BAHAMAS: Jurisdiction Largely Compliant On Key Tax Evasion ‘Action’.

As published on tribune242.com, Wednesday 20 April, 2022.

The Bahamas has been cited for just relatively minor deficiencies by an Organisation for Economic Co-Operation and Development (OECD) review of its compliance with a key anti-tax evasion standard.

The Paris-headquartered forum, in a just-published assessment of The Bahamas’ adherence to “action 14” of its Base Erosion and Profit Shifting (BEPS) initiative simply called on this nation to be more transparent when it came to disclosing the mechanisms and processes for resolving tax-related disputes.

Dispute resolution, via the so-called mutual agreement procedure (MAP), is at the heart of “action 14” which is one of the standards that The Bahamas has agreed to abide by. “Jurisdictions should publish clear rules, guidelines and procedures on access to and use of the MAP, and include the specific information and documentation that should be submitted in a taxpayer’s request for MAP assistance,” the OECD said in its assessment of this nation.

“Due to the fact that the Bahamas has not issued MAP guidance, no rules or timelines are in place for requesting additional information for a consideration of a MAP request by the Competent Authority (Ministry of Finance) and for taxpayers to provide such information.”

While The Bahamas had informed the OECD that it was currently drafting this guidance, the report said: “The Bahamas should, without further delay, introduce and publish guidance on access to and use of the MAP, and in particular include the contact information of its Competent Authority as well as the manner and form in which the taxpayer should submit its MAP request, including the documentation and information that should be included in such a request.”

The only other deficiency cited in the OECD report was the fact that tax dispute resolution guidance was not publicly available. “The Bahamas should make its MAP guidance publicly available and easily accessible once it has been introduced. Furthermore, The Bahamas should provide further details in its MAP profile,” the assessment added.

BEPS was driven by the OECD, on behalf of the world’s major developed and industrialised countries, in a bid to crack down on tax avoidance by multinational corporations in a world where the digital economy increasingly facilitates the movement of funds across borders.

The Bahamas has already agreed to sign on to the BEPS Inclusive Framework, and meet the ‘minimum standard’, as part of the OECD’s drive to ensure the profits of such companies are taxed in the country where they are generated. Only major conglomerates, with turnover in the high nine-figure range, are being targeted at present.

Multinational companies often use legitimate tax avoidance strategies to “exploit gaps and mismatches” between different countries’ tax rates and rules, and “artificially shift profits” to low or ‘no tax’ jurisdictions despite conducting no or minimal business there. This enables them to minimise their tax exposure by paying a lower rate than they otherwise would in countries where they do conduct business.

The OECD, in summing up The Bahamas, said: “The Bahamas only has one tax treaty. The Bahamas has no experience with resolving MAP cases, as it has not been involved in any cases. The Bahamas reported that it has no direct tax system and does not impose income, corporate, capital or other direct taxes.

“This specific situation makes it unlikely, under its current tax system, that The Bahamas takes an action that results in taxation not in accordance with any tax treaty it has entered into. However, the Bahamas reported that it is ready to resolve tax treaty-related disputes that would arise after an action being taken by its treaty partner.

“Overall, The Bahamas meets the majority of the elements of the ‘Action 14’ minimum standard. Where it has deficiencies, The Bahamas worked to address some of them, which has been monitored in stage two of the process. In this respect, The Bahamas solved some of the identified deficiencies.”

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