As published on tribune242.com, Wednesday 18 May, 2022.
The Bahamas will lose its position as a digital assets leader and the potential economic “upswing” if it fails to shed its ‘tax haven’ label, a Bahamian financial services provider warned yesterday.
Paul Moss, Dominion Management Services’ president, told Tribune Business that while crypto currencies, blockchain technology and other digital asset forms represent a potential saviour and game changer for the Bahamian financial services industry the opportunity if this country did not get its taxation house in order.
While shrugging off the recent crypto value crash as part of a typical market cycle, he added that The Bahamas needed to preserve its position by getting “ahead of the game” and implement a low-rate corporate income tax that would eliminate perceptions that this nation remains a so-called ‘tax haven’.
With the G-7 and major industrialised countries pursuing the adoption of a global minimum 15 percent corporate tax rate, targeted only at large multinationals initially, Mr Moss voiced fears that The Bahamas - by failing to enact tax reforms to suit its own needs - will give the likes of the Organisation for Economic Co-Operation and Development (OECD) the chance to drive it out of the digital assets space.
“Fundamentally it comes down to how we promote ourselves and present our taxation system,” he told this newspaper. “It appears to me that we’re not prepared to address that issue. We could have all the players, and all the grand games, all of the attractive products, but until we address the issue of taxation we will not see the benefit of an upswing in financial services in the country.
“We don’t seem prepared to do so. We could have the most sexiest products but, at the end of the day, be caught out. We have the opportunity to be ahead of the game. We need to address the issue of corporate income tax in the country to move The Bahamas from being a low tax, offshore, zero tax country to being a low-tax country.
“If we do that we will have a chance, but if we continue to act as we have been for many years, we know what is going to happen, no question about it. I think if we address it, it will certainly help the country. But we don’t seem to have the will and foresight to make these decisions ahead of time for ourselves so that we’re not forced by someone from the alphabet groups that we have to tax our people in a certain way and at a certain amount.”
The Bahamas, buoyed by the presence of FTX Digital Markets, the world’s second largest crypto currency exchange that is building its head office in this nation and organised the recent Crypto Bahamas conference, has sought to capitalise on all this - together with the Digital Assets and Registered Exchanges Act’s legislative platform and the Government’s digital assets ‘white paper’ - to establish itself as a leading jurisdiction in the sector.
The Government has also engaged the Deloitte & Touche accounting firm to study the Bahamian tax system, and implications of the 15 percent global corporate income tax initiative. However, Mr Moss compared all this to “putting spray paint on a car that has no tyres; the tyres are bald” unless The Bahamas makes the necessary reforms to make a clean break with its so-called ‘tax haven’ past.
“We’ll be game for most products in the world as they know we will no longer be considered a tax haven,” he told Tribune Business. “Everything will be transparent, and we will be able to sign tax agreements with every country in the world and make it quite open. Otherwise we’re going to have the same results.
“We have to do our part and address the issues as we must. If we don’t do it, it means we will be in the world and the big players in the G-7 and OECD will see the advances The Bahamas is making, say they want a part of that and then force us to over-regulate the sector like we’ve done in the past.
“We tend to lag behind. Although we are ahead of the game right now, parliaments around the world move very quickly. We don’t have the drafts people to draft the laws. We don’t have draftsmen dedicated to the financial services industry so it’s very easy for them to catch us up and pass us. We have to get ourselves together and have to do it now.’
The Government’s ‘white paper’, entitled The Future of Digital Assets in The Bahamas, seeks to balance signalling to crypto, blockchain and non-fungible token (NFT) providers that this nation is ‘open for business’ with the necessary risk-based regulatory approach to protect the country’s reputation and the interests of investors/consumers.
Indicating The Bahamas’ eagerness to attract blue-chip operators of the same calibre as FTX Digital Markets, one of the world’s largest crypto currency exchanges, who wish to operate in a compliant environment, the paper lists multiple broad-brush goals and policy objectives that the Government wishes to achieve in building a sustainable digital assets sector.
Pledging to work with the Central Bank and private sector to enable Bahamians to invest in digital assets using Bahamian dollars, and thus overcome a key complaint of many locals, the ‘white paper’ also promised to this year establish a Digital Policy Committee and Digital Advisory Panel to advise the Government on how best it can facilitate the sector’s growth via legislative and policy initiatives.
The Committee will be headed by the Prime Minister, be charged with overseeing the attainment of the Government’s digital policy objectives, while the Panel will feature industry and regulatory executives functioning in a capacity that will see them advise the former.
And, perhaps critically, the ‘white paper’ also focused on enabling Bahamian entrepreneurs and workers to exploit digital assets opportunities by providing them with the necessary skills upgrades. It calls for a partnership between the University of The Bahamas (UoB), Securities Commission and private sector to develop crypto asset-related courses, certifications and degrees.
To help finance this, the Government says it is mulling whether to impose a “development and training” levy - sum and mechanism not specified - on “the largest digital asset businesses” to ensure The Bahamas can provide the qualified, well-trained workforce that can help attract other operators to domicile in this nation.