12/05/20

BAHAMAS: 'Don't Let Eu Dictate Our Taxation Policy'.

As published on tribune242.com, Monday 11 May, 2020.

The Bahamas must show it “will not be dictated to” by the European Commission’s “economic terrorism” over its tax structure, a local financial services provider has blasted.

Paul Moss, principal of Dominion Management Services, told Tribune Business that The Bahamas is not obligated to act as a “tax collector” for the commission and 27 member states of the European Union (EU) to which it is responsible.

Arguing that The Bahamas is “at liberty as a sovereign nation” to determine its own forms and methods of taxation, Mr Moss said that while he believed introducing corporate income tax represents the way forward for this nation it should not be forced into taking this route by the EU to meet that bloc’s objectives.

The Dominion Management Services chief hit out after Carl Bethel QC, the attorney general, last week revealed that a senior member of the European Parliament had informed Maria O’Brien, The Bahamas’ ambassador to the EU, that Europe “has its foot on The Bahamas’ neck and will not take it off until corporate income tax is implemented”.

Mr Bethel told Tribune Business that the European Commission, the EU’s civil service, is using the anti-financial crime initiative of the Financial Action Task Force (FATF) - the global standard-setter in the fight against money laundering and terrorism financing - to mask its true intention towards this nation and other Caribbean states, which is to force them to go further than recognised world standards.

The Bahamas is currently in the process of “exiting” the FATF’s enhanced scrutiny of states considered to have deficiencies in their anti-money laundering and terror financing regimes, with the latter’s team having been due to make a “site visit” to the country by this month to ensure all regulatory and legislative reforms had been properly implemented.

The government had been anticipating that the visit would give The Bahamas a clean bill of health, thereby paving the way for the FATF to delist this nation at its next meeting in June.

The COVID-19 pandemic, though, has forced the site visit to be postponed to an undetermined date. This has triggered a chain reaction, dashing The Bahamas’ hopes of being removed from the FATF monitoring list at the hoped-for date, while also sparking this nation’s inclusion on the EU’s blacklist.

The European Commission, explaining its rationale for placing The Bahamas on its “high risk” listing, confirmed in its official statement on Thursday that the COVID-19 enforced delay to the FATF’s “site visit” meant it “cannot confirm” whether the country has resolved the deficiencies in its anti-financial crime regime.

This was affirmed by the Bahamian embassy in Brussels, which said the “solution” to escaping the commission’s blacklist is totally dependent on the country exiting the separate FATF process. It added that the Commission, recognising COVID-19’s impact on The Bahamas’ “exit” from the FATF listing, was “delaying the implementation” of its blacklist until 2020 as a concession to affected countries.

Ms O’Brien met twice last week with John Berrigan, the EU Commission director-general in charge of financial stability, financial services and capital markets, on May 6 and May 8 after it was revealed that The Bahamas would be included on the blacklist.

In response to The Bahamas’ concerns about the lack of consultation and notification prior to the Commission’s actions, Mr Berrigan responded that the issue had been raised between the two sides “in the margins” of the last FATF meeting in February 2020.

“The EU advised The Bahamas that if the country remained on the FATF ‘grey list’, it was almost 100 percent certain that The Bahamas would be on the EU ‘blacklist’ as well,” the Bahamian embassy noted of Mr Berrigan’s response.

“Therefore, The Bahamas should not have been too surprised that the country is on the EU Commission’s list as the EU made it clear that the FATF list would be the baseline. Once removed from the FATF, The Bahamas will be removed from the EU list unless they can identify a particular EU problem, which is not very likely.”

Mr Bethel, though, last week voiced concerns to Tribune Business that the EU may make additional demands of The Bahamas beyond merely escaping the FATF listing. This prompted a furious reaction from Dominion Management’s Mr Moss, who said The Bahamas had no choice but to “stand up and fight” - with the Prime Minister leading the way - over any pressure to reduce a corporate income tax.

“This calls for a clear and demonstrative statement by the chief executive of this country [Dr Hubert Minnis] to the EU,” Mr Moss told Tribune Business. “He has to state to them that, on the issue of taxation, that is left to the sovereign will of any nation, and The Bahamas will not be dictated to with regard to this issue.

“It’s not for them to say to us that this is what we ought to do. We are sovereign. We have a parliament. Even though I’m of the view, and there’s no question in my mind, that we ought to go to a corporate income tax, we ought to be told or forced to do so.”

The push for a Bahamian corporate income tax reflects similar demands from individual EU states such as the Netherlands, which last year demanded that The Bahamas implement a corporate income tax at nine percent or higher as the price to escape its national tax non-cooperation “blacklist”.

However, Mr Moss and others in the Bahamian financial services industry have argued that a low-rate corporate income tax may be the way to go, as it would remove the so-called “tax haven” stigma and enable this country to enter into double taxation agreements with other nations.

Reaffirming this belief, Mr Moss nevertheless said The Bahamas should adopt such a tax for its own benefits and not be forced into it by the EU or others. “This where the torch has to be,” he added. “This is the way forward. There’s no escaping, no way around it. I’ve been saying for a long time it makes no sense putting it off and kicking the can down the road.

“Whether this Parliament has the impetus to do it is another question, but this is where we have to go in the next five years. We will be there. We have to take time to carefully craft a strategy that we comprehend to be in the best interests of this country. A three to five percent corporate income tax rate ought to be where we have to go.”

Reiterating that it was “unacceptable” for the EU to dictate to The Bahamas what its tax structure and system should be, Mr Moss said the commission’s action showed that the 27-nation bloc will “continue to come after us” regardless of whatever laws were passed or reformed to address its concerns.

“All we’ve done for the last 20 years is pass laws to suit their purpose all to the detriment of the financial services industry,” he added, suggesting that while this government and its predecessors talked tough before the Bahamian people they always ended up giving in to the demands of the EU and others.

“They just capitulate every single time. We have to stand up and fight, and need leaders to stand up and fight, saying they’re not going to accept it. International law prohibits you from forcing us, and telling us, how to tax. It’s essentially an act of terrorism to say they want us to change taxation, and put their feet on our neck.”

Mr Moss reiterated that the “only way” to counter the likes of the EU was for The Bahamas to band together with international financial centres (IFCs) subject to similar attacks to ensure individual nations were not isolated and picked off one by one.

Besides crafting a common defence strategy, he also called on The Bahamas to reach out to the US and “use them as our protectors” against the Europeans.