Minnis: Bahamas’ financial services sector shrinking

Prime Minister Dr. Hubert Minnis acknowledged yesterday that The Bahamas’ financial services sector is shrinking due to global pressure.

“The offshore financial services sector, our number two industry, has been shrinking due to a vastly different and much more stringent global regulatory environment,” Minnis said.

He made his comments while opening the 2021/2022 national budget debate in the House of Assembly, making those remarks in the context of the bleak economic situation in the country due to Hurricane Dorian and the COVID-19 pandemic.

The financial services sector could take another hit soon, as global tax watchdogs and the global superpowers look to impose a minimum corporate tax on corporations across the world.

A Yahoo Finance article outlined US President Joe Biden’s tariff threat to Britain if it does not back a global corporate tax deal. The article stated that G7 countries will meet this month to discuss taxing tech giants.

An article on news website Equal Times noted that time is winding down for a meeting of G20 finance ministers, where they could agree on a global corporate tax rate.

“The aim of the meeting, hosted by the Organisation for Economic Co-operation and Development (OECD), is to agree to new rules for taxing cross-border trade, as well as a global minimum corporate tax rate, which would reduce the incentive to report profits in other jurisdictions,” the Equal Times article stated.

“According to an OECD report issued in February, ‘Today, all the conditions to find a consensus-based solution by the July meeting of G20 finance ministers are met.’”

The United States’ House Financial Services Committee revealed last month that it hopes to have its Disclosure of Tax Havens and Offshoring Act – that will require multinational corporations to disclose “country-by-country financial reporting” – ratified soon, hoping it would reveal “corporate abuse of tax havens”.

If the act becomes law, it could also lead to the further erosion of the kind of business international financial centers like The Bahamas provide.

While The Bahamas has been pegged as a tax haven in the past and blacklisted as such, Attorney General Carl Bethel told Guardian Business last month that the country’s adoption of many multilateral frameworks and agreements already move multinational corporations or their subsidiaries operating in The Bahamas to adhere to certain reporting requirements.

“At the end of the day, the issue of tax shifting is covered on a multilateral basis by the OECD/EU’s (Organization for Economic Cooperation and Development/European Union) BEPS (Base Erosion and Profit Shifting) initiative, to which The Bahamas has already acceded to, hence the CESRA (Commercial Entities Substance Requirements Act),” said Bethel.

He added that The Bahamas has already guarded itself against whatever fallout could come from the passage of the act in the US.

However, Hubert Edwards, managing consultant of corporate governance and risk management consultancy Next Level Solutions, told this paper last month that should the legislation pass, many of the advantages multinational corporations enjoy from utilizing international financial centers like The Bahamas, could simply “evaporate”.

Edwards said companies could choose to move away from The Bahamas to avoid the challenges that could come from the legislation and the possible reputational damage that could come from having to be pegged as a tax avoider.

Last year, a 2020 report compiled by advocacy group Tax Justice Network (TJN), revealed that as a “tax haven”, The Bahamas is a minimal player.

The TJN found that The Bahamas caused only $21 million in corporate tax losses to other countries annually, compared to Barbados and the Cayman Islands that caused about $6 billion.

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source https://thenassauguardian.com/minnis-bahamas-financial-services-sector-shrinking/