Wednesday, May 31, 2017
By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
A veteran financial services provider yesterday warned that automatic tax information exchange could breach fundamental rights protected by the Bahamian constitution, while threatening to make this nation a “European satellite”.
Anthony Howorth, president of Euro-Caribbean Management Services, questioned whether the Government and financial services industry had “really thought through” the consequences of bowing to international demands to exchange tax information automatically via a multilateral basis.
He argued that compliance with the wishes of the Organisation for Economic Co-Operation and Development (OECD) and its members would further transform the Bahamas into a ‘vassal tax collector’ for other countries, while undermining the competitiveness of a sector that underpins this nation’s middle class.
Mr Howorth said the Bahamas had been wrongly characterised as “a tax haven” when it was really “an asset protection haven” focused on legitimate business, and warned that an estimated 50 per cent of this nation’s business was preparing to move as a result of automatic tax information exchange.
“I don’t think people have really thought this through,” he told Tribune Business yesterday. “Do we want to be a sovereign nation, or a satellite country of the European Union (EU)? That’s the main point I’m making.”
Mr Howorth added that automatic tax information exchange “should be challenged” in the courts on constitutional grounds, given that it appeared to breach privacy and confidentiality rights granted to Bahamians - and their clients - by the constitution.
“The more and more I think about it, that’s the route to take,” he said.
Mr Howorth set out his concerns in a letter to sent to two Cabinet ministers and the Bahamas Financial Services Board (BFSB) yesterday. He told K P Turnquest, the minister of finance, and Brent Symonette, minister of financial services, that automatic tax information exchange was merely the latest in a series of external regulatory impositions that have “devastated” the industry over the past two decades.
Arguing that the Bahamas would only incur greater costs, and no benefits, from assisting other countries with their tax collection, Mr Howorth urged the Government to “stand up for the fundamental rights” of Bahamians and their financial services clients.
“The adverse focus by the media and foreign governments on trying to ‘blacklist’ the Bahamas, by wrongly designating it as a ‘tax haven’, has resulted in a massive loss of legitimate asset protection entities,” he wrote.
“As amanager and director of over 400 International Business Companies (IBCs) over the past 40 years, a number now reduced to less than 40, the need for the protections granted by the Constitution of the Bahamas have been recognised by legal advisors all around the world.
“The business of managing wealth from the Bahamas has reduced by over 50 per cent, and may never return. Job losses among educated Bahamians, and the knock-on effect for landlords, has brought property prices down. This hits all sectors of the economy, as highly paid executives are let go. The Bahamas must learn very fast.”
Mr Howorth’s remarks to Tribune Business, and letter published on Page 2B today, provide an alternative viewpoint on how the Bahamas should respond to the latest international regulatory initiative targeting its financial services industry.
Both the Minnis administration and its predecessor, and many in the financial services industry, believe the Bahamas cannot afford to resist the pressures to conform to the demands of the OECD, EU and their member states.
The Government and wider sector have taken the position that this nation must avoid ‘blacklistings’, such as the one threatened by the EU, at all costs given the significant reputational damage and loss of access to the global financial system this would inflict.
However, Mr Howorth’s comments are likely to strike a chord with a significant number of Bahamians who believe this nation should stand up to the OECD’s bullying tactics. This is especially since the numerous regulatory initiatives that have targeted the Bahamas since 2000 are perceived as a thinly-disguised attempt to erode this country’s competitiveness and drive it out of the financial services business.
Mr Howorth himself added that he was greeted with cheers when he expressed the sentiments contained in his letter at a recent Rotary Club meeting.
“This is what the politicians and bankers don’t feel very happy about,” Mr Howorth told Tribune Business yesterday. “In talking to people, some of them have gone to Hong Kong already, and some have said they’re going to open banks in Shanghai as they feel it’s a more comfortable way to deal with offshore assets in Chinese currency. Others have gone to Singapore.
“You’ll probably find 50 per cent of the business is starting to move, if if has not moved already. The Bahamian people have not been told this, and goodness knows if the government people realise the effect on the economy in the next two to three years.”
He added that the OECD had deliberately mischaracterised the nature of the Bahamas’ International Financial Centre (IFC) model, adding: “We’re not a tax haven; we’re an asset protection haven.”
As an alternative to the Common Reporting Standard’s (CRS) automatic tax information exchange model, Mr Howorth suggested that Bahamian accountants and attorneys be engaged to review account data for such purposes.
He argued that “no date and information should go outside this country”, with home country tax authorities instead having to come to the Bahamas to get the information they need.
“It would be under the supervision of auditors, and take the onus off the banks themselves,” Mr Howorth said. “We don’t know the tax laws of the other countries. Automatic exchange: What the hell does that mean? We don’t know what they want to know. Why should we give information that is not applicable?”
Whether the OECD and its members would agree to the Bahamas remaining an “outlier”, going against its commitments to implement the internationally-agreed CRS standard by September 2018, is another issue entirely.
Comments
killemwitdakno says...
Amen. They'll just move to Sark Island.
Posted 31 May 2017, 3:05 p.m. Suggest removal
DEDDIE says...
The Government is concerned about been blacklisted because they believe that non-compliance will have a devastating affect on our bank sector.The affect of compliance has already decimated our financial sector. Any further coputulation will further erode anything we have left. We need to let the OECD countries know that we will go no further than what the USA, Cayman islands or any other jurisdiction has gone.
Posted 31 May 2017, 6:50 p.m. Suggest removal
The_Oracle says...
Complete lack of foresight for decades has led us down this path,
while internal compliance without signing onto these external requirements could have put us in a very strong position.
Kinda hard to turn it around now, given that we are so beholden to the IMF etc.
Posted 31 May 2017, 8:35 p.m. Suggest removal
Well_mudda_take_sic says...
Frankly, I'm sick and tired of hearing dimwit Bahamian lawyers like Brian Moree say we have no choice but to do as the OECD says. You have to wonder whether some of the more 'noisy' lawyers on this subject have been engaged (are being paid) by the OECD or its affiliated organizations to surreptitiously espouse their client's hideous agenda. For more than two decades it has been readily apparent that the real aim of both the U.S. and OECD 'blacklisting' initiatives has been to drive "onshore" the very successful "offshore" financial services businesses that once existed, and existed for a good reason.
Posted 31 May 2017, 10:02 p.m. Suggest removal
Reality_Check says...
You're right about Mr. Moree - he spends too much time beating his chest in public without properly thinking things through.
Like the U.S., the OECD countries have seen their governments become puppets of the wealthy ruling class (with their global business enterprises) who have succeeded since World War II to push an ever-increasing share of the taxation needs of their countries down to the middle and lower classes. The wealthy ruling class soon realized though that their countries faced serious taxation challenges arising from unchecked government waste, fraud and corruption, as well as pension and healthcare benefits obligations to their aging citizenry, e.g. the "baby boomer" generation in the U.S.
Nevertheless the greedy wealthy ruling class (with their equally greedy global business enterprises) continued to lobby (coerce) their governments to introduce even more harshly regressive and unfairly burdensome taxation structures on the middle and lower classes to meet the growing taxation needs of their countries. It was this insatiable greed and unwillingness of the wealthy class (and their global business enterprises) to pay their fair share of the taxation requirements of their own developed countries that gave birth to the offshore financial services sector. As the gap between the 'haves' and 'have nots' grew in the developed countries, the offshore financial services industry flourished while the tax bases of the developed countries shrank.
Fast forward, and the offshore financial services industry, in low or no income tax jurisdictions like the Bahamas, finds itself in the dire predicament that it is in today. The U.S. and OECD countries are, by internationally unlawful bullying tactics, forcing low or no income tax jurisdictions, like the Bahamas, to help them for their exclusive benefit, but at our great cost, police and enforce compliance by their citizenry with their very own unfairly imposed regressive and oppressive taxation regimes.
We are being unfairly coerced by the governments of these developed countries because of their own failure to deal with public sector waste, fraud, corruption and outright theft that has taken a serious toll on their tax bases, as well as their own failure to properly implement and monitor (at their cost, not ours) progressive taxation structures considered to be fair to their middle and lower classes. What these developed countries are doing to us, through their sponsored organizations like the OECD, shamefully impinges and wrongfully infringes on our sovereign rights under long standing internationally recognized laws applicable to nations.
Posted 31 May 2017, 10:05 p.m. Suggest removal
Socrates says...
we dont seem to stand for anything in this country.. just like a little puppy, everytime some colonialists or their surrogates say 'jump', we respond, 'how high'...
Posted 1 June 2017, 4:49 a.m. Suggest removal
Porcupine says...
I am pleased to read the comments here.
At least there are a handful of people who understand what is happening.
It is a race to the bottom.
I wish I could say that once the "people wake up" things will improve.
But, they won't because the re-education of the world's people has been ongoing and nearly complete. All well documented.
The weapons systems, bullets, bombs, surveillance, and economic warfare tactics are all in place.
Who isn't watching how educated and concerned protesters, grandparents and teachers are all being treated when they take to the streets?
Yes, our economy is being hollowed out, not just because of the international bankers attempt to crush economies so that they can rush in and buy their assets for pennies on the dollar, but because we allowed our economy to be built on sand. Greed now rules the day. As we continue to worship at the alter of the money changers and merchants all that was once held dear is rotting to the core. The financial class, those who make their money in their sleep, are now in control and will be battling among themselves for the last crumbs to be picked from the working people's pockets. We will vote one or the other party in, as if there is really a difference. Progressive taxation, thoroughly Christian in nature, has been educated out of our heads, replaced with the suffocating regressive taxation on the working class and the poor.
Welcome to our new and improved world. Get used to it. Get used to the increasing poverty, crime, corrupt leadership and hollow words from the alter. Yes, VAT is such a wonderful thing, for those who have no soul. When the discussion about a country's economic future rests upon whether to share tax data, some bells should go off inside your head? Did they in yours?
Posted 1 June 2017, 6:08 a.m. Suggest removal
Baha10 says...
Stand strong Bahamas! Why capitulate Bahamas? Be unique Bahamas? What Benefits did we see, much less actually get from going along with the First Rounds of compliance?!? ABSOLUTELY NOTHING! Stop following the Pack and rolling over to the demands of those already Developed Countries that simply wish to take what "little" we have left, particularly as they have no intention of reciprocating themselves. We are an independent Nation sitting off the Coast of the most powerful Country in the World and as such have a lot more leverage than you think ... why do you think the Chinese are here ... for Sun, Sand and Sea! WAKE UP BAHAMAS!
Posted 1 June 2017, 7:17 a.m. Suggest removal
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