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Financial Services Needs 'Swashbuckling' Reforms

• Provider says 'too big' for Recovery Committee

• Urges corporate tax as he challenges: 'Be bold'

• Says firm's revenues down 75% due to COVID

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian financial services provider yesterday voiced doubts the Government-appointed Economic Recovery Committee (ERC) will propose the "swashbuckling" reforms needed to revive the sector.

Paul Moss, principal of Dominion Management Services, told Tribune Business that the need for a low-rate corporate income tax and other bold moves to place the financial services sector back at the industry's forefront would likely be "too big" for both the Government and committee members.

Calling for the Committee to back his call for a shift from a 'no tax' to 'low tax' platform, in a bid to end the scrutiny by the European Union (EU) and others, Mr Moss said he held out little hope this would actually occur.

"I doubt they would do it," he told this newspaper. "I think it's going to be big for them to think about. I don't think it's going to happen. Unless something like that happens we are going to see the further shrinkage of the industry until it cannot shrink any more.

"We really have to shore up that industry and do something swashbuckling to show the world we're serious about being in this industry, that we're serious about taxation and we're bring forthright in our tax outlook for the world to see that The Bahamas is on the right stage with doing business in a transparent way.

"Until that happens we will continue to be blacklisted and people will shy away from the jurisdiction. Until we open our economy to the citizens of the world and show we have these double tax agreements, and operate in a tax transparent manner, we won't be attractive to investors, have people come to our country and get the growth we should."

Mr Moss has long called for The Bahamas to introduce a low-rate corporate income tax of 7 percent or less as a means to reposition its financial services industry as a tax transparent sector, on the basis this would give it extra legitimacy and help attract companies to domicile and do business here.

The Economic Recovery Committee has numerous members connected to the financial services industry, including John Rolle, the Central Bank's governor; Christina Rolle, the Securities Commission's executive director; and Tanya MacCartney, the Bahamas Financial Services Board's (BFSB) chief executive.

Ms McCartney indicated in a recent newsletter to the financial services industry that the proposed reforms being examined by the Committee include areas such as the ease of doing business and Immigration, but Mr Moss argued they needed to go much further than that.

"I don't think they have the spirit of what this moment calls for," he argued. "It's calling for boldness, things not done before. I'm not sure they have the make-up to do that. They're taking the approach that's been taken for too long now."

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.

Mr Moss revealed that his firm's revenues are down 75 percent compared to pre-COVID-19 levels, as he said: "We're just hoping to get through this year and see what happens. To be quite frank with you it's very slow. There's not a great deal of activity out there.

"We're just praying that things turn around and get better very quickly. A lot of clients are not really sure what the future holds, so they are really reluctant and conservative in their approach."

Comments

Proguing 3 weeks, 6 days ago

There were two pillars of the offshore industry in the Bahamas. Banking secrecy and zero taxes. The first pillar is gone with the automatic exchange of information and the second one will probably go the same way, due to the constant attacks on this country. But who will want to incorporate an IBC here when corporate taxes will be levied? Oh, and by the way “high tax” jurisdictions usually started with “low taxes”, just like with VAT. As for the blacklistings they will continue, as long as we have an offshore sector and rich foreigners relocating here. Therefore, to capitulate after each backlisting is to incite more of the same, as we have seen over time.

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newcitizen 3 weeks, 6 days ago

What are you talking about zero tax? Companies here pay a ton of tax. They have to pay it on revenue and not profits (like every major economy in the world) which more often than not results in a higher cost than taxing profit. Income tax is zero and will remain zero for a long time because then politicians would be forced to file returns based on their income.

Having a proper, profit based corporate tax would be a huge boost to the country.

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