Tax officials from the European Union’s 25 member states met yesterday to discuss plans to negotiate tax deals with so-called tax havens like The Bahamas, but a senior government official said the country remains firm in its resolve that there must first be a level playing field.
“There is no level playing field and the effect of moving too fast and doing what they want would mean we become even less competitive and of course our business would go to the OECD countries,” said James Smith, minister of state for finance. “Weﾒve already seen this during the first blacklisting.”
European press reports said that the European Commission was seeking to secure a mandate from the member states to open talks with certain countries on combating tax avoidance.
Commission spokeswoman Maria Assimakopoulou was quoted as saying the commission wants to extend the EU tax directive to cover European citizensﾒ savings in offshore financial centres.
“Itﾒs not a question of threatening them (these countries),” she was quoted as saying.
The European Union Savings Directive came into force on July 1, 2005, and allows tax authorities to share information about savings income payments made to individuals. Its aim is to ensure that savers and investors pay the “correct tax” on their savings income in their country of residence. Through the directive, EU member states seek to increase tax revenues.
“We were asked by member states to look into ways of extending the directive beyond Europe, and this is the first stage in that process,” the spokeswoman was also reported to have said.
Minister Smith told The Bahama Journal the directive also provides certain benefits to the so-called tax havens through tax sharing.
But he explained that there is no way The Bahamas could benefit from this.
“The difficulty with The Bahamas, first of all, is thereﾒs no direct tax on individual income, nor does The Bahamas have a double taxation treaty with any other country,” he said.
“We do have a [Tax Information Exchange Agreement] with the United States; thatﾒs the only one. Therefore, for them to bring The Bahamas into it, they can talk to us as much as they like, but they have to get past the original thing we agreed to: that is that we have a level playing field and up to now studies that have been conducted by the OECD and by the United States have indicated that the very thing theyﾒre asking us to do or not to do they themselves are not compliant [with].”
The Bahamas signed a TIEA with the U.S. on January 24, 2002. When he signed on behalf of The Bahamas, then Minister of Finance Sir William Allen said The Bahamas is firmly against the use of its financial system for illicit purposes.
“We are determined that the same financial standards apply in The Bahamas as apply in other recognized financial centres,” Sir William also said.
“Our commitment to this fundamental principle was demonstrated by the compendium of comprehensive legislation passed in December 2000 and the other steps taken to strengthen our regulatory framework in support of our fight against money laundering and other crimes, to expand and deepen our prudential supervision oversight, and to provide for international cooperation in financial supervision.”
Minister Smith pointed out that after the blacklisting by the Organisation for Economic Cooperation and Development and the Financial Action Task Force, many countries, particularly the small island developing states, complained about the unfairness of the process.
“In effect, the OECD countries were pretending to be judge, jury and executioner and they were making up rules for the offshore centres to comply with when the offshore centres were not at the table,” he reminded.
In response to that, and in accepting the criticism as being somewhat fair, the OECD then formed the Global Forum, a grouping of countries, which allowed small nations like The Bahamas to have a voice on tax-related issues on the international stage.
“The Bahamas stayed engaged in the process because it became a part of the forum and has been attending the meetings where they were discussing ways and means of improving tax information exchange,” Minister Smith said.
“However, this is where The Bahamas had indicated back in 2001, which is still the position today, that it will not enter into any other tax information exchange treaties unless there was a level playing field and this has been the position then and now.”
The minister added, “The OECD continues to talk to these countries trying to devise ways and means of basically advancing this argument.”
By: Candia Dames, The Bahama Journal
