“The ball is in the Bahamas’ court” to meet its automatic tax information exchange commitments, a senior industry executive yesterday saying there is “no alarm” about this nation having to alter its approach, reports Tribune.
Tanya McCartney, the Bahamas Financial Services Board’s (BFSB) chief executive, told Tribune Business that the private sector acknowledged the Government may “have to consider a policy change” on how this nation implements the Common Reporting Standard (CRS).
She was speaking after Organisation for Economic Co-Operation and Development (OECD) representatives last week warned that the Bahamas must “take quick action” to avoid being ‘blacklisted’.
Monica Bhatia, who leads OECD’s Global Forum secretariat, said the Bahamas was perceived as “the last tax haven standing” and an “outlier” because it was the sole financial centre of any significance to persist with the bilateral approach to CRS implementation.
Emphasising that the Bahamian financial services industry’s priority was to avoid any ‘blacklisting’, Ms McCartney said this objective meant there was an acceptance the CRS implementation policy may need to change given the increasing pressure from the OECD, European Union (EU) and their members.
“There is acknowledgement that the Government will have to consider whether we meet the requirements of the OECD, and also whether there needs to be a change in policy,” the BFSB chief executive told Tribune Business.
“I do not believe the laying on the table, so to speak, that we need to consider the Multilateral Convention on Tax Matters, caused any alarm. No overwhelming alarm or concern was expressed by industry to the possibility of us having to take a new course.”
As revealed by Tribune Business, the Bahamas is now isolated, and under growing pressure, to bow to international demands that it automatically exchange tax information on a ‘multilateral’ basis, with the EU and its members refusing to accept this nation’s preferred approach.
The Bahamas previously agreed to implement the CRS, the OECD global standard for automatic tax information exchange, via a bilateral approach that involved negotiating agreements on an individual country-by country basis.
However, the OECD and its developed country members have been steadily increasing the pressure on the Bahamas to switch to the ‘multilateral’ approach, requiring this country to negotiate tax deals with all-comers at once.
The Bahamas has been left exposed by the decisions of Hong Kong, Panama and the United Arab Emirates to switch from the bilateral to multilateral approach, which has left this nation as the last international financial centre (IFC) of significance that is sticking to the former.
Tribune Business sources present at last week’s seminar with the OECD said the body had cleverly modified its arguments, and objections, regarding the Bahamas’ choice of the bilateral implementation route.
Given that it had previously approved the ‘bilateral’ route as an option, the OECD knows it is open to charges of ‘hypocrisy’ and ‘goal-post moving’ if it simply demands the Bahamas goes multilateral.
Instead, its officials last week argued that the Bahamas had left it too late to use the bilateral approach to meet its automatic tax information exchange commitments by the September 2018 deadline.
The OECD’s presentation to the Bahamian financial services sector was described as “dripping with sarcasm” by one observer, who said it employed the theme: ‘Why are you always the last guys to comply?’
Its representatives employed the analogy of a high-rise building to describe the Bahamas’ situation, saying that all other countries were taking the elevator to the top via the multilateral approach, and this country was the only one using the stairs.
Several financial industry sources, speaking on condition of anonymity, told Tribune Business that given the EU’s stance and the pressing compliance deadline, combined with this nation’s bilateral ‘isolation’, the Bahamas was unlikely to be able to “hold out”.
Hope Strachan, minister of financial services, appeared to subtly acknowledge this last week when she spoke to Tribune Business, her words effectively laying the ground for a policy shift by whoever is elected as the next government.
Tribune Business also understands that the Bahamian financial services industry, and its various working groups, have already been asked for feedback on the potential impact of switching to the ‘multilateral’ CRS implementation approach.
“My take away from it was this,” Ms McCartney told Tribune Business. “The ball is in the Bahamas’ court to demonstrate it can effectively implement the CRS.
“We have to consider objectively the extent to which we can stand up to scrutiny. If policymakers determine, despite our best efforts, that we are not where we need to be, a policy position will have to be taken.
“The question is: Can we close sufficient agreements in the timeframe we have? Legitimate assessments have to be done by policymakers, and we have to do enough in the best interests of the sector to avoid blacklisting and ensure we live up to our commitments. There is continued agitation for us to consider signing the Multilateral Convention.”
Ms McCartney said last week’s seminar had clarified issues surrounding the CRS’s implementation and provisions, and identified provisions of the Multilateral Convention where the Bahamas could seek to obtain “reservations”.
“Ultimately, whatever we do has to put us in a position to avoid adverse listings,” she told Tribune Business. “There are two things the industry is concerned with. We don’t want to be on any blacklist, and two, we are mindful clients are concerned with data protection and privacy.”
To allay the latter concern, Ms McCartney said the OECD was conducting assessments of all Global Forum members’ data protection regimes to ensure they are up to standard, and will publish a list of those countries that meet the requirements.
A ‘blacklisting’ along the lines of the 2000 listing by the Financial Action Task Force (FATF) would threaten the Bahamas’ reputation and integrity, causing a potential loss of business and impeding access to developed countries’ financial markets.