Racial bias part of global tax system, says law professor

As The Bahamas and other Caribbean nations continue to lobby for fairer practices in regards to compliance with global financial watchdogs, a US law professor with Bahamian roots said there is no way to separate race from how small developing nations are treated by large global financial institutions.

Professor Steven Dean, a law professor at Brooklyn Law School, was a panelist at a recent virtual summit entitled “Tax Blacklists and Propaganda: Defeating the Discrimination and Pro-Poverty Agenda”, and is currently penning a book on the issue.

“There’s really no way to see how the global tax system works that doesn’t acknowledge that there are people involved that have biases, that have their own ways of looking at the world that colors and shapes how they see things,” he said.

“My work in recent years has really focused on trying to address those biases and explain how it can be that a global tax system can incorporate those kinds of biases.”

Last September, Barbados Prime Minister Mia Mottley advocated on behalf of the Caribbean before the US House Committee on Financial Services, regarding the de-risking of regional jurisdictions that have in the past decade felt the heavy hand of international regulatory bodies.

Days later, Prime Minister Philip Davis, speaking at the 77th session of the United Nations (UN) General Assembly, said The Bahamas is the victim of “inequitable and unjust” measures on the part of major economic actors and charged that evidence is mounting that the decisions to target vulnerable states has less to do with compliance and more to do with discriminatory perceptions.

Speaking to the way that developing countries are treated by the likes of the Organisation for Economic Cooperation and Development (OECD) and the European Union (EU), Dean said it is clear that the tax treaties entered into in good faith are not working.

“These tax treaties for a while have been criticized for their impacts on developing countries, but they are really terrible for rich countries too. They are really bad for everybody. How about we just stop doing that? What are they for? Why do we have all of these treaties? What if we stop doing all of the things we’ve been doing that have either been working or not working – depending on your perspective – for the last few decades? The answer is really quite simple.”

Dean continued, “Obviously we know that there have been real proposals that have been made in quite serious ways by quite serious people for many years. There are ways we can actually impose and collect taxes from multinational corporations, we’ve known how to do this for as long as I’ve been in this game and there is just no appetite for it at all. It’s really not that hard. It’s really just a political matter. If you want to work around the edges and say the current system is fundamentally sound, we just need to add a few tweaks or 14 action items. You could do that or you can say we just need two pillars to prop up a system that is fundamentally fine.”

He was referring to the OECD’s two-pillar solution to address the tax challenges arising from the digitalization and globalization of the economy. The OECD has said this new framework is expected to provide additional taxing rights for market jurisdictions by creating a global 15 percent minimum effective corporate income tax rate.

The new global minimum tax rules were originally slated to be implemented in the first quarter of this year, but are now expected to be fully implemented in 2024.

“What we’re doing certainly isn’t working. But I know there are other ways to do this that people who are a lot smarter than me have worked out in detail, and I’m just not sure why we’re not talking about this,” Dean said.

“There was a Stanford study that just came out a few weeks ago that showed that US tax payers who are black are three to five times more likely to be audited by the IRS, than white tax payers…We’re too willing to treat all of this as a purely technical exercise. It’s not.”

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Paige McCartney

Paige joined The Nassau Guardian in 2010 as a television news reporter and anchor. She has covered countless political and social events that have impacted the lives of Bahamians and changed the trajectory of The Bahamas. Paige started working as a business reporter in August 2016. Education: Palm Beach Atlantic University in 2006 with a BA in Radio and Television News

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