By K. Quincy Parker Nassau Guardian Business Editor From Caribbean News Now

NASSAU, Bahamas — The Bahamas has rejected outright an attack by UK publication The Economist, which claims The Bahamas’ choice to implement automatic exchange of information (AEOI) through bilateral agreements is an intentional “go-slow approach” based on “fabricated confidentiality concerns” designed to allow The Bahamas to “share data with as few countries as possible”.

The scathing article seeks to eviscerate The Bahamas on its position with respect to AEOI, and doubles down on the disputed assertion that The Bahamas is “a tax haven of long standing”.

The article also misrepresents the number of tax information exchange agreements (TIEAs) The Bahamas has signed, charging that TIEAs between The Bahamas and other so-called tax havens “are meaningless”.

Minister of financial services Hope Strachan suggested that the article was really an attempt by the Organization for Economic Cooperation and Development (OECD) to force The Bahamas to implement its common reporting standard (CRS) through the Multilateral Convention Agreement rather than the bilateral agreement method of AEOI, under which The Bahamas is due to begin automatic exchange in 2018.

Heads up

Strachan explained that Bahamian authorities had gotten a heads-up about the impending publication of the article, and were afforded – through the good offices of an intermediary – an opportunity to respond to the tone of the article. The magazine reportedly sent the ministry of financial services a set of questions about the AEOI regime and timelines.

“The interesting thing about it was that the article was apparently already written and they gave us 24 hours within which to answer the questions they submitted. We answered those questions very frankly… and submitted those within the deadline that they set. We suspected – which turned out to be true – that they had already written that article and that no matter what we wrote or how we responded to those questions, it would make very little difference,” she said.

The minister said the writer of the article, who is unnamed on the website, appears to have cherry-picked bits and pieces from the ministry’s statement.

“The fact of the matter is, the way [the article] tried to paint The Bahamas is totally unfair, and untrue. It’s wrong. We have committed to CRS, to the automatic exchange of information. We did it based on the fact that the OECD provided us with a choice: the choice was either you sign the Multilateral Convention Agreement, or you go by way of a bilateral approach. It was a choice, and we made the choice to go bilateral because we thought that it better suited our tax regime, our tax structure,” she said.

“I think what we are seeing here is the attempt of the OECD or persons within the OECD to force us into the multilateral agreement approach. It is clear that that is the preferred approach by them, but we are not the only jurisdiction that has chosen to go bilateral,” she asserted.

Strachan asserted that the legislation to allow The Bahamas to engage in bilateral AEOI will be finalized in draft form within the next two weeks, and would then go to the industry for consultation before passage, most probably in line with the October 2016 timeline. Once the legislation is passed, The Bahamas will then go out to negotiate its bilateral AEOI agreements, similar to the 33 tax information exchange agreements (TIEAs) that are already extant.

“We have a strategic plan that we are following, with timelines, and we have so far successfully been able to hit those timelines. We are really not sure why it is that these attacks are coming, but we suspect that it is because the multilateral approach is preferred. But the fact of the matter is we have committed to the bilateral approach and we have to show the OECD that we can do it and that we can do it successfully,” she said.

Strachan pointed to the implementation of the US Foreign Account Tax Compliance Act (FATCA), which was successfully implemented in The Bahamas relatively smoothly.

“The fact that we had to implement FATCA allowed us a platform where we can implement the CRS and automatic reporting.

“So we are comfortable with our position, and we are going to continue to work hard and assiduously towards it. It’s unfortunate that that picture was painted by that article, because it really does not reflect what we are doing in The Bahamas towards automatic exchange,” she said.

Meanwhile, Bahamas Financial Services Board (BFSB) CEO Tanya McCartney pointed out that the board is actively engaged with the ministry of financial services as project lead and the government’s technical team to ensure that The Bahamas meets it commitment to a 2018 implementation date for AEOI.

“We know that an aggressive schedule with measurable goals and timelines has been set to ensure that we demonstrate this commitment to the OECD and the wider international community. Draft AEOI/CRS legislation is currently being finalized. Once this is done, BFSB will facilitate the requisite stakeholder engagement before the finalization and enactment of the legislation.

“Further, we are committed to developing and marketing tax compliant products and services. Moreover, The Bahamas has consistently demonstrated its commitment to tax cooperation as evidenced by our 33 TIEAs. Ultimately, our strong regulatory framework is a key component of our overall value proposition as a responsible international financial center which will are committed to maintaining,” McCartney said.

No respect

Titled “The Bahamas cocks a snook at the war on tax-dodgers”, the article presents a biting look at how The Bahamas plans to approach AEOI. Even the title is an attack: Cambridge University Press’ Cambridge Advanced Learner’s Dictionary & Thesaurus © defines “cock a snook at” as “to do something intentionally to show you have no respect for someone or something”.

The article describes The Bahamas as chief among “recalcitrants” with respect to the Organization for Economic Cooperation and Development (OECD) Common Reporting Standard (CRS). The CRS is, according to The Economist, becoming the global benchmark for sharing data, under which regular and systematic exchange is meant to begin in 2017. The Bahamas has agreed to begin exchanging information in 2018 using the bilateral approach.

The Economist characterized it this way: “Most of the 100-plus countries in the CRS have signed a “multilateral convention” designed to speed up the data-swapping. Although The Bahamas is in the CRS, it is one of a few that have elected instead to strike deals one country at a time — and then only with those with which it already has special data-exchange agreements known as TIEAs. The Bahamas has only 26 of these (not counting TIEAs with other tax havens, which are meaningless). That leaves a lot of gaps. It has only two with Latin American countries, which provide the bulk of its offshore business. It says others are in the works.”

The article accused The Bahamas of attempting to justify what it called a “go-slow approach” by citing concerns over the security of data passed to other tax authorities, and – in the magazine’s words – arguing the bilateral approach is better suited to countries like The Bahamas, which have with systems based mainly on indirect taxes.

“This looks like an excuse to drag its feet. The OECD has a team policing CRS members’ data-security safeguards, which even the Bahamians admit mitigates some of the worries. Mark Morris, an independent tax expert, says the Bahamas has a “disingenuous ‘compliant non-compliance’ strategy”: join the CRS, but choose the clunkier bilateral method and use fabricated confidentiality concerns to share data with as few countries as possible,” the article said.

Strachan said, “We reject that outright. We chose the bilateral approach because it was a choice that the OECD offered. We are not the only country that made that choice. And we chose it based on a genuine consideration that, based on our tax regime, this was the right approach for us.”

Some have questioned why, if the OECD established a platform and gave two options – the MCA or the bilateral approach – jurisdictions are being attacked for choosing one of those options.

“That’s more than disingenuous,” Strachan said.

Crusader

Even more cuttingly and in what some say is a purposely vague fashion, the article characterizes what it admits is the BFSB’s assertion at international industry events that it will move very cautiously on AEOI as “a veiled invitation to park undeclared money [in The Bahamas]”.

The article continues, “Others say The Bahamas’ talk of its strategy being key to its finance industry’s ‘survivability’ shows it believes it can carry on only by accepting undeclared funds. Tax-dodgers may also be attracted by the fact that The Bahamas is one of the few places where tax evasion does not count as a ‘predicate’ (underlying) offense for money-laundering charges.”

The article also says the situation “worries” the OECD’s tax-transparency crusaders, and says Pascal Saint-Amans, OECD head of tax policy, was “concerned enough to fly to Nassau last year to address the Cabinet”.

The article quotes Saint-Amans as saying, “I told them if they play games, they will lose. Their reputation will be hit.” The supposed lack of a response reportedly left him “extremely disappointed”.

Strachan, however, said that while Saint-Amans was in The Bahamas, what was said in the article “was not the approach that he took”.

“The article gives the impression that he was somewhat chastising the government, and that when he came to The Bahamas that in some way he came to warn us; that was not the approach he took when he came here. The approach was more informational, in terms of providing us with the relative advantages to the multilateral approach.

“The impression given was that there was some warning, and that we have somehow not acted appropriately after that warning, and that is absolutely not true. It’s not true,” Strachan said.

Still, according to The Economist, Saint-Amans says he now plans to write the government a stern letter.

The minister said she had been under the view that while Saint-Amans stated a preference for the multilateral approach, there was no disagreement with the fact that The Bahamas had opted for the bilateral approach. The OECD executive, she said, just stressed the importance of The Bahamas hitting its commitments.

“His demeanour was consistent throughout his visit,” she said.

Original Source: Nassau Guardian

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