's offensive is directly tied to the OECD's Base Erosion and Profit Shifting (BEPS) initiative. The Bahamas has already agreed to comply with the BEPS minimum standards, which seek to achieve the same anti-tax evasion goals as the EU.
The 29-nation EU, though, is going further than the OECD by demanding the elimination of 'ring fencing', or preferential tax regimes for non-resident entities and foreign investors, which are not offered to their Bahamian counterparts.
A particular concern for The Bahamas is the preferential Stamp Tax regime for International Business Companies (IBCs) already in existence, and which investors have a legitimate expectation of enjoying, along with the flat $300 Business Licence fee for non-resident entities.
Many in the financial services industry have called for the Removal of Preferential Exemptions Bill, which is designed to address the EU's "ring fencing" concerns, to "grandfather" in any changes for investors and Bahamian-domiciled entities already enjoying these benefits.
Other draft Bills produced for the EU and OECD's review include the the Register of Beneficial Ownership Bill and the Non-Profit Organisations Bill, with the Ministry of Finance yesterday confirming all four pieces of legislation will be enacted by month's end.
Mr Turnquest said in a statement: "The meetings were very productive, and we feel that the Europeans now have a greater understanding that The Bahamas has always been focused, at the highest political level, on protecting the integrity of the Bahamian financial system from abuse.
"Our approach has been to take a holistic view of the challenges that confront us and, pragmatically, do what promotes the long-term viability of our financial services industry."
Mr Turnquest could not be reached for further comment, and it is unclear whether the Government delegation addressed the OECD's listing of The Bahamas' economic permanent residency regime among investment incentives that threatened the integrity of its automatic tax information benchmark, the Common Reporting Standard (CRS).
That was not mentioned in the Ministry of Finance's statement, even though it referred to meetings with the OECD's deputy secretary-general; the deputy director of the OECD Centre for Tax Policy and Administration; and the head of the secretariat of the Global Forum on Transparency and Exchange of Information for Tax Purposes.
As for the EU, the Government team met with the Code of Conduct Group, the directorate-general for taxation and Customs Unions and other representatives of the European Commission.
The EU "blacklisted" The Bahamas earlier this year for being non-cooperative in the fight against corporate tax evasion, although a swift government response resulted in this nation's rapid removal.