(Tribune242) -- THE Bahamas has been urged to assess the feasibility of a corporate income tax without being forced into it by the Organisation for Economic Co-Operation and Development (OECD).
Tanya McCartney, the Bahamas Financial Services Board's (BFSB) chief executive, told Tribune Business that this nation needed to review corporate income tax and other reform options "outside" the OECD's Base Erosion and Profit Shifting (BEPS) initiative. And she emphasised that tax reform had to be analysed "in the broader economic context" beyond just the financial services sector, so that other industries and the economy as a whole benefited from whatever was implemented.
Ms McCartney spoke out amid concerns that compliance with the OECD's BEPS initiative may require the Bahamas to implement a low-rate tax on corporate (company) income, something that K P Turnquest, the deputy prime minister, conceded this nation "may have to look at".
"While it may not require us to, it may behove us to," the BFSB chief executive replied, when asked whether the Bahamas was being forced to examine such a tax. "Outside of BEPS, we have to determine whether that's [a low-rate corporate income tax] something we need to do separate and apart from this initiative.
"Industry, for some time, has been working on a proposal for a review of our tax structure. We've shared our views with the Government, and they have the matter under review and consideration as to how to proceed with a review of our tax system."
Tribune Business last week detailed the potential dilemma facing the Bahamas as it seeks to meet a December deadline to state how it plans to comply with the OECD's initiative, which is intended to crack down on often-legal tax avoidance schemes used by multinational companies.
The Bahamas has to adopt four out of '15 actions' to meet the minimum threshold for compliance. The four that the Bahamas will likely select, according to a Bahamas Financial Services Board (BFSB) statement, are: (Action 5): Countering Harmful Tax Practices; (Action 6): Treaty Shopping; (Action 13) Transfer Pricing Documentation and Country-by-Country Reporting; and (Action 14) Dispute Resolution.
However, financial services industry sources told Tribune Business that compliance with Action 5 is especially problematic for the Bahamas.
The OECD considers a corporate tax rate of 10 per cent or less to be a 'harmful tax practice', but the Bahamas - with no income taxes of any kind - has an effective corporate tax rate of 'zero' because it simply does not have this system.
As a result, and with the OECD and its G-20 and European Union (EU) members threatening 'blacklistings', Tribune Business understands there is significant concern over how the Bahamas will comply and whether it will be forced to adopt a corporate income tax.
"This is what we are still hoping for and advocating for as an industry," Ms McCartney told Tribune Business. "The review of the tax structure to determine how best to rationalise it, or consider whether some form of corporate tax is feasible; it may be an option.
"Outside of BEPS this has to be under active consideration. We ought to look at it. It may be an opportunity to review our existing Business License tax regime."
Chester Cooper, the PLP's deputy leader and Exuma MP, has also suggested that the Bahamas revise its Business License fee, which is levied on a company's gross turnover, as part of its strategy to achieve BEPS compliance.
Ms McCartney, meanwhile, acknowledged that tax reform could not focus on the benefits/disadvantages that would accrue to just one industry such as financial services.
"We need to look at it in the broader economic context, not just confined to financial services," she told Tribune Business. "We cannot consider it solely in the context of financial services. The preliminary work we have done in industry sought the broader views of other sectors.
"The next thing we want to see dialogue and broad-based discussion on is a review of our tax system. We'd love for that dialogue to commence. We believe that if we start that dialogue now it will be consistent with a proactive approach to reposition the economy as well as the sector."
Some financial services executives, including Paul Moss, principal of Dominion Management Services, have long argued that the Bahamas should introduce a low-rate corporate income tax, as this would enable the country to shed its 'tax haven' image and break into the market for investment and double taxation treaties.
Ms McCartney, meanwhile, confirmed that BEPS and the Bahamas' position on it was "initially raised" with the Christie administration, but nothing was done and the matter has now passed to its successor to be dealt with.
Many are likely to have considered BEPS as having little relevance to the Bahamas, given that this nation has no corporate - or any form of - income tax, and the initiative is targeted more at institutional business and multinational companies. This country's financial services industry is focused largely on private wealth management and estate planning for individuals and families.
However, yesterday's 'Paradise Papers' revelations, based on leaked documents from the international financial centre (IFC) specialist law firm, Appleby, are likely to intensify pressure on the Bahamas and others to join 100 other nations in complying with BEPS.
Ms McCartney said BEPS was an initiative that has been "in train for a very long time", and she added: "The Bahamas has to be proactive in achieving global regulatory standards.
"Very often we find ourselves reacting and assessing compliance after the fact. It's important for us to get ahead of initiatives such as BEPS."
Concerns about being 'blacklisted', she explained, frequently distracted the Bahamian financial services industry from focusing on growth, innovation and service delivery - factors that would improve its competitiveness and ability to attract business.