Bahamas faces ‘hostile economic dismantling’


Tribune Business Editor

The FNM’s deputy leader yesterday accused the OECD and other foreign actors of

being “intent on dismantling this country’s economic base in a most hostile way”, after the Bahamas fell victim to a Panama Papers-style leak.

K P Turnquest told Tribune Business that elements in the international community had disregarded the Bahamas’ compliance with all global tax and regulatory initiatives, and now appeared intent on driving it out of the financial services industry.

However, he called for the Bahamas to reassess its ‘no tax’ financial services business model as a way to “meet its detractors head on” and again become “the jurisdiction of choice”.

Speaking after some 1.3 million documents, relating to 176,000 Bahamas-domiciled companies, trusts and foundations were allegedly ‘leaked’ from the Registrar General’s Department’s Companies Registry, Mr Turnquest took aim at the forces seemingly ranged against this nation.

“It is clear that there are international interests unconcerned with the facts, or the tremendous efforts the jurisdiction has been engaged in to keep pace with the changing landscape, but instead intend on dismantling this country’s economic base in a most hostile way,” he told Tribune Business.

But, rather than simply complain and try to resist, a strategy that many believe will ultimately be unworkable for the Bahamas, Mr Turnquest called for this nation to reposition itself to withstand the latest international pressures.

“It is also clear that the Bahamas as a jurisdiction must become even more proactive to out-think and out-manoeuvre our economic detractors, and to make the Bahamas a clear jurisdiction of choice rather than one of pure convenience, as alleged,” the FNM deputy leader told Tribune Business.

“It is time for us to meet the challenge head on and make the case for the Bahamas, rather than continue to be victims of circumstances surrounding us. We must now reconsider our tax structure as it relates to IFC clients as well as domestically.

“We must look at our Immigration policy to ensure we steer clear of claims of jurisdictions of convenience, and we must look at our openness to transparency as defined by the OECD and others. We must redefine our value proposition based upon clarity, transparency and compliance today, with full anticipation of the next OECD moves.”

Mr Turnquest is the first serving politician to make the case for the Bahamas switching from its current ‘no tax’ model, where there is no income, capital gains, corporate or estate taxes levied on either domestic of foreign entities/individuals.

Several financial services professionals have urged this nation to move to a ‘low tax’ model, and impose corporate and income taxes, on the grounds that this would give the Bahamas extra legitimacy and enable it to shed the ‘tax haven’ moniker.

They also believe it would help to attract business to the Bahamas, rather than lose it, especially corporate and institutional clients, who could then exploit the Bahamas’ ‘low rate’ environment to gain tax savings if this nation were to enter into ‘double taxation’ treaties with other countries.

One such advocate, Paul Moss, told Tribune Business that the data ‘leak’, and associated coverage by International Consortium of Investigative Journalists (ICIJ) members, provided another opportunity for the Bahamas to craft a business model that could withstand all international regulatory pressures.

“If we have hit ground zero, the only way is up,” the Dominion Management Services president said yesterday. “For us, having been stuck for a long time, it gives us an opportunity to pause, look at many things, and make decisions concerning our long-term future in a holistic way.

“It is clear that they [the international community] are not going to go away. We have to be seen to be doing something for ourselves, not for them. Part of that will be making these kind of changes without them telling us what kind of changes ought to be made.”

Mr Moss continued: “It is obvious the Bahamas is in the crosshairs of the OECD and others. But we seem to be nonchalant. It almost seems as if we’re in an industry that we don’t check for.

“We respond to criticism and blacklistings, but then carry on in the same way. We’re not proactive, and don’t set the industry on a path for it to go on uninterrupted.”

The Bahamas has yet to find a strategy, or a model, that would make its financial services industry OECD-proof and impervious to further international tax and regulatory initiatives.

Given that the likes of the OECD and European Union (EU) are either backed by, or draw their membership from, the world’s most powerful countries, such as the G-20, there appears little sense in the Bahamas engaging in a direct fight with them.

Given their ability to sanction or ‘blacklist’ states deemed un co-operative, the Bahamas can ill-afford to incur their wrath, especially in an environment where its correspondent banking relationships are already under threat.

Even though the Bahamas is being bullied, and facing a ‘might is right’ situation where its sovereign rights are being overridden, it appears to have little choice but to meet the demands of the OECD and others.

This nation is especially vulnerable, given that it is an independent sovereign nation and cannot draw on the political backing many of its international financial centre (IFC) rivals, such as Hong Kong (China) and Cayman and Bermuda (the UK), can draw upon.

Even greater protection is available to the likes of Delaware and Nevada, which continue to operate under regulatory regimes far less onerous than the Bahamas.

This is at least recognised in some quarters. Clark Gascoigne, deputy director of the Financial Accountability and Corporate Transparency Coalition (FACT Coalition), speaking on the Bahamas’ leak yesterday, acknowledged: “It is worth repeating that the US remains one of the easiest places in the world for a criminal to set up an anonymous shell company that can be used to launder money.

“Perhaps, with leaks coming from 50 miles off the Florida coast, it is time for Congress to pass the bipartisan bills that would put an end to this outrage.”