By NATARIO McKENZIE
Tribune Business Reporter
THE BAHAMAS is in a “battle” to save its financial services industry, the Deputy Prime Minister said yesterday, expressing optimism that legislation tabled yesterday will avert any further “blacklistings”.
K Peter Turnquest, updating Parliament on efforts to comply with the Organisation for Economic Co-Operation and Development (OECD) and European Union (EU) anti-tax evasion initiatives, said: “This is a sector still trying to rebound from the effects of de-risking and withdrawal of financial institutions as a direct consequence of increased compliance costs and the compound effects of the global financial crisis.
“While we are implementing measures that will ensure compliance with the international standards on tax governance and transparency, we let it be known that we reserve our sovereign right to develop our legal, tax and regulatory framework in ways that we deem necessary for our economic development.
“We are in a battle to save an industry that is a significant contributor to our economy, and we are being attacked on multiple fronts. With the legislation we are tabling, and which I anticipate will proceed through the legislative process quickly in order to meet the December 31 deadline, I believe that we have deflected the threat of being reinstated to the EU’s list of non-cooperative jurisdictions when the EU Council of Finance Ministers meet in January.”
The Bills are the Commercial Entities (Substance Requirements) Bill 2018; the Removal of Preferential Exemptions Bill 2018; the Register of Beneficial Ownership Bill 2018; the Non-Profit Organisations Bill 2018; and the Penal Code (Amendment) Bill 2018, which are designed to put The Bahamas in full compliance with the EU and OECD standards.
“These Bills have been widely circulated, consulted and agreed by industry stakeholders after extensive private and public industry briefings, and with the technical representatives of the EU and OECD,” Mr Turnquest said.
“The Commercial Entities (Substance Requirements) Bill 2018 will require commercial entities that engage in specified activities to demonstrate economic substance through having substantial economic presence and real economic activity within The Bahamas,” said Mr Turnquest.
“This means, for example, that commercial entities will have to demonstrate that they have an adequate number of full-time, qualified employees; that directors are qualified to make strategic decisions on the operation of the entity; and that the entity demonstrates a sufficient level of expenditure commensurate with the activities that it undertakes.
“This development, while posing some risk to entities that do not require a physical presence in the ordinary course of business, also provides potential opportunities for qualified Bahamians to provide physical presence and services, creating employment and space requirements for international operations wishing to remain in our jurisdiction.”
Mr Turnquest added that the Removal of Preferential Exemptions Bill 2018 provides for the elimination of preferential tax advantages afforded to non-resident companies that are not given to domestic ones.
“This Bill will have the effect of equalising the tax treatment of domestic and international companies, and eliminates the long complained-about perceived advantages offered to foreigners that Bahamians are not entitled to by virtue of their domicile,” he said.
The Non-Profit Organisations Bill, 2018 according to Mr Turnquest, brings non-profit organisations under regulatory oversight. “This will enhance the integrity of and mitigate abuse of these entities,” said Mr Turnquest.
The Beneficial Ownership Register Bill will create a non-public database for the collection and retention of information on the beneficial owners of all incorporated entities. “This is a part of a global push to eliminate opaque entities that could be used to hide corporations and individuals from tax obligations, and aid in the fight against anti-money laundering/terror financing and corruption,” said Mr Turnquest.
“The Penal Code (Amendment) Bill makes it a crime to intentionally defraud a person employed in the public service relating to the collection of money for the purposes of general revenue. This Bill brings tax evasion within the lexicon of criminal acts in The Bahamas and is a landmark Bill whose time has come.”