Bahamas Urged: ‘Resist’ New Global Tax Pressure

A former Bahamas Financial Services Board (BFSB) chairman yesterday urged the Government to resist “disingenuous” international pressure, after this nation was accused of single-handedly undermining the global “war on tax dodgers”.

Michael Paton told Tribune Business that the Bahamas needed to remain steadfast and meet the commitments it has made to implement the Common Reporting Standard (CRS) for automatic tax information exchange on a bilateral (country-to-country) basis by 2018.

He warned that it would be “a big mistake” for the Bahamas to alter its position in response to an article in the respected international magazine, The Economist, which described this nation as ‘The Holdout’ on automatic tax information exchange.

The article, published both in print and electronically on September 10, 2016, described the Bahamas as “chief among the recalcitrants” who had not agreed to the automatic exchange of tax information on a multilateral basis.

Agreeing to this would require the Bahamas to exchange tax information on the financial services industry’s foreign clients with all signatory countries – more than 100 – instantaneously.

Instead, the Bahamas has agreed to implement the CRS on a bilateral basis, meaning it will negotiate agreements one country at a time with nations seeking to automatically exchange tax information with it.

Even though the Organisation for Economic Co-Operation and Development (OECD), the global tax information overseer, has agreed that countries are free to determine their approach – bilateral or multilateral – the Bahamas has been portrayed as a non-compliant threat to the international order.

The Economist, whose target readership is the global financial and business community, just the sort of high net worth clients this nation wants to attract, accused the Bahamas of a “go-slow approach” to meeting its international tax information exchange commitments.

“This looks like an excuse to drag its feet,” the magazine, which has a global circulation, said of the Bahamas’ bilateral approach, in an article that said: “The Bahamas cocks a snook at the war on tax dodgers.”

It then quoted a ‘Mark Morris’, who its described as an ‘independent tax expert’, who accused the Bahamas of adopting a “disingenuous ‘compliant non-compliance’ strategy”.

This was described as the Bahamas joining the CRS, but using the bilateral approach to delay automatic tax information exchange, while using “fabricated concerns” about whether other countries would properly protect the shared data to agree deals with as few nations as possible.

Given the magazine’s standing, the article’s depiction of the Bahamas as a non-compliant, non-cooperative jurisdiction threatens to undermine its international financial centre reputation – potentially scaring off both current and future business (see other article on Page 1B).

Mr Paton, though, called on the Government and financial services industry to provide a resolute response, and not be intimidated by what he described as crude pressure intended to force the Bahamas to adopt the ‘multilateral’ approach.

He also accused The Economist of basing its article on “a false premise”, namely that the Bahamas would only agree to automatic tax information exchange with those 33 countries with which it has existing Tax Information Exchange Agreements (TIEAs).

“What’s their problem with that?” Mr Paton said of The Economist’s criticism of the Bahamas’ bilateral approach. “That’s an agreed approach to the adoption of the CRS.

“And no one is saying the Bahamas is only going to enter into automatic tax information exchange agreements with those countries it already has a TIEA with. That is clearly not true.

“That is a false premise right there, and it is very disingenuous for them to say that. Nowhere has the Bahamas come out officially and said that. It’s certainly not the assumption that the Bahamas Financial Services Board and the industry are operating on.”

Reiterating that the OECD had itself approved the CRS implementation approach that the Bahamas is taking, and which is also being used by the likes of Hong Kong and Singapore, Mr Paton said the position being taken by Morris, the ‘tax expert’, was “very loaded and disingenuous”.

“The Economist is a well-respected publication, so of course I’m concerned,” Mr Paton told Tribune Business of the potential repercussions from the article.

“Do I think it will have a real impact? It will only have a real impact if the Bahamas Government does not react in a way that is measured and considerate.

“The Bahamas stated a position, and it would be very unwise to resile from that position. The objective of the industry now is to hit the [implementation] milestones. I’d like to see the enabling legislation in place by the end of the year, and there’s nothing to stop the Bahamas initiating automatic tax information exchange agreement negotiations now.”

Mr Paton further blasted The Economist article as “hypocritical”, and suggested the Bahamas was being singled out because of a perception that it was less able to defend itself than the likes of Singapore and Hong Kong.

“If they think that’s going to make the Bahamas turn and agree to the multilateral convention, I’d be very surprised,” he added.

“I’d counsel against doing that. We’ve taken a legitimate, correct position that’s been endorsed by the OECD itself. I’d say stick to our position. We have nothing to be apologising for. We’ve given our formal commitment, and are well within the timelines to do what needs to be done.”

Apart from Mr Morris, the only other source quoted in The Economist article was Pascal Saint-Amans, the OECD’s head of tax policy.

He said the Bahamas had failed to respond to a presentation he gave to the Christie Cabinet last year, and told the magazine: “I told them if they play games they will lose. Their reputation will be hit.”

Mr Saint-Amans said he had been left “extremely disappointed” by the Bahamas’ response, and was now planning to send the Christie government what was described as a ‘stern letter’.

Mr Paton, though, slammed Mr Saint-Amans for “not being honest”, reiterating that the Bahamas was implementing the CRS via an approach his own organisation, the OECD, has already endorsed.

“The OECD has already said we’re well within our rights to do what we’re doing,” he added. “This sounds like someone’s got an axe to grind.

“If they’re trying to put the pressure on, resist it. We’re well within our legal rights. Until such time as we don’t meet a milestone, they don’t have a right to criticise…

“My advice to the Government and the industry would be to stick to the position taken. It’s legitimate, and as long as we meet the implementation milestones, we’re good. It would be a big mistake to change tack now.”