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'Next Level' For Financial Sector After Eu Escape

Deputy Prime Minister Peter Turnquest.

Photo: Terrel W. Carey/Tribune Staff

Deputy Prime Minister Peter Turnquest. Photo: Terrel W. Carey/Tribune Staff

By NEIL HARTNELL

and KRISHNA RUSSELL

Tribune Reporters

The Bahamas must use its escape from the European Union's (EU) tax "blacklist" to take the financial services industry to the "next level of growth", the deputy prime minister urged yesterday.

K P Turnquest, speaking after it was confirmed that The Bahamas had avoided the EU's 15-strong list, told Tribune Business that the country needed to exploit this outcome by repositioning the sector to focus on high-margin, value-added business.

Following the "arduous" effort to enact multiple laws bringing The Bahamas into compliance with the EU's demands, Mr Turnquest said this nation now needed to use this legislative platform to its advantage by attracting companies to domicile and conduct real business from these shores.

He argued that this would both deepen the financial services industry's ties to the domestic economy, and provide "real, tangible benefits to the Bahamian people", since an expanded corporate presence would speak greater commercial activity and job creation.

"This is the message that needs to be put forth," Mr Turnquest told Tribune Business yesterday. "What has been a very difficult and arduous process gives us the opportunity to retool the financial services sector for the next level of growth, which is the deepening of the industry's involvement domestically and expansion of its value-added side to drive real, tangible benefits to the Bahamian people.

"It is the evolution of the business. I don't think we can deny that the volume business, as you put it, is a thing of the past, but it gives us an opportunity in respect of the high value side of the business that we can do very well in."

Mr Turnquest explained that the latest reforms will shift The Bahamas away from its traditional reliance on "volume" - represented by International Business Company (IBC) incorporations and number of bank accounts - to the higher margin end of the financial services market where real value has to be added by companies with a physical presence.

With The Bahamas' traditional "secrecy" and tax minimisation model long obsolete, it now has to restructure and reposition the financial services industry - and, by extension, the wider economy - for continued growth by developing new competitive advantages in a tax transparent and compliant world.

The Government appears to have been preparing for this eventuality since last year with the passage of the Commercial Enterprises Act, which is designed to remove Immigration-related bureaucracy and red tape and make it easier for approved businesses in targeted industries to establish a physical presence in The Bahamas.

This has now been further underpinned by the Commercial Entities (Substance Requirements) Act, which is designed to address the EU’s demand for all nations to impose “economic substance” regimes that effectively require companies to prove they have a physical presence - and are doing “real business” - in a jurisdiction.

The two Acts are thus directly linked, with the EU-related law requiring entities operating in this nation to show they have a physical presence by conducting income-generating activities here. Management and control must also reside in this country.

Headquarters operations, together with banking, insurance, fund management, financing and leasing, shipping, distribution or service center operations, and holding companies, are the business activities under the Act that must have a “substantial presence” in The Bahamas through offices and employees and be conducting “real business” activities.

Mr Turnquest yesterday indicated that "if we get it right" these Acts could form the platform to relaunch The Bahamas as an international business centre and trade hub, with financial services - as the "second pillar" of the economy - continuing to play a key role in this evolution.

He warned, however, that the Government and financial services industry must still do "a tremendous amount of work" between now and July 2019 to "operationalise" The Bahamas' new regulatory regime and show the EU it has been fully implemented.

Explaining that the 28-nation bloc will "constantly be monitoring" The Bahamas to ensure effective execution, and also conducting "peer reviews" of this nation and other jurisdictions, Mr Turnquest said some "additional tweaks" still need to be made to the new regime although he declined to provide details.

The deputy prime minister pledged that The Bahamas will now be "scanning the horizon" constantly for new international regulatory initiatives that may pose a threat to its financial services industry in a bid to get ahead of potential attacks and develop an appropriate response.

"Right now we are putting all our efforts into ensuring we operationalise all the legislation passed. There's a tremendous amount of work to be done between now and July to ensure we operationalise and implement all of the laws, and ensure we pass the monitoring and peer review test," Mr Turnquest confirmed.

"They [the EU] will be constantly monitoring our implementation, and the first peer reviews of jurisdictions will start in the next few months. There are a couple of additional tweaks to some of the legislation that we wish to make to ensure they are co-ordinated with all aspects of the regime, but those are not significant to the overall EU objective."

Mr Turnquest added that The Bahamas was an "active participant" in all EU and Organisation for Economic Co-Operation and Development (OECD) working groups dealing with tax-related issues, and "making our contribution at the table".

Revealing that the Government was still on alert for developing international regulatory initiatives, he told Tribune Business: "We are scanning the horizon for those issues being mentioned in sidebars by member states so that we are cognisant of them, put them on our radar and thinking through responses should they come forward."

Mr Turnquest identified such initiatives as the taxation of electronic and digital transactions, plus the harmonisation of VAT rates, and added that The Bahamas will do "as much as we can to ensure we can shape the environment" in a still-evolving sector.

Notwithstanding such future concerns, Mr Turnquest argued that The Bahamas' non-inclusion on the EU list had "validated" the work done by the Government in partnership with industry to transform The Bahamas' regulatory regime.

"It's very important to stay off that list and follow-up, and do the work necessary to get off their 'grey list'," he added. "Listing comes with requirements for extra due diligence and other punitive measures and, to the extent we were able to avoid this, it puts our financial services industry in a much better position.

"Not only could it affect our offshore business but also the onshore centre and its ability to facilitate trade through correspondent relationships and ease of trade across borders."

Mr Turnquest said The Bahamas' non-inclusion by the EU represented "a strength we can leverage in trying to grow and support the industry", reinforcing this nation's argument that it was a compliant, co-operative jurisdiction.

"Now that we have passed the regulatory test and are engaged in the implementation test, given these realities we have to ensure our products and services are outstanding and go back into the world in a positive and proactive manner to let the investor public know we are compliant," Mr Turnquest said.

"That we are still a progressive and well-regulated jurisdiction, and will continue to provide a valuable service to the international financial services industry, and have an attractive value proposition to bring to the table."

The EU yesterday confirmed that The Bahamas is among 34 jurisdictions that have been given until end-2019 to fulfill their commitments to complying with its tax transparency and anti-evasion/avoidance demands otherwise they could be "blacklisted" in 2020.

Tribune Business's Tuesday article, which identified all the "blacklisted" nations and The Bahamas' non-inclusion, was spot on. The 15 jurisdictions singled out by the 28-nation bloc are Aruba, Barbados, Belize, Bermuda, Fiji, Oman, Vanuatu, Dominica, the United Arab Emirates, Marshall Islands, American Samoa, Guam, Samoa, Trinidad and Tobago, and the US Virgin Islands.

Detailing the cost to these nations, the EU said development funding cannot be channelled through their financial institutions. Enhanced tax reporting is also likely to be imposed.

"In addition to the EU provisions, member states agreed on sanctions to apply at national level against the listed jurisdictions," the European Commission said in a statement. "These include measures such as increased monitoring and audits, withholding taxes, special documentation requirements and anti-abuse provisions.

"The Commission is urging member states to step up their efforts to agree on strong, binding and co-ordinated defensive measures as soon as possible to give the EU list an even greater impact."

Pierre Moscovici, the EU commissioner for economic and financial affairs, taxation and customs, said: "The EU tax havens list is a true European success. It has had a resounding effect on tax transparency and fairness worldwide./

"Thanks to the listing process, dozens of countries have abolished harmful tax regimes and have come into line with international standards on transparency and fair taxation. The countries that did not comply have been blacklisted, and will have to face the consequences that this brings. We are raising the bar of tax good governance globally and cutting out the opportunities for tax abuse."

Comments

TheMadHatter 1 year, 6 months ago

Wow. He is totally correct. My apoligies for the terrible things i have thought about him the last 12 months. On the right track here. Excellent. Now if he could just find our VAT money, everything would be hunky dory.

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Well_mudda_take_sic 1 year, 6 months ago

Doofus Minnis and his equally incompetent sidekick Turnquest just don't get it. They refuse to acknowledge and accept that there are only two reasons the blacklisting has temporarily ceased, and neither has anything to do with anything they have done. The two reasons are:

1) Well over a dozen or more of the largest European banks based in many of the OECD countries are currently embroiled in a huge international money laundering scandal as a result of their non-compliance with both the EU and OECD's own anti-money laundering measures; and

2) By every definition our country is no longer an international financial centre; the EU and OECD won and we lost, thanks in large part to the stupidity of the brain-dead leadership of our PLP and FNM governments, including the current one led by Minnis.

Meanwhile, Doofus Minnis and his equally incompetent sidekick Turnquest somehow think they deserve to take a victory lap for our country not being on the most recent blacklist. What a joke! LMAO

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TheMadHatter 1 year, 6 months ago

What's really amazing is you NEVER hear of anybody in the whole world being arrested and found guilty of money laundering. All of us have to give blood sample and wear underwear two sizes too small every time we go in a bank to "prevent money laundering" which never happens.

Some say this is because any particular bank does not want to be "associated" with it in the news. Why not? Why not be proud and say "We here at First Federal Bank of Somecity are proud of our work together with the FBI that brought these criminals to justice. You can be assured of secure and legal transactions when you bank with us."

Nope. They hide behind a curtain and make us feel like criminals.

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pro_test 1 year, 6 months ago

So in other words you would prefer for us to stay black listed. You are one miserable man, nothing makes you happy. It's like you won't be please until you see the Bahamas burn.

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Well_mudda_take_sic 1 year, 6 months ago

Now that we are no longer an international financial centre it really doesn't matter whether or not we are blacklisted. As for The Bahamas burning, you're obviously blind to the high flames dancing all around us thanks to yet another very corrupt government. Oh, and by the way, I'm told most of my friends regard me to be quite jovial. So, cheer up! LMAO

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ohdrap4 1 year, 6 months ago

well , as a sideline, he said today at the guardia morning news that the EU wants "uniform vat rate"

i am now fearful that it is an excuse to raise the VAT to 15%

I think it has already been agreed , as the grapevine says the EU demanded 15% VAT.

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John 1 year, 6 months ago

Yes the VAT rate desired is 15%, but that was based on the total elimination of most customs duties and reductions of others so that there was no net increases in per line tax, except on services. This Bahamian government introduced VAT without the reductions in duties. So they used VAT as an additional source of revenue as opposed to tax reform introduced

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bogart 1 year, 6 months ago

LEGAL AUTHORITIES NEEDED TO BE INVESTIGATIONS.......INTO VAT..IMPLEMENTED INTO THE APPLICATION BY..BUSINESSES.....,!!.,!!!!!!!!!.....being a REGRESSIVE TAX.....hurting WE DA PORE PEOPLE.......an being less affecting the big salaries...CRONIES...RICH...COHORTS...we da small pore ordinary dey accomplices aint check for us.....DESPITE ALLEGATIONS.......BUSINESSES......COMMON SENSE.....TEMPTATION....UPPING THEIR PRICES TO COVER THE IMPLENTATION OF VAT....IMPLEMENTATION....ADMINISTRATIVE COSTS.....!!!!!!!!!.....paying for more computer ...ink...accounting officer...paperwork....gas for car running up an down....more paperwork added.....changing prices....an mabye evrn adding a lil...add on to increase profit....BOTTOM LINE WE DA PORE PEOPLE SEEMS TO SEE THE PRICES....JUMP WAY BEYONG THE LEGISLATED VAT INCREASE......

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bogart 1 year, 6 months ago

EXTRAORDINARY...,!!!.....overshadowing the hard to see past is the level of Corruption....in the path....Public Domain...survey ...mentioned in recent ORG.....commentary....many persons dont tell....having effects back on them.....basic lack of OMBUDSMAN....Cannot yet be NOT noticed is the some 2 years investigation into US VISA scam by alleged Haitian citizen, Bahamian resident referred to 'MR.Fix It' ?, referred to Mr. Edward isreal Santil who was caught by US investigaton AND of glowing concern alleged frauds into numbers of areas.....alleged bribery of person from Bahamian Immigration....alleged documents for workers...alleged fraud of fraudulent bank statements...alleged bank accounts.....alleged Bahamian business with documents re employees not employed....alleged concerns that Mr. Santil has a lot of good chjaracter support by local colleagues Haitian community.....alleged concerns of documents re Labour.....many areas needs investigatons despite 20 years plus efforts to stop and enhance best protection banking.

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ThisIsOurs 1 year, 6 months ago

Here's an idea. I hope you're reading this. Make a call to action to every BAHAMIAN programmer in the country. Enroll them in financial services courses.

You're doing a couple of things:

1.There are many retired financial services EXPERTS. Financial services professionals who've been let go in downsizing exercises. Pay those persons to teach courses. Employment rate down. Do not bring in any foreign firm to do this work. We have the talent.

Your strategy should be to hit the unemployed "qualified" persons first. This is strategic you're attacking two problems. Unemployment and education. Before you start put these persons through a course with Bettina Albury, she can determine who has the correct skills to train. Others may need a longer training period.

Hire them as instructors under the tutelage of an existing financial services education body. The Securities commission already offers courses, there may be other bodies that do. No fly by night operations, no hiring your buddies, this is the sector's and possibly the Bahamas' life support system you're dealing with. You don't want bad teachers.

2.Secondly you're preparing the Bahamas for the future in a concrete way

3.You're investing in our greatest asset. In one to two years you will have a cadre of programmers trained in financial services.

  1. When they're done give them something to do for one year. You have a year to plan what "something" is. Another opportunity for retired or unemployed experts to become involved.

  2. We may need some mathematicians.

I'm here tomorrow too. (by God's grace). Id ask for royalties but i een here from noone on the other stuff :-|

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Well_mudda_take_sic 1 year, 6 months ago

There are over 50 million Red Chinese who are accomplished and experienced code writers (programmers). Quite a few of them will no doubt be coming to and working from the Bahamas soon. Red China will benefit enormously from this, but it's not going to help us Bahamians one bit.

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ThisIsOurs 1 year, 6 months ago

No non-bahamians we have to build ourselves. If we have ten programmers this year 40 next year 80 the year after we are moving forward

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ThisIsOurs 1 year, 6 months ago

If we throw up our hands and say let the Chinese and Indians do it we een gat nobody capable OF we say let's wait for the 5 year olds or 16 year olds to learn how to use those laptops we are another 20 years behind the

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Well_mudda_take_sic 1 year, 6 months ago

Red China has been heavily greasing our corrupt Minnis-led FNM government in an effort to get the Bahamas to join the WTO as soon as possible. If and when that happens, our country will be filled up over night by thousands of Red Chinese, with very few if any decent paying jobs remaining in our economy for Bahamians. You only have to look at what has happened to other countries whose corrupt governments were wooed by Red China into signing on to membership in the WTO. The writing is already on the wall, and it's plain as day for all Bahamians to see.

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ThisIsOurs 1 year, 6 months ago

My personal belief is the govt made the wrong move with the CEB bill for the same reason. They should have made a move to build up our own people. ICT is an industry that you could have 1000 started in the space of a year. Not every problem needs a rocket scientist. But again I believe personal interests whispered in the ear of the PM.

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