EU

EU Blacklist: What has really changed?

  • Bahamas remains on grey list

  • Strategic not myopic approach to financial services

  • New standard imminent and inevitable

  • Government kicking can down the road

  • Time to govern for Bahamians

The recent announcement by the European Union (EU) that The Bahamas remains on its grey list and has not been blacklisted is a welcomed development. This follows the removal of The Bahamas from the EU blacklist to the grey list in May 2018 after the government made several commitments to carry out reforms.


While the temptation to embark on celebratory exercises and seek political brownie points may seem attractive to the government, it would be prudent not to do so. In reality, The Bahamas’ status as a country on the EU grey list has not changed since May 2018.


According to the European Commission, 25 countries from the original screening process have been cleared; The Bahamas is not one of those countries. The Bahamas remains on a grey list of countries that will continue to be monitored in 2019 and is listed among 34 jurisdictions that have already taken steps to comply with the requirements under the EU listing process. The EU has directed that jurisdictions on this list must complete this work by the end of 2019, to avoid being blacklisted next year.


The Democratic National Alliance (DNA) reiterates that the current administration continues to adopt a myopic approach to the second pillar of our economy. The government has taken the view that the avoidance and removal from adverse listings by international agencies is their priority over developing a growth action plan for the industry. They are squandering an opportunity to truly govern for the Bahamian people by rebranding, refocusing and reviving the financial services industry.


As we have seen in times past, the goal posts will continue to shift as new standards will be established to undermine the value proposition of The Bahamas as an International Financial Centre (IFC). It would be naïve for the government not to realize that the next standard or hurdle is imminent and inevitable. We submit that it is even more egregious for the government to adopt a reactive approach and kick the proverbial can of comprehensive tax reform down the road.  It is an open secret that the ultimate goal of certain global organizations is the demise of the Bahamas' financial services industry. The government cannot be complicit in this endeavor by continuing to capitulate to the extra territorial demands of multilateral ‎bodies until we have no financial services business to regulate. 

 

The discussion about a global taxation standard has commenced and it is only a matter of time before this becomes the new agenda. In the interim, The Bahamas must be proactive and strategic in shedding the tax haven label while articulating a vision for the future of our financial services industry.


It is common knowledge that we have a tax system that is regressive and oppressive to the detriment of the masses. The middle class and vulnerable in society bear the brunt of the tax burden imposed by a government that has worsened the misery index. The question on the lips of Bahamians is when will this FNM administration start governing for them rather than special interest groups and international agencies?


Arinthia S. Komolafe, Leader

Democratic National Alliance


EU and OECD: Wrong Impetus for Reform

  • Financial services under constant pressure

  • Agility of Government questioned

  • Long term strategy required for Financial Services

  • Domestic-driven comprehensive tax reform long overdue

  • Proper consultation and details required

The Bahamas' financial services industry has been under intense pressure over the last year. During this period, we have seen The Bahamas placed on adverse listings or blacklists by the European Union, Organization for Economic Cooperation and Development (OECD), Financial Action Task Force (FATF), United Kingdom, United States of America and The Netherlands.

Observers of the global landscape for financial services are aware that the second pillar of the Bahamian economy has been under assault for over two decades with the goal posts for compliance being moved constantly and continuously. The end goal of the implementation of new standards and placement of additional hurdles for International Financial Centres like The Bahamas seems apparent to industry professionals.

This could not have been more obvious than the Netherlands' recent inclusion of The Bahamas on a blacklist of tax havens with no corporate tax or corporate tax rates lower than 9%. This took place while the Government was working around the clock to implement sweeping changes to our tax system in order to meet an EU imposed deadline. The Netherlands Government in this instance, indicated that the list was subject to consultation from 25 September to 22 October 2018. It is concerning that adverse listings of this nature and other blacklisting initiatives often catch the Government by surprise. This raises questions about our level of engagement and the agility of relevant government ministries or agencies in keeping up with global trends and initiatives.

It is time for the Government to wake up to the reality that the pressures will not cease, and the goal posts will continue to shift. A reactive approach to new standards set by international bodies and other jurisdictions is myopic and demonstrates a lack of a long term plan or vision for the financial services industry and the Bahamian economy as a whole.

Long overdue reforms that are required to usher The Bahamas into the 21st century cannot be ignored or delayed until external pressures force the Government into these initiatives. The recent press release on financial sector reform is a prime example of this phenomenon. We have once again kicked the proverbial can of comprehensive tax reform down the road thereby ignoring the need to move from the current regressive tax system to a more progressive and equitable one. The current system places undue and unfair burden on the working and middle class as well as those who can least afford it.

While some clarity has been provided on the basis for the calculation of business license tax with a link to positively rated taxable supplies, it does not address the main concern of the business community that the tax is imposed on turnover rather than profits. This is especially relevant for high turnover and low margin businesses.

It is imperative that the actual details underlying the proposed changes to our tax regime are provided to stakeholders and the public for scrutiny and feedback. We urge the Government not to shove this down the throats of domestic entities in the same manner as the significant increase in the VAT rate. There must be transparency and disclosure in relation to the criteria for determining the proposed new taxes and/or fees.

We welcome any initiative aimed at reducing the cost of doing business and improving the ease of doing business in The Bahamas. It is our hope that the Government's agenda and priorities will someday not be dictated or determined by external factors but rather a coherent vision which has at its core the best interest of the Bahamian people.

Arinthia S. Komolafe

Deputy Leader, Democratic National Alliance


EU Grey List: Welcomed but Not Out of Woods

• We must look beyond December 2018
• Bahamian people deserve to know commitments made to EU
• Government must deliver on commitments
• Prudent decisions and proper consultation essential

The news that The Bahamas has been removed from the European Union’s (EU) list of non-cooperative tax jurisdictions is welcomed. According to a press release issued earlier today, The Bahamas has been moved from Annex 1 (blacklist) to Annex II (grey list) by the EU.

While this is a notable development, we are not out of the woods yet and there is much work to be done to ensure that The Bahamas is totally removed from any adverse listing published by the EU. This is bearing in mind that countries on the grey list can be moved back to the blacklist if they fail to honor their commitments.

The rationale for the addition of The Bahamas to the grey list is that commitments have been made by The Bahamas at a high political level to remedy EU concerns. It is imperative that these commitments are shared with the Bahamian people in the spirit of transparency and accountability. It is noteworthy to state that several jurisdictions have consented to the publication of their commitment letters on the EU’s website thereby providing their people with access to commitments made on their behalf.

The clock is now ticking as the December 31, 2018 deadline for delivering on our commitments to the EU is fast approaching. We are hopeful that this impending deadline will not result in rushed or imprudent decisions and the ditching of proper consultation with stakeholders and the Bahamian people. In the days ahead, the Bahamian people will be looking to the Government to lay out its comprehensive plan to ensure our removal from the EU grey list. This should include the approach to be taken in addressing the fair taxation criterion and clarify the framework for rectifying the economic substance and ring fencing issues identified.

We implore the Government to look beyond the upcoming deadline and develop a comprehensive Financial Services Growth Action Plan (FSGAP) which will reposition The Bahamas as a premier international financial centre. Our focus must extend beyond removal from blacklists and compliance with international standards to strategic planning for the creation of a thriving financial services industry. The global landscape for financial services has changed and continues to evolve; The Bahamas cannot afford to be left behind.

The international pressures we face present us with a unique opportunity to re-imagine, reform, retool and rebrand our financial services industry. We must look at the bigger picture and the Government must not be myopic in its responses. The ultimate objective must be to place the interests of the Bahamian people ahead of all other interests. We stand ready to assist the Government in a non-partisan effort in the national interest.

Arinthia S. Komolafe
Deputy Leader, Democratic National Alliance

Re: Removal from Blacklist

The decision of the European Union Code of Conduct Group (COCG) to recommend to the Economic and Financial Affairs (ECOFIN) Council that The Bahamas should be removed from the list of non-cooperative jurisdictions for tax purposes is a welcome development. The announcement that our removal from the blacklist is expected to be approved and made official by the ECOFIN Council by May 25, 2018 is good news.

The short period of time between the inclusion of The Bahamas on the infamous blacklist and the COCG's recommendation for The Bahamas' removal suggests that we ought not to have been placed on the list in the first place. The impact on our nation's reputation because of the EU's action cannot be quantified or ascertained. However, we are optimistic that this will also serve as a wakeup call to the Government to ensure that there is no miscommunication or inadequate responses to requests for information in future.

Our efforts must now be channeled towards meeting the December 31, 2018 deadline for honoring the commitments made to the EU. More importantly, we must look beyond the impending deadline to develop a robust Financial Services Growth Action Plan which articulates our strategy for the growth of this vital sector going forward.

We cannot always be in a reactive mode to international pressures on our financial services industry; rather we must chart our own course for the future. The ever-changing goal posts of international agencies and groupings demand that our focus is much more than avoiding or being removed from one list after the other. It is time to embark on initiatives for our own sake and place us on a path to progress and prosperity. These initiatives must involve a deliberate strategy to shed the tax haven label currently attached to The Bahamas.

We are hopeful that the Government will take heed and we stand ready to assist in this regard.

Arinthia S. Komolafe, Deputy Leader
Democratic National Alliance

EU Blacklist: Did the Government Drop the Ball?

EU Blacklist: Did the Government Drop the Ball?

While multilateral and international agencies are known to engage in the continuous shifting of the goal post in relation to tax cooperation or compliance, the EU’s commentary begs the question: Did the Government of The Bahamas drop the proverbial ball in this matter?

EU Blacklist: Time to Change our Approach

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