**Hon. Alfred Sears, M.P.**
Participating in a Business Seminar hosted by the Bahamas Institute of Financial Services on Monday, the Hon. Alfred Sears, Attorney General and Minister of Education, reviewed the OECD’s Harmful Tax Competition initiative.
Pointing to the “commitment in favour of the OECD” as executed by The Bahamas in March 2002, the Attorney General explained that the nation’s agreement to entertain bilateral negotiations with OECD member countries on information exchange in tax matters had been conditioned on several measures:
(a) That The Bahamas is not included on any list of non-cooperative tax havens nor subjected to any co-ordinated defensive measures by OECD countries.
(b) The Bahamas’ stated intention to protect is economic interests and fiscal autonomy in all negotiations.
*(In this connection, a clear stipulation was made that a level playing field among all OECD members and those non-members that are materially in competition with The Bahamas in the provision of cross-border financial services is **critical** to the economic interests of The Bahamas)*
(c) Co-ordinated defensive measures would be imposed by the OECD member countries on non-compliant member countries and non-member countries alike.
(d) The Bahamas would become a full and equal participant in the Global Forum discussions for the implementation of internationally accepted standards for tax information exchange.
(e) The detailed implementation of any commitment not already provided for under Bahamian law would be subject to the prior approval of the Bahamian Parliament.
(f) The implementation of any information exchange in respect of savings instruments for civil tax purposes would only take effect at such time as international standards in this area have been established.
*(This particularly took note of the on-going discussions within the EU on the application of its Savings Tax Directive to Belgium, Luxembourg and Austria as well as non-EU members such as the United States, Switzerland, Liechtenstein, Monaco, Andorra and San Marino)*
Provided these conditions are met, The Bahamas has committed to bilateral “negotiations” for exchange of tax information in criminal matters by January 1, 2004 and for exchange of information in civil matters by January 1, 2006.
The Bahamas participated in the only Global Forum meeting convened since presenting its commitment letter to the OECD and, arising from that October meeting, serves on a technical sub group that is mandated to consider how to effectively and equitably introduce a requirement for “corporate type” vehicles to maintain financial records – i.e. trusts, partnerships and other vehicles that do not have a defined legal personality such as a company.
One of the broad commitments made to the OECD under the genre of “transparency” – and also conditioned on the measures above – related to a requirement for companies and other such legal entities to maintain financial records subject to de minimis and other exceptions to be developed within the Global Forum. Any such audits would be conducted in accordance with internationally accepted standards.
That Global Forum meeting last October concluded with a clear consensus that the whole issue of the accounts requirement was “still a work in progress until such time as respective member-governments of the Global Forum has agreed all aspects.” Minister Sears said this would include those OECD members that have not abstained from the process, and those jurisdictions that have signed commitments letters.
Importantly on the level playing field issue, the OECD has confirmed that any standard developed by the Global Forum would apply equally to OECD and non-OECD members and, further, that no sanctions would be applied to any jurisdiction before such is imposed on a non-cooperating OECD member.
Efforts are underway now to have the Global Forum discuss the future of the OECD’s entire harmful tax project. The Attorney General pointed out that the major challenge to the project has been its inability to provide tangible evidence of any progress made in applying its commitment to a level playing field to non-member economies nor to its own non-compliant members. In this connection, he said The Bahamas *”continues to monitor developments within the OECD and to remain mindful of the level playing field condition and other conditionalities governing our commitment.”*
He also referenced suggestions that the EU is not prepared to recognise any member country as having “potentially harmful tax regimes” – a move that has significant implications for the OECD’s harmful tax initiative as a whole.
Seminar participants were assured that the Bahamas Government fully expects all OECD members and non members alike which are materially in competition with The Bahamas in the provision of cross-border financial services to have provided the same commitments (in scope and time frame) as those extracted from the committed jurisdictions by the time this nation is required to act on its commitment. This is a position which has been – uniformly and collectively – echoed by all committed jurisdictions.
Minister Sears also spoke to the information exchange agreement signed with the United States last year, “broadly in terms of the commitment given to the OECD”’; i.e. criminal tax exchange as of January 2004 and civil tax exchange as of January 2006. He said that in both cases the taxable periods in question must arise after the effective date of implementation. Currently, a draft of enabling legislation to implement the US agreement is being refined within relevant government agencies.
The U.S. TIEA is consistent with the intent of the OECD commitment, and other OECD member countries seeking a TIEA with The Bahamas will be required to negotiate such as bilateral arrangements, provided that all preconditions of the commitment have been fully met at the relevant time.
Minister Sears said multi-lateral arrangements and agreements which regulate trade must be of great significance to The Bahamas because of the heavy reliance on international trade for the nation’s survival and sustenance. *”For us in The Bahamas the time certainly has come where we have to become much more diligent in cultivating the internal resources to craft a place in the evolving construction of the international trade regime.”*
The nation remains committed to international cooperation as “a responsible and significant” player in the international trade arena, and it is in this context that it must view and address relevant international initiatives.
The Business Seminar was part of a series of events scheduled under the general theme *”Repositioning Financial Services”*, during the annual Bahamas Institute of Financial Services Week.