Thursday, March 22, 2018
Thursday, March 22, 2018
Deputy Prime Minister and Minister of Finance Peter Turnquest said the European Union (EU) Code of Conduct Group (COCG) has set compliance criteria for jurisdictions, including The Bahamas, to follow.
DPM Turnquest addressed financial industry officials on the EU Finance Ministers’ decision at their regular monthly meeting 13 March 2018 to discuss the decision from the Council of the EU to include The Bahamas on the list of non co-operative jurisdictions for tax purposes.
He explained that with respect to Criterion 1.1, The Bahamas was invited to confirm its commitment to sign and ratify by the end of 2018 the Multilateral Competent Authority Agreement on Common Reporting Standard (CRS) or having a network of arrangements in place in order to be able to automatically exchange information with all EU Member States.
He said The Bahamas signed the Multilateral Competent Authority Agreement (MCAA) on December 13, 2017 in San Marino, Italy.
“The Bahamas intends to activate the Competent Authority Agreements under the MCAA prior to September 2018 and exchange information with all EU Member States.”
The DPM said under Criterion 1.3, The Bahamas was invited to confirm its commitment to sign and ratify the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAC).
“The Bahamas signed the Convention on Mutual Administrative Assistance in Tax Matters (the Convention) on the December 15, 2017 at the Organisation for Economic Cooperation and Development (OECD) headquarters in Paris, France. The Bahamas is in the process of completing its formalities to ratify and deposit the MAC.”
He said with respect to Criterion 3, The Bahamas was invited to confirm its commitment to join the base erosion and profit shifting (BEPS) Inclusive Framework or commit to implementing the BEPS four Minimum Standards and communicate the timeline for doing so.
DPM Turnquest said The Bahamas became a member of the Inclusive Framework for the implementation of the BEPS in December 2017 and as such the country has committed to implementing the BEPS four minimum standards within the requisite timeframe.
“These four minimum standards are Action Five Countering Harmful Tax Practices/Preferential Regimes, Action Six Preventing Tax Treaty Abuse, Action 13 Country by Country Reporting and Action 14 Dispute Resolution Mechanisms.”
He said further with regards to Criterion 2.2, the secretariat of the COCG raised concerns with jurisdictions facilitating offshore structures or arrangements aimed at attracting profits which do not reflect real economic activity in the jurisdiction.
The DPM said in addition, the absence of a corporate income tax or a nominal corporate income tax was taken into account.
“The secretariat of the COCG further advised that the main concern relates de facto lack of substance which may be due to the absence of legal substance requirements, which increases the risk that profits registered in a jurisdiction are not commensurate with economic activities and substantial presence.”
He said the secretariat asked The Bahamas to address the issues that arise in connection with entities operating without any substance and advised that this may require The Bahamas to introduce additional accounting and tax reporting obligations.
“An appropriate notification regime would ensure the collection and subsequent exchange of relevant information with member states.”
DPM Turnquest said The Bahamas was asked to address the concerns relative to the issue of legal mechanisms existing in The Bahamas that enable the granting of advantages only to non-residents or in respect of transactions carried out with non-residents, in particular, through the incorporation of entities which are not permitted to carry on business in The Bahamas.
“The Bahamas government via the Ministry of Finance is engaged in active dialogue with the EU Code of Conduct regarding its concerns and our commitments.”
“The government is therefore committed to taking a closer look at our legislation, including but not limited to the International Business Act, the Foundations Act, the Exempted Limited Partnership Act and the Business License Act and any other amendments we deem necessary for the country’s compliance on or before December 2018. To this end, we have completed and submitted to the EU an implementation and action plan outlining the steps to be undertaken.”
He said: “We realise that our work does not stop here. As the industry continues to evolve, The Bahamas will remain vigilant of emerging international standards and best practices on matters that affect its economic, development and financial well-being.”
The DPM said the government will continue to convey and demonstrate that The Bahamas is a clean, compliant and cooperative international financial centre.
“We are committed to international tax transparency, exchange of information, and regulatory standards.”
He said: “We recognise that the non-cooperative listing has structural implications for some businesses and may spark general concern in the industry.”
“The government wants to reassure all of its stakeholders in the financial services sector that we have a strong and unwavering commitment to the integrity of our financial services industry.”