The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian financial services executive has warned the COVID-19 pandemic will be "very catastrophic" for the industry, adding: "No sector of our economy will be spared."

Paul Moss, head of Dominion Management Services, warned that the global economic shutdown and associated stock market crash meant that The Bahamas' high net worth clients were facing significant losses to their wealth and asset portfolios.

Describing the sector as being in "a holding pattern" due to the freeze on client activities, he urged The Bahamas to seize the opportunity provided by the global COVID-19 lockdown to adjust its business model and position itself as a low-tax - rather than a "no tax" - jurisdiction through the introduction of a single-digit corporate income tax.

Arguing that such a change could be phase in over a three-year period, Mr Moss said that announcing such a move now would give international clients and their advisers time to adjust and "signal to the world where we're going" as a jurisdiction.

In the short-term, though, he conceded that the Bahamian financial services will not be immune from the COVID-19 fall-out due to the pandemic's impact on clients' stock market and other investment holdings.

"The work we do is really based on jurisdictions around the world that are part of this global pandemic, and which are suffering as well," Mr Moss told this newspaper. "Many of them are shut down. There's not a lot of movement, and already we're only doing occasional work for clients.

"That tells me that when things get back to normal there's going to be a drop-off. This is very catastrophic as well for the financial services industry. There's no doubt about that lack of client activity. The stock markets have crashed, and people that invest in them are going to cash out or crash out. That's going to take a toll on the industry as well. The overall portfolio of Bahamian companies will take a hit.

"This [the pandemic] is catastrophic for the entire country. It doesn't matter what industry you're in. It doesn't matter what sector you're in. Even if we open at the end of the month it doesn't mean other parts of the world will. It's very disconcerting. It's a terrible situation."

COVID-19 has struck a Bahamian financial industry that was slowly being whittled away by a 20-year process of attrition sparked by international regulatory and tax initiatives. Given that private banking and wealth management fees are typically related to assets under management, which will likely have shrunk in recent weeks, most - if not all - Bahamian providers will now be facing reduced earnings.

Still, suggesting that The Bahamas cannot afford to pass up what he views as a chance to reform, Mr Moss added: "This may be a good opportunity for The Bahamas to be unwrapped, and look within and come out as a defined destination.

"We have an opportunity to look at what we want to be. It gives us an opportunity to reposition, look at what we have now, and see how we can change it. Even if we say the changes we will announce will only be implemented in three years' time, at least that gives the world an opportunity to know where we're going.

"Announce that the form of taxation is going to be corporate income tax. That gives people time to get comfortable with it so that we can implement within the next three years double tax agreements with countries around the world," he continued.

"There's no doubt the industry is going to take a hit, a significant hit, and we need to reposition ourselves for what it looks like when it comes out. We have to reposition the industry for taxation and mitigate the losses we have now. I think that corporate tax rate would be under 10 percent, and nothing more than 7 percent. I believe 5 percent is good rate to start at."

Mr Moss added that that Bahamian financial services industry was "in a holding pattern", and said: "There's nothing much we can do, and the clients are not in any position because of the shut down taking place across the globe right now.

"There's no aspect of the economy in this country that will not be affected by this. The question is how long this will be sustained."