The Bahamas Are An Independent Nation State
The Bahamas became independent from the UK in 1973, although the Queen remains Head of State. Beginning 50 miles off Florida, in the Caribbean, the Bahamas has 700 islands and a population of 285,000. The official language is English. The capital is Nassau, there are a number of international airports with good connections, and there are excellent port facilities. The climate is sub-tropical. The Westminster-style government is business-friendly. Next elections in 2002.
Economy Based on Financial Services and Tourism
The Bahamas was a trust and tourist jurisdiction very early in the 20th century, but was relatively late in developing as a financial centre. The economy is heavily dependent on tourism (4m visitors a year), but financial services are growing in importance. GDP is $3.4bn, and GDP per head is $12,000, good for the region but not wonderful. Unemployment is a problem, but has eased recently. The Bahamas are very dependent on imports and have a structural trade deficit
The Bahamas’ Stock Exchange
In May 2000, the Bahamas’ new stock exchange (BISX) went live, originally with 2 established brokers but its continuing success will allow for larger expansion. The BISX has an upgraded infrastructure from which remote trading across a secure private WAN and the launch of an international segment can take place.
The Bahamas’ Lowtax Specialisations
Leading sectors are banking (over 400 banks with external assets over $150bn) and mutual funds ($70bn under management). Trust management is also prominent. Captive insurance is weak; new legislation is needed. Professional services are excellent. The shipping registry has been very successful for larger vessels. The Government has passed a modern securities law which will lead to the opening of a stock exchange.
No income tax in the Bahamas!
There is no income tax, capital gains tax, VAT, sales or use tax or wealth tax. Annual government fees are imposed on businesses and there are national insurance, stamp duties and property taxes. Local businesses are controlled by licensing and somewhat protected, although there are good investment incentives in some sectors. Offshore operations take place through International Business Companies or other tax-exempt forms.
In June 2000, the Bahamas was identified by the FATF as a non-cooperative and harmful tax haven. The result of this is that the Bahamas is one of fifteen tax jurisdictions placed on an OECD blacklist. Each ‘harmful’ tax haven has a year in which to correct its tax regulations and legislation, once it has done so the tax haven will be removed from the list.
Those who do not conform within the year will be dealt with by measures set out in a US Anti-Money Laundering Bill. The Bill is currently in the draft stage, but it aims to give sweeping powers to the US, which will prevent US financial institutions from dealing directly with errant jurisdictions or with specified institutions in those jurisdictions.
US Treasury Advisory Information
In July 2000, The Bahamas was placed on an OECD blacklist of harmful tax havens which possess the potential to launder money. Consequently, the US Department of State issued an Advisory against The Bahamas. The US Treasury Secretary, Larry Summers, has warned that the Advisory is a caution to US financial institutions to give extra scrutiny and caution to transactions with The Bahamas.
Immigration Controlled by Residence and Work Permits
With an unemployment problem, the Government controls access to Bahamian jobs with a system of work permits. Access to housing has been recently relaxed for foreigners, who are now encouraged to buy or build ‘second homes’.