Bahamas ‘unfairly dumped on’ with EU blacklisting

The Bahamas was yesterday “dumped on” through its inclusion on another so-called financial services ‘blacklist’, although an ex-Attorney General and others suggested the development should be taken “with a big grain of salt”, reports the Bahamas Tribune.

John Delaney told Tribune Business that the European Union’s (EU) decision to ‘blacklist’ the Bahamas, and 29 other small jurisdictions and international financial centres (IFCs), appeared to be based on “superficial and suspect” criteria.

The EU Commission said the Bahamas and other nations were listed because they were ‘not doing enough’ to crack down on tax avoidance by individuals and multinational companies.

The listing was published as the EU announced plans to combat corporate tax avoidance by companies. Pierre Moscovici, the EU’s top tax official, said: “These tax havens cover the five continents.”

He called on the Bahamas and other listed nations, who included Barbados and major IFC rivals, the Cayman Islands, Bermuda, British Virgin Islands, Panama, Guernsey, Hong Kong and Liechtenstein, to quickly adopt “agreed international standards” to fight against tax evasion.

Mr Moscovici described the Bahamas and other listed jurisdictions as the EU’s “top 30” non-cooperative nations, based on the fact that they all featured on at least 10 ‘blacklists’ of EU member states.

Mr Delaney, who served as attorney general under the former Ingraham administration, told Tribune Business that the criteria employed by the EU in ‘blacklisting’ the Bahamas and others “appears to be suspect”.

Questioning what ‘not doing enough’ to combat tax avoidance meant, Mr Delaney said the Bahamas had complied with every global tax information and transparency standard emanating from the likes of the G-7 nations and Organisation for Economic Co-Operation and Development (OECD).

He added that it had also committed to comply with the automatic tax information exchange standard that will take effect from 2018, thus directly rebutting Mr Moscovici’s call for the listed states to adopt “agreed global benchmarks”.

“All I can say to you is that it smacks to me of being quite unfair to the Bahamas, being so arbitrary,” Mr Delaney said of the EU ‘blacklist’, “and more of the same of being dumped on by very subjective and suspect criteria.

“Standards, we understand, are evolving, but when these standards evolve the Bahamas has consistently moved to ensure they’re aligned with best international practices, and that continues to be the case.”

Mr Delaney said the Bahamas had exceeded the OECD’s ‘information upon request’ standard by signing more than 30 Tax Information Exchange Agreements (TIEAs).

And the nation had committed to the automatic exchange of information on a bilateral basis, in compliance with the standards laid down by the OECD’s Global Forum, from 2018.

“Certainly, any listing that purports to be fair and doesn’t recognise that the Bahamas is in line with all current prevailing international standards, and has committed to be in line with evolving information exchange standards, any listing of the kind you reference has to treated with a big dose of salt as being suspect,” Mr Delaney told Tribune Business.

“The Bahamas, like any jurisdiction, cannot unfortunately help the fact they will be unfairly criticised. The only thing we can do is show we’re responsible, and responsive to any fair standard, and the Bahamas has done exactly that.”

Mr Delaney was backed by K P Turnquest, the Opposition’s deputy leader and finance spokesman, who agreed that the EU ‘blacklist’ should not be taken too seriously.

“I take it with a grain of salt,” Mr Turnquest told Tribune Business. “It is a fact of doing business in the offshore industry that you will be put on these kind of lists because of the perceived lack of transparency in these so-called developing countries.”

However, he urged Hope Strachan, minister of financial services, and Fred Mitchell, minister of foreign affairs, to “be on top” of this latest EU move and “get ahead of whatever bad publicity comes from this”.

And Mr Turnquest suggested that the Bahamas “form a coalition” with other ‘blue chip’ international financial centres (IFCs) on the EU list to raise the matter at the United Nations (UN).

“It is unfair the way they treat these jurisdictions,” he added. “Boy, it doesn’t stop.

“Certainly, it’s another strike on the Bahamas as a fair, clean and transparent jurisdiction for the legitimate and legal conduct of financial services.”

Mr Turnquest continued: “It is a further back hand to the entire offshore industry, which is unfortunate, but to the extent it affects us and there are any potential ramifications for the jurisdiction and the industry, certainly we would expect the Bahamas to respond.

“As the Prime Minister is still the sitting head of CARICOM, he ought to be driving a response through CARICOM to this issue. He’s been driving climate change, which is all well and good, and is a reality, but I don’t know if it’s priority in ensuring our people have a standard of living and way of life.”

Mr Turnquest said the then-FNM administration “took a lot of heat” for the way in which it responded to the 2000 ‘blacklisting’ by the Financial Action Task Force (FATF).

He added that while the resulting legislation and reforms were “not palatable to many”, the Government “had to do what it needed to do” to protect the Bahamian financial services industry.

The FNM deputy leader urged the Christie administration to adopt a similar approach to the EU listing, employing legislation, regulations or even “moral persuasion”, to protect the Bahamas’ reputation.

Yesterday’s EU list seems more symbolic than an actual threat, and there were media suggestions that its publication was designed to distract attention from the ‘tax avoidance/minimisation’ structures that companies have employed in one of its member states, Luxembourg.

Thus far, there appears to be no threat of sanctions or penalties by the EU towards the Bahamas and other listed countries, but the potential to deter European clients from doing business with this nation – and reputational fallout – cannot be underestimated.

The full list is: Anguilla, Antigua and Barbuda, Bahamas, Barbados, Belize, Bermuda, British Virgin Islands, Cayman Islands, Grenada, Montserrat, Panama, Saint-Vincent and the Grenadines, Saint Christopher and Nevis, Turks and Caicos Islands, U.S. Virgin Islands, Andorra, Guernsey, Liechtenstein, Monaco, Liberia, Mauritius, Seychelles, Brunei, Hong Kong, Maldives, Cook Islands, Nauru, Niue, Marshall Islands and Vanuatu.