Now that The Bahamas has cleared the hurdle of being removed from the European Union’s (EU) grey list on tax matters, Deputy Prime Minister and Minister of Finance Peter Turnquest said there is no time to rest as the financial services sector is now turning its focus toward aggressively addressing the Organization for Economic Co-operation and Development’s (OECD) global minimum tax rate proposal in the immediate future.
“Obviously with the changing landscape that we continue to face, we recognize that this is just another post that we have moved past and have successfully been able to address. The future is in respect to this global tax initiative that has been raised and how that affects us in terms of our local tax regime, as well as how it affects global digital or e-commerce looking forward. So, those are the challenges we face in the immediate term,” Turnquest told Guardian Business on the sidelines of the Bahamas Financial Services Board’s (BFSB) financial crimes enforcement, compliance and risk mitigation workshop yesterday.
“That is going to require a lot of research and introspection on our part to determine how we see ourselves in the future given the fact that the circumstance that we have been able to enjoy for these many years is being challenged and is becoming increasingly difficult to maintain.”
In recent weeks, industry observers have urged the government not to wait for the OECD to mandate the minimum tax rate, but to join the rest of the international financial sector and set its own regime.
In response to this stance taken by industry insiders, Turnquest said, “That’s what I’m saying today, that we do have to consider that kind of initiative and be proactive, as we look forward to see where the world is going. And that’s why it’s important for the engagement that we have had. Because we are not only looking at the academic situation today, but we’re looking forward to networking with those individuals from around the world about where the world is going and how it will affect us in the long term. We’re doing that.”
He said such a move takes a lot of research and a measured approach, given the implications it can have on government revenue and the business climate.
“We’re also looking and doing research on our own tax circumstance to see how the various alternatives to our current tax regime may affect us in terms of the government’s revenue, as well as the investment and business climate here in The Bahamas. As you can well imagine, any change to our tax regime would be traumatic,” he said.
“So, we have to be very careful, make sure that we have a fact-based approach to it and make our decisions based upon empirical data. We are engaged in that kind of research and we have to do more. Of course, resources constrain us to some extent, but we are making efforts in that regard. We’ll see where the data leads us.”
Turnquest shrugged off recent observations that the financial services sector is hemorrhaging as international financial groups close their Bahamas operations bit by bit.
“There really is no hiding anymore in terms of the various jurisdictions and I think the listing of Cayman is proof that eventually we will all be subject to this international standard. So, moving business from The Bahamas to other jurisdictions is a temporary reprieve at best. It will catch up. What it means is that the business itself is evolving and we as local providers have to evolve with it. So, again just as we are doing in the ministry, industry has to look forward as to where regulators are going, what is driving the shifts and try to anticipate what products might fit in that new reality,” he said.
“Yes, the business is likely to change from the way it looks today and some of the participants in the industry may not find it advantageous to maintain their relationship with The Bahamas, but we believe that if we adjust properly in a timely way and continue to be creative as we have done in the past, we will have a continued strong presence for this industry here in The Bahamas.”