By NEIL HARTNELL
Tribune Business Editor
The Attorney General last night said senior European officials and politicians have warned The Bahamas: "We won't take our foot off your neck until you implement a corporate income tax."
Carl Bethel QC revealed that a "senior" member of the European parliament had delivered this extraordinarily blunt message to The Bahamas' ambassador to the European Union (EU), Maria O'Brien, as this nation's inclusion on the bloc's anti-financial crime blacklist was confirmed yesterday.
He added that Ms O'Brien was also informed by the official heading the European Commission body that oversees the initiative there was "nothing The Bahamas can say or do" to alter the decision, which he branded "a breach" of the Commission's commitment to engage impacted countries before listing them.
Describing the European Commission's action as "a hostile act by one of the world's largest economic blocs" towards The Bahamas, Mr Bethel accused it of using the initiative by the Financial Action Task Force (FATF) - the global standard-setter in the fight against money laundering and terrorism financing - to mask its true intention towards this nation and other Caribbean states.
While the Commission, which acts as the EU's civil service, says its own blacklist is based on those countries subject to enhanced FATF surveillance as a result of weaknesses in their anti-financial crime regimes, Mr Bethel said this did not explain why Trinidad & Tobago - which exited the latter's process in February 2020 - was still being targeted by the Europeans.
He suggested the European Commission was maintaining Trinidad's blacklisting as a means to pressure it to develop a register showing the beneficial ownership of all corporate vehicles in that jurisdiction, and argued that this - together with the comments made to Ms O'Brien - indicate demands will be made of The Bahamas that go far beyond those of the FATF process.
The European Commission, explaining its rationale for placing The Bahamas on its "high risk" listing, yesterday said in its official statement that the COVID-19 enforced delay to the FATF's "site visit" to this nation meant it "cannot confirm" whether the country has resolved the deficiencies in its anti-financial crime regime.
The FATF had earlier this year placed The Bahamas in the "exit process" from its oversight initiative, with Mr Bethel and the Government hoping that its on-ground assessment could have been conducted by May in time to remove this country at its June plenary. But COVID-19 has put paid to both that meeting and the "site visit" for now, meaning The Bahamas will have to wait longer to escape FATF surveillance.
"The Bahamas has taken steps towards improving its anti-money laundering/counter terror financing regime and, in February 2020, the FATF made the initial determination that The Bahamas has substantially completed its action plan and warrants an on-site assessment to verify that the implementation of The Bahamas’ reforms has begun and is being sustained, and that the necessary political commitment remains in place to sustain implementation in the future," the European Commission said.
"The FATF has yet to carry out such assessment to confirm its initial determination. Therefore, the Commission does not have in its possession information which would enable it to confirm at this stage that the strategic deficiencies have been effectively addressed."
Mr Bethel, though, argued that the European Commission was using the FATF's initiative as a "precursor" to cloak its true motives and objectives towards The Bahamas and other targeted nations. And he accused the Commission of hypocrisy given that its representatives on the FATF had also voted in favour of The Bahamas' site visit earlier this year.
"They must have been satisfied that we had made sufficient progress to warrant an on-site visit," the attorney general said. "It's the European Commission that's represented at the FATF, not any other EU body or directorate.
"To now put us in the same category as Yemen or Myanmar, and countries of that ilk, which are only just entering the FATF process and have not made the changes The Bahamas has made, is disproportionate and unacceptable; totally unacceptable."
Pointing to Trinidad's continued presence on the European Commission list, despite its removal from FATF scrutiny, Mr Bethel added: "They're [the Commission] following their own agenda. The FATF is a precursor to their own agenda.
"As indicated by the treatment of Trinidad, the FATF is just a horse they're riding on. They're going to use this blacklist to obtain more from jurisdictions. This is unilateralism in the extreme and simply unfair. They want to force Trinidad to do something they want them to do."
He accused the European Commission of breaching its own criteria for determining how countries would be selected for inclusion on its blacklist, especially the pledge that affected nations would be given advance warning and given an opportunity to present their case.
Following Tuesday's Reuters report about The Bahamas' impending inclusion, Mr Bethel said the Ministry of Foreign Affairs only received formal notification from the European Commission's Jamaica-based representative the following day.
The Bahamas move swiftly to activate all diplomatic channels, but Mr Bethel said Ms O'Brien received a cool response from the Irish official heading the European Commission directorate overseeing the blacklist. "She was told that the determination had been made to blacklist The Bahamas. Period," he added. "He said the decision was made and there was nothing we could say or do. They are in breach of their own stated methodology."
Mr Bethel said the European Commission's last-minute notification highlighted both the lack of due process afforded The Bahamas and its "determination to hit The Bahamas willy-nilly". He agreed that "it is not a given" that The Bahamas will escape its blacklist even if its exit from the FATF process is confirmed.
"A lot of what goes on in the European Commission is motivated by civil society in Europe and pressure from members of the European Parliament," Mr Bethel told Tribune Business. "One of them had an exchange with our ambassador, and it was reported to me somewhat casually, which shows the depth of their animus to The Bahamas or some people's animus towards The Bahamas.
"The ambassador was told that Europe has put their foot on the neck of The Bahamas, and unless we have a corporate income tax, their foot will not come off the neck of The Bahamas. That was said by a senior member of the European parliament. The foot of Europe has been put on the neck of The Bahamas, and will not be removed until The Bahamas implements a corporate income tax."
Such a demand threatens to cause further economic dislocation at a time when the Bahamian economy is already reeling from COVID-19. It signals further unrelenting pressure, and a tightening of the screws, on the Bahamian financial services industry that has been suffering slow but steady attrition for the past two decades due to the onslaught of global regulatory initiatives from various international bodies - including the EU.
The push for a Bahamian corporate income tax reflects similar demand from individual EU states such as the Netherlands, which last year demanded that The Bahamas implement a corporate income tax at 9 percent or higher as the price to escape its national tax non-cooperation “blacklist”.
While some in the Bahamian financial services industry have argued that a low-rate corporate income tax may be the way to go, as it would remove the so-called 'tax haven' stigma and enable this country to enter into double taxation agreements, Europe's position effectively represents interference in a country's ability to determine its own tax structure and methods.
While there was no question about the fairness and integrity of the FATF process, Mr Bethel said The Bahamas "can rest assured" that even if it is removed from that organisation's process there will be "additional demands from elements in Europe".
He added: "It's a naked exercise of unilateralism by a global power and we have to survive it as best we can, seek to address their concerns as best we can, and hope reason will prevail at the end of the day. You cannot have meaningful dialogue based on one power's imposition of their will. It doesn't work that way. We hope in time that calm and reason will prevail."
Contrasting the European Commission's current approach with the "mutual respect" if afforded The Bahamas on recent tax-related matters, Mr Bethel told Tribune Business: "That is absent in this process right now which is unfortunate, because in all previous discussions with them the one thing we had was a reasonable and respectful relationship that underpinned everything.
"This blacklisting is so arbitrary and so aggressive, and it defies that previously existing relationship. It's very harmful. It's a hostile act by one of the largest economic blocs in the world against tiny little countries, including The Bahamas. It simply beggars belief that this could be happening to The Bahamas and other Caribbean countries. It's not the relationship we had come to expect from the EU, with decades of co-operation between our countries and the EU."
Mr Bethel added that The Bahamas is "not adverse to complying with established rules that apply even other countries globally".