Euro Blacklisting To End This Week?
The Bahamas could be removed from the European Union’s (EU) ‘blacklist’ as early as this Thursday, with the Government hoping to at least get “an indication” of delisting progress.
K P Turnquest, Deputy Prime Minister, told Tribune Business that the Government was yesterday “following up” with EU officials on the 28-nation’s ‘Code of Conduct Group’ to determine whether the Bahamas removal will happen on April 12.
He revealed that the Government at least hoped to “satisfy” the demands of the EU’s technocrats at Thursday’s meeting, an achievement that would mean the Bahamas’ delisting was a relative “formality” when the bloc’s finance ministers meet on May 25.
“That is our hope,” Mr Turnquest said of the April 12 meeting. “They [EU officials] had indicated when we were over there they would have a meeting on the Friday following our meeting, and they were hoping to put our issue on the agenda.
“We did not make it, and the next available opportunity is April 12. We’re following up on that, and hoping to get some success there. If not, we’ll be moving on to the full EU council agenda on May 25.
“We’re hoping we’ll be dealt with on April 12. If not in full, at least the technical committee are satisfied, and we move on to the full ECOFIN (finance ministers) on May 25, which will then hopefully be a formality in terms of a review.”
Such an early delisting, if the EU does act in the Bahamas’ favour on April 12, would provide a much-needed boost to both the Minnis administration and the Bahamian financial services industry, both of which are badly in need of positive developments.
The EU formally ‘blacklisted’ the Bahamas on March 13, having ‘leaked’ its intentions the previous week, for allegedly being non-cooperative in the fight against large-scale tax avoidance by multinational companies.
The 28-nation bloc complained that it did not receive the ‘high level political commitment’ it had been seeking from the Bahamas to address its concerns, which largely related to ‘ring fencing’ and the absence of ‘economic substance’ requirements for corporate vehicles operating in this jurisdiction.
Mr Turnquest subsequently said letters he had personally signed committing the Bahamas to compliance with the EU’s anti-tax avoidance drive were “obviously not taken into account” in the ‘blacklisting’ decision.
He suggested that miscommunication, and related misunderstandings, had contributed to the Bahamas’ ‘blacklisting’, not least that its ‘commitment letter’ to the EU was signed by a senior civil servant in the shape of acting financial secretary, Marlon Johnson, as opposed to a Cabinet minister.
“We are confident,” Mr Turnquest said yesterday of the Bahamas’ delisting prospects. “As I have indicated in earlier releases, the [EU] technical committee had already indicted we have done everything we need to do, so we are confident we ought to be off the list.
“We’ll see what happens. A lot of factors go into these decisions, technical and political, but we’ll see. I don’t know if we can come off without a full [finance ministers’] meeting in May, but we’re certainly hoping for an indication we’ll be off.”
The Bahamas is seeking to address the EU’s concerns over economic substance/physical presence and ‘ring fencing’, the latter of which involves ‘preferential tax regimes’ for non-resident entities and foreigners, through the Multinational Entities Financial Reporting Bill.
The Bill raised immediate alarm by seemingly enabling the Minister of Finance to eliminate ‘ring fencing’ through the implementation of corporate taxation, on a range of key financial services products, at ‘a stroke of the pen’.
Mr Turnquest, though, subsequently described such concerns as ‘unfounded, and yesterday pledged that the Government would give financial services and private sector feedback full consideration.
“We are listening to industry and we will respond, certainly in co-ordination with the advice we receive from them, in conjunction with the advice we receive from our technical team,” he told Tribune Business.
Michael Paton, the former Bahamas Financial Services Board (BFSB) chairman, is among those arguing that the Multinational Entities Financial Reporting Bill is too complex because it attempts to address the EU’s concerns and the Organisation for Economic Co-Operation and Development’s (OECD) Base Erosion and Profit Shifting (BEPS) initiative in one piece of legislation.
He is calling for the EU’s ‘ring fencing’ fears, and the BEPS country-by-country financial reporting requirements, to be dealt with in two separate Bills.
Meanwhile, acknowledging that tax reform was “a hot button topic”, and corporate taxation in particular a “live conversation”, Mr Turnquest said the Government “welcomes” such debate.
“At the end of the day we want to have the best, most efficient and progressive tax system for our people, and ensure the most vulnerable are not unduly burdened,” he told Tribune Business.
“But, by the same token, it must allow the Government to earn the revenues to provide essential public services and correct the deficits we have had for many years.”
Mr Turnquest added that the reduction/elimination of import tariffs resulting from the Bahamas becoming a full World Trade Organisation (WTO) member would require an “adjustment of the tax system to compensate for any losses” of revenue.
“We stand alert and prepared to do what has to be done to protect the Government’s earnings,” he said.