|The Bahamas Investor Magazine
January 1, 2017
January 1, 2017
Over recent years there has been a persistent and unstoppable surge towards automatic exchange of information (AEOI) as regards international tax practices. The US opted for the creation of Foreign Accounts Tax Compliance Act (FATCA), which it later amended in light of the Panama Papers, while the Council of the Organization of Economic Co- operation and Development (OECD) approved The Standard for Automatic Exchange of Financial Account Information in Tax Matters July 15, 2014.
The Bahamas moved swiftly to address FATCA stipulations and it has just finished its second reporting cycle, using the Model 1 Inter-government Agreement.
As regards to the OECD initiative, the rules and method of this exchange standard were laid out in the Common Reporting Standard (CRS). In October 2014, The Bahamas government confirmed its commitment to implementing the new universally agreed and ascribed global standard of AEOI by December 31, 2018 using a bilateral approach. The key elements of this approach are:
1. The need to meet the associated timelines with respect to the completion of the domestic legislative process, and completion of all relevant law making steps.
2. Confidentiality and protection of financial data being a fundamental element of agreeing to the CRS and the highest level of data protection will be negotiated with interested appropriate partners as part of the bilateral agreements.
3. The receiving country having a framework in place to ensure confidentiality, data protection and use of information for the specified purpose.
Speaking at the Nassau Conference towards the end of last year, Minister of Financial Services Hope Strachan reaffirmed that the government was on course to successfully implement the CRS in accordance with the December 2018 deadline. “My understanding is that the draft legislation, and guidelines is scheduled for release. A task force has established a strategic plan for the way forward and together we are confident that we can meet the implementation date of 2018,” she said.
These initiatives mark a clear and fundamental shift in the international tax regulatory compliance landscape. While there are elements of the industry where certain practices will no longer be profitable or indeed possible, the plain truth is that the AEOI regime is only going to get greater and more expansive.
“The question is, how are you going to look to see where you fit in this evolution [of transparency],” said international tax expert and partner at Graham Thompson Attorneys Ryan Pinder during an address to financial services professionals at a recent event organized by the Bahamas Institute of Chartered Accountants.
“Focus on this niche and gain all of the expertise you can because this is not going to go away. Accountants have a tremendous opportunity here. The CRS is about 600 pages long. It is a lot of work, but I want to encourage you to really invest in this. It is fundamental.”
Industry stakeholders and policymakers in The Bahamas are strategically combining efforts to respond to the new paradigm, says Minister Strachan. “Now more than ever the government and industry must partner to ensure that while we adhere to our global regulatory obligations we do so in a manner that protects the interests and reputation of the jurisdiction. While The Bahamas is currently going through challenging times, we must not be discouraged. The Bahamas has weathered similar storms in the past and we are confident that we will continue to overcome them in the future.”