An Act to implement the U.S. Tax Information Exchange Agreement (TIEA) is in its first draft, Attorney General Alfred Sears has confirmed.
The Bahamas has committed to bilateral negotiations for exchange of information in criminal matters by Jan. 1, 2004, and for exchange of information in civil matters by Jan. 1, 2006, he said.
The TIEA is considered an essential weapon in global efforts against terrorism, drug-trafficking, money-laundering, financial crimes and alien smuggling.
Any member country of the Organisation for Economic Cooperation and Development, seeking a TIEA with The Bahamas will be required to negotiate in the same fashion, provided that all preconditions of the commitment have been fully met at the relevant times, Mr Sears told the Bahamas Institute of Financial Services.
The Bahamas, he said, remains committed to international cooperation as "a responsible and significant" player in the international trade arena.
However, he said, to avoid flights of services to competitors, the OECD, in order to achieve its objective of curtailing "harmful tax practices," must apply the same standards to its own members.
"Any TIEA that will affect The Bahamas will result from bilateral negotiations," Mr. Sears said, explaining that a letter of commitment signed by the previous government in March of 2002, merely set broad parameters for bilateral negotiations towards a TIEA.
"These bilateral negotiations, if made pursuant to the commitment letter would do so only against a backdrop of the conditions precedent having been fully satisfied," he said, and, "This does not inhibit the government's ability, outside of the OECD arrangement and upon due consultation with industry, to commence TIEA negotiations for some other compelling reason."
The implementation of any information exchange in respect of savings instruments for civil tax purposes would only take effect at such time as international standards in this area have been established, he stated.
Mr Sears noted that there were three broad commitments in the area of "Transparency," to which The Bahamas committed, again subject to condition precedent, to:
1. Make available to Bahamian tax and regulatory authorities, beneficial ownership information of companies, partnerships and other such legal entities, including trusts that are established in The Bahamas;
2. Require the entities listed to maintain financial records subject to de minims and other exceptions to be developed within the Global Forum;
3. Require, in those cases where the law places an obligation on any entity listed in (1) above to maintain audited accounts, that such audit be conducted in accordance with internationally accepted standards; and,
4. Allow access by Bahamian regulatory authorities to bank information necessary to perform obligations under the TIEA.
Bahamian technical experts, comprising senior officers of the Ministry of Finance and the Attorney General's Office, have participated in the only Global Forum meeting convened since signing its commitment.
A meeting held in the Cayman Islands in October 2002, not only considered OECD status on the level playing field as a prerequisite for the implementation of the commitments by all committed jurisdictions, but also considered how to effectively and equitably introduce a requirement to maintain financial records, particularly in the case of trusts, partnerships and other "corporate-type" vehicles that do not have a defined legal personality, such as a company, Mr Sears said.
He added that a technical sub-group continues discussions on the consideration that The Bahamas is represented on this sub-group.
The Global Forum meeting concluded with the clear consensus that the whole issue of the accounts requirement is still a work in progress until such time as respective member-governments of the Global Forum has agreed all aspects.
This would include those OECD members that have not abstained from the process, and those jurisdictions that have signed commitments letters.
The OECD members abstentions are: Switzerland, Luxembourg, Belgium and Portugal. The number of committed jurisdictions is 31.
Mr Sears reiterated that the government fully expects that all OECD members and non-members alike, which are materially in competition with The Bahamas in the provision of cross-border financial services, will have provided the same commitments as those extracted from the committed jurisdictions, by the time The Bahamas is required to act on its commitment.
By Lindsay Thompson, The Nassau Guardian
