EU blacklist escape key to ‘new world order survival’

Attorney General Ryan Pinder.

Attorney General Ryan Pinder.

• AG: ‘Entire rebuild’ secures Bahamas removal

• Substance reporting exchanges jump 13-fold

• Gov’t, Opposition again spar on responsibility


Tribune Business Editor


The Bahamas “can only survive in this new world order” through ongoing compliance with global demands, the Attorney General asserted yesterday, as it escaped the European Union’s (EU) tax blacklist.

Ryan Pinder KC, in a series of e-mailed answers to Tribune Business questions, said The Government’s 12-18 month effort in “rebuilding the entire economic substance compliance process” had been rewarded by yesterday’s confirmation from Brussels that The Bahamas was among four nations removed from its non-cooperative tax list.

He added that The Bahamas’ exchanges of economic substance information had increased 13-fold year-over-year to more than 130 in 2022, with the development of a new reporting portal for locally-domiciled companies and “overhaul” of relevant laws also key to ensuring this nation’s blacklist delisting.

The 27-nation EU, in a move widely expected given that The Bahamas’ imminent removal had been leaked a week in advance, said this nation now met its economic substance reporting requirements for countries with either “no or only a nominal corporate income tax” after remedying deficiencies identified by the OECD’s ‘harmful tax practices’ forum.

“Concerning Bahamas and Turks and Caicos, ever since October 2022, deficiencies in the enforcement of economic substance requirements had been identified in both of these jurisdictions by the OECD Forum on Harmful Tax Practices (FHTP),” the EU said in confirming The Bahamas’ escape.

“In the FHTP’s most recent assessment, the recommendations to both jurisdictions to remedy these deficiencies were converted from ‘hard’ to ‘soft’ recommendations, which allowed the [EU] Code of Conduct Group to consider these jurisdictions compliant with the standard for jurisdictions with no or only a nominal corporate income tax.”

The EU’s list of non-cooperative jurisdictions for tax purposes takes its cue from, and is largely determined, by findings on individual countries’ compliance by the Organisation for Economic Co-Operation and Development’s (OECD) ‘harmful tax practices’ forum. This is why The Bahamas has spent considerable time and effort addressing deficiencies identified by the OECD in its economic substance reporting.

Emphasising that The Bahamas must get off, and stay off, such blacklists if its economy and key industries are to prosper, Mr Pinder told Tribune Business: “The financial services industry in this new world order can only survive and develop in a compliant atmosphere.

“Being non-cooperative for tax matters had significant adverse implications, including challenges with cross-border business and payments, stress with correspondent banking and ability to do business in other jurisdictions.”

Blacklisting by the EU, in particular, will have impeded access by Bahamian businesses and financial institutions to European markets. Financial transactions involving European clients and institutions may have been delayed, or even not processed at all, costing time and money as all Bahamas-originating wires and transfers will likely have been subjected to extra scrutiny.

Besides impacting The Bahamas’ financial services and economic competitiveness, and undermining the ‘ease of doing business’, being on the EU’s blacklist for 16 months will also have potentially impacted the country’s reputation and integrity as well as cost it potential business.

That threat was yesterday removed with The Bahamas having twice last year reformed its economic substance regulatory regime, as well as transforming the reporting portal, to ensure its escape from the EU’s clutches. “We have had to effectively rebuild the entire economic substance compliance process,” Mr Pinder said.

“This includes overhauling the legislative framework to be compliant with international best practices and striking a balance between what the [OECD] forum on harmful tax practices and EU expected and also the continued facilitation of the industry.”

Providing further insight into the work performed, Mr Pinder added that it involved “rebuilding the compliance unit within the Ministry of Finance to evaluate the reporting data, effectively conduct the reporting and implement proper compliance and enforcement frameworks to demonstrate that we can carry out the obligations under law”.

Finally, there was “the development of a new reporting portal that would ensure accurate data collection, effective reporting where required, and ability to analyse the data and test the economic substance in practice of in scope entities”.

And, to prove The Bahamas’ compliance with EU and OECD mandates for the exchange of economic substance with other nations, Mr Pinder said this nation “conducted a total of 133 exchanges with relevant exchange partners” in 2022 - a 13-fold rise on the previous year.

“This is a considerable increase, as compared with the year 2020 where a total of nine exchanges were conducted, and the year 2021 where a total of ten exchanges were with relevant partners,” he added.

Mr Pinder also warned that, despite yesterday’s EU blacklist escape, The Bahamas must remain “vigilant” and nimble to stay ahead of further international regulatory initiatives so that it does not run afoul of further blacklistings in the future.

“We have to stay vigilant and constantly monitor the evolution of regulatory standards globally so we can prepare for the changing rules which are bound to come,” he added. “An example of this is the FATF (Financial Action Task Force) and anticipated changes on beneficial ownership reporting for trusts.

“We have identified this is coming, prepared advocacy positions on it, but also prepared ourselves for the necessary reforms that will have to happen. Unfortunately, this has been the expectation in today’s global environment.”

The Ministry of Finance, too, in its own statement on the EU delisting signalled it is looking past yesterday’s events and focusing on the future by taking an “aggressive” and “proactive” approach to remaining compliant with tax-related demands from both the 27-nation bloc and OECD.

It explained that it is seeking to attain the Fully Equipped Monitoring Mechanism (FEMM) designation for The Bahamas, which will affirm that this nation has all the necessary systems and processes in place for “full tracking” of corporate income and assets.

‘Economic substance’ is a test that requires companies to show they are doing real, legitimate business in a jurisdiction and are not merely brass plate, letterbox fronting companies acting to shield taxable assets and wealth from their home country authorities.

The initial Commercial Entities (Substance Requirements) Act 2018 required all companies conducting “relevant activities” to confirm they are carrying out real business in The Bahamas via annual electronic filings - a requirement that has been maintained in the upgraded legislation passed by Parliament last year. BDO, which built the beneficial ownership portal, developed the economic substance counterpart.

Mr Pinder added that meeting the OECD/EU demands, and securing The Bahamas’ removal from the latter’s blacklist, was “no small accomplishment” as the Government paid tribute to the work performed by the Attorney General’s Office in collaboration with the Ministry of Finance’s legal and regulatory affairs unit, Department of Inland Revenue and wider financial services industry.

The Attorney General, though, again hit out at the former Minnis administration for leaving its successor to inherit an economic substance reporting portal and process that he again branded as “deeply flawed”.

“The process which we met on coming to office was deeply flawed - ineffective data collection and a complete inability to report in compliance with our own legislation and international standards,” Mr Pinder blasted.

However, Kwasi Thompson, the Opposition’s finance spokesman, yesterday countered by arguing the Davis administration could have remedied such concerns much more quickly and that The Bahamas need not have been blacklisted in the first place in October 2022 or remained on the list for as long as it has.

“We do maintain that the present administration simply was not as focused and nimble as it ought to have been in resolving the outstanding matters much earlier. The Bahamas remained on the blacklist longer than was necessary,” the east Grand Bahama MP.

This political ‘blame game’ and finger-pointing stems from Opposition claims - previously denied by the Government - that the latter shelved a plan it met already in place to address the EU/OECD concerns and disbanded the Ministry of Finance unit responsible for monitoring economic substance compliance and related issues.

Tribune Business previously revealed that Philip Davis KC, the prime minister, signed three separate letters over a six-week period between December 15, 2021, and January 26, 2022, to the EU pledging that The Bahamas will resolve the 27-nation bloc’s issues over “economic substance” and tax reporting

This was clearly never accomplished to the EU’s satisfaction as The Bahamas was duly ‘blacklisted’ some ten months later. It is unclear what happened between those letters and October 2022, and it was only after this nation was listed that Simon Wilson, the Ministry of Finance’s financial secretary, said the Government would have to spend between $4m-$5m on an entirely new reporting system.

However, the Ministry of Finance yesterday said it remains determined to look forward, not back, given the EU’s confirmation of The Bahamas’ significant progress. Pointing to the new portal’s September 8, 2023, launch as ensuring the necessary economic substance data is reported and collected, it added that there is now increased enforcement and compliance focus, as well as training in the portal’s use.

“The Bahamas will continue to remain a responsible international exchange partner, demonstrating and maintaining co-operation and standards in the area of transparency and exchange of information for tax purposes in order to safeguard the forum on harmful tax practices’ rating of “not harmful’,” the Ministry of Finance added.


bahamianson 3 months ago

Yes, thank you for bullying the Bahamas. All these other jurisdictions are bullys. They talk against bullying in schools , but it is okay to bully another country to abide by your rules. This is wrong , but what can a small country say but bow down and kiss the feet of larger countries.


sheeprunner12 3 months ago

The damage to our banking sector has already been done. Twenty+ years of blacklisting has rendered our international and domestic banking a shell of itself pre-2000.

Blacklisting & webshops have destroyed any form of access to formal quality banking on the Out Islands. We are back to the age of under the bed & rock hole banking. Online & sand dollar banking is still a pipedream for most Out Islanders. Poor internet & support services make it almost impossible to depend on them.

Very sad situation


bcitizen 3 months ago

Money is safer in a rock hole these days than in the loan shark banks who pay no interest, really do not give loans, and nickel and dime your money to death with fees.


bcitizen 3 months ago

Money is safer in a rock hole these days than in the loan shark banks who pay no interest, really do not give loans, and nickel and dime your money to death with fees.


ExposedU2C 2 months, 4 weeks ago

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ExposedU2C 2 months, 4 weeks ago

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