Financial services sector execs express views on corporate tax

While the government has committed to the development of a more equitable tax system, former Minister of Financial Services and Trade Ryan Pinder, who is a financial services and tax attorney, insisted yesterday that introducing a corporate tax would be of little benefit to The Bahamas.

“I do not support a corporate income tax in The Bahamas. It would be difficult to implement and would put further strain on an already fragile domestic economy,” he told Guardian Business yesterday.

“The threat of blacklisting by the powerful economies of the world and especially the European Union will not end, no matter what reforms we do. It’s time we start governing for our own benefit and not at the will of others who have no concept of what it is to be a small island developing country with a narrow and fragile economy.”

However, Fidelity Group Chief Executive Officer Gowon Bowe, who has long called for a corporate tax of some sort, said as far as the members of the European Parliament are concerned, The Bahamas is still a harmful tax jurisdiction because it does not have a corporate tax. He said the country can no longer bury its head in the sand over this matter and must decide if it will adapt and compete, or ignore the heavy hand of these international watchdogs.

“It has been abundantly apparent that they view any tax system that does not have a tax base that is based on income to be a harmful tax jurisdiction. So their very red line statement that if you don’t have some form of corporate tax or income tax, then you should be blacklisted, is something that we have always known and we are no longer able to bury our heads in the sand. They’ve now made it abundantly clear, so the tiptoes that have been by their side and our side have been made abundantly clear,” he said.

Bowe continued, “Now the truth of the matter is we do have an equivalent called business license fee, the difficulty is that it has a ringfencing component to it, because it is not really taxing businesses that are registered here, but businesses that are operating here. So we need to be wise that we already do tax.

“The question is, should we extend that to international entities so that we can just use the existing system in order to do so and then more progressively, we’re going to have to ask is our current system appropriate, is it equally distributing the actual burden of taxation and allowing us to be competitive? And all of those answers are no. So if we’re going to be in for a penny we should be in for a pound and so let’s not have tangential conversations about these potential changes, but let’s really define what we want to do globally. It sort of lays down very clearly their line in the sand that any absence of corporate tax is a harmful tax jurisdiction. Do we want to compete in that space and if we do, then how do we start to compete and if we’re going to do things to compete in the international arena, then make sure that it is beneficial for us as a country?”

While adopting a new resolution last week to put more pressure on so called “tax havens” via the European Commission, Chair of the European Parliament’s Subcommittee on Tax Matters Paul Tang mentioned The Bahamas, Guernsey and the Cayman Islands as countries that should have never been delisted by the European Union and that moving forward, jurisdictions with zero percent corporate taxes should be automatically blacklisted.

The EU is seeking to formalize a new process of establishing blacklists before the end of the year.

In his remarks during the adoption of the resolution, Tang admitted that EU countries are responsible for 36 percent of tax havens.

“It is a positive statement in the sense that they recognize the hypocrisy within their own ranks,” Bowe said. “Meaning that they don’t really have a clear and transparent allocation of responsibility for tax. They have picked on territories that are outside of the European Union and ultimately they have some of their own members who are some of the greatest violators. So I think that’s a positive one.”

Bowe added that he doesn’t believe The Bahamas was meant to be targeted and got lumped together with other jurisdictions that have not made the level of progress with transparency this country has.

“The negative side is what I’m going to call the slave shaming, because the territories that they mentioned are very strategically placed. The Bahamas got caught up but if you look at all of the others, they mentioned they’re British dependent territories and you now just have had Brexit,” he said.

“And so, when you look at the European Union, while the UK (United Kingdom) by all mechanisms is a member of the OECD (Organisation for Economic Development and Cooperation), it is no longer a member of the European Union and so they kind of called out the Cayman Islands, Bermuda, Guernsey – all of these UK-dependent territories – and I think that was strategic. It obviously shows that the European Union sees The Bahamas as almost still a UK territory because I think we got named in that one largely because they were really taking a blow towards the UK.”

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