By FARRAH JOHNSON
DEPUTY Prime Minister Peter Turnquest said yesterday that the removal of The Bahamas from the European Union’s tax watch-list proves that the country’s financial services industry is solid and managed by a “sound regulatory regime.”
Mr Turnquest made the comments at a Financial Crimes Enforcement, Compliance and Risk Mitigation seminar hosted by the Bahamas Financial Services Board Industry (BFSB) at the British Colonial Hilton yesterday.
“At the meeting in Brussels, the European Union Economic and Financial Affairs Council completely removed The Bahamas from its list of non co-operative tax jurisdictions,” he said. “And this is confirmation that the Bahamas has committed the necessary (reforms) to meet the EU’s criteria of tax governance and cooperation for tax management. It is confirmation that the Bahamas’ financial services industry is stable and governed by a sound regulatory regime.”
Mr Turnquest said in March of last year, the country was placed on the EU’s Annex II, otherwise known as the “grey list,” which he said varied from the “more serious Annex I black list.”
He said at the time, the country was subject to “ongoing monitoring” by the EU in regards to the “implementation of economic substance requirements.”
“With the EU’s decision this week, the Bahamas has addressed all the concerns on economic substance, removal preferential exemptions and automatic exchange of tax information,” he said.
“The government welcomes the decision and the positive impact it should have on growth to investor confidence in the industry.”
Mr Turnquest also thanked the agencies, regulators and industry stakeholders who contributed to the achievement.
He noted that their “support, encouragement and technical skills,” were crucial aspects during the process of addressing the issue. “Coming off this list was indeed not an easy process,” he said. “We engaged many stakeholders and executed a comprehensive strategy that not only addressed the EU’s concern, but also to defend the jurisdiction in unwarranted recent attacks on the legitimacy of our financial services industry.
“And yes, (that included) plenty trips to Paris, to Brussels and to other European headquarters which affects our travel budget.”
Mr Turnquest said that over the past year, teams of technical advisors had several meetings with the European Union’s code of conduct group to “engage in dialogue on the integrity of the Bahamas’ tax governance measures.”
He said the majority of their decisions were focused primarily on the “introduction of economic substance requirements for investments funds.”
“Early signs of our successful efforts came last July with the forum on harmful tax practices of the Organisation for Economic Co-operation and Development (OECD) concluded that the domestic legal framework of the Bahamas was in line with international standards and therefore not harmful.
“At every level, the Bahamas is doing its part in a global effort to tackle harmful tax practices and dismantle artificial tax practices.”
Mr Turnquest said officials have worked “diligently to demonstrate” their dedication at the “highest political level.”
He added that their commitment was also evident in their efforts in addressing financial crimes like tax evasion and money laundering.
“We have already satisfied over 30 of the 40 recommendations under FATF (Financial Action Task Force) and continue to take the appropriate measures to ensure that the Bahamas adheres to international best practices,” he said. “The government will continue to promote engagement with all stakeholders on these issues and do it what is in our national interest to ensure the Bahamas remains the preferred jurisdiction of choice for financial services in this region.”
Mr Turnquest also urged financial professionals attending the seminar to “listen with an ear” so that they can prepare for the future. “Just on the horizon we are looking at more significant changes in (the) global landscape that will have a direct impact on us here at home,” he said.
“As you know, taxation of the digital economy is the next frontier for global regulatory reform. In fact, at the G20 summit we have later this year, some of the largest economies in the world are expected to vote in support of the new system of taxation rights allocation.
“The new system intends to prevent multinational companies from diverting taxable income to low tax jurisdictions by opposing the minimum tax levels on their global income.”
Insisting that the “introduction of the global minimum corporate tax rate” will have an immediate and long-term impact on all countries, he added: “It will have future implications for participation in the global economy.
“So now is therefore the time to plan and to prepare so that we can exercise influence and better adapt to new possible realities and we are fully engaged in that process.
“As I have said before, the participation of everyone in the industry is needed to support with this effort and there’s no point in being afraid of it, we have to face it.”
Mr Turnquest said as the country “navigates times ahead,” the government will continue to “protect, promote and facilitate the growth” of the local financial services industry.
“As we have conquered challenges in the past, we will conquer them in the future as well,” he said.
“...We do not make the rules, but we have to comply with the rules. We do not make the rules, but we do have an opportunity to be partners and to ensure that the special circumstances that affect jurisdictions like ours are considered in a proactive way.”