The recent announcement that The Bahamas is at risk of being included on the European Union’s list of non-cooperative jurisdictions for tax purposes (blacklist) is both surprising and disappointing. According to media reports, the Code of Conduct Group (COCG) intends to recommend to the Council of the EU, the inclusion of The Bahamas on this infamous list.
In the aftermath of the recent efforts made by the Government to avoid the blacklisting of our nation, it is clear that the age-long practice of international and multilateral agencies continuously moving the goal post is still alive. The Bahamas dodged the proverbial bullet when the initial list was published in December 2017 due to the devastating storms that impacted the Caribbean in 2017.
Since then, our Government has signed on to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters and the Multilateral Competent Authority Agreement. The Bahamas also joined the Inclusive Framework on Base Erosion and Profit Shifting (BEPS) December 2017. However, these actions have been presumably deemed inadequate by the COCG.
Having addressed the criteria on Transparency and Anti-BEPS Measures, it remains unclear how the Government intends to address the issue of Fair Taxation as highlighted by the EU. In the EU's assessment of Fair Taxation, consideration is given to the absence of a corporate tax or application of a nominal corporate tax rate equal to zero or almost zero by a jurisdiction.
It is unfortunate that external pressures have put us in a position in which we are being compelled to address our system of taxation and chart the course for the financial services industry going forward. However, we have an opportunity to carry out comprehensive tax reform with due regard for the introduction of a more equitable and progressive tax system for our people.
Tax reform in The Bahamas should not result in an increase in the overall tax burden on Bahamians. The overall net effect of this reform should not complicate the ease of doing business or increase the cost of doing business in The Bahamas for Bahamian businesses. We are already burdened by several taxes, fees and levies without the necessary prudence, accountability or improved infrastructure to show taxpayers. Due consideration should be given to the reclassification or modification of existing taxes. A prime example is the business licence tax which is currently assessed on gross revenue rather than net profit.
The evolving and shifting goal posts for compliance with international standards have nurtured a reactive rather than a proactive approach to our nation’s financial services industry over the years. We have found ourselves in survival mode rather than being strategic in planning for the repositioning of the financial services industry. It is time to turn this around for our own benefit.
Rather than just focusing on the short-term goal of avoiding blacklists, a Financial Services Growth Action Plan (FSGAP) should be developed. This plan must be holistic while leveraging our strengths and the expertise of Bahamian professionals. The DNA stands ready to assist the Government in the development of a plan to ensure financial services growth inclusive of the crafting of a fair and equitable system of taxation for Bahamians.
Arinthia S. Komolafe
Deputy Leader, Democratic National Alliance