The government yesterday reaffirmed its decision not to enter into any other Tax Information Exchange Agreements [TIEAﾴs] following changes in an international tax convention that would make it difficult for the Bahamas to hide behind bank secrecy as grounds to refuse tax information requests from other countries.
Up to now the Bahamas has only signed on to one TIEA with the United States.
In an interview with the Bahama Journal Wednesday, Minister of State in the Ministry of Finance James Smith said the government had no intention of entering into any new TIEA agreements any time soon.
ﾓUntil we have a level playing field with regard to tax information exchange we are not entering into any treaties with other OECD members,ﾒ he said.
Last month, the Organization for Economic Cooperation and Development [OECD] Committee on Fiscal Affairs (CFA) announced new provisions for the exchange of information between various member states.
The OECD is the international organization that criticized the Bahamas a few years ago for having ﾓharmful tax practices.ﾒ This branding, coupled with the blacklisting by the Financial Action Task Force for a deficient counter-money laundering regime sent the Bahamas financial services sector into a tailspin in 2000.
The new tax provisions are expected to improve international co-operation and assist in the administration of domestic tax laws and international tax treaties.
More than 2,000 bilateral tax treaties are based on that OECDﾴs Model Tax Convention.
According to CFA Chairman Bill McClosky this is the first comprehensive revision of the tax convention on information exchange since 1977.
With an increasing number of taxpayersﾴ engaged in cross border activity, the OECD believes it is essential for authorities to have an effective legal mechanism in place to obtain information from treaty partners.
ﾓThe exchange of information provision offers a legal framework for cooperating across borders without violating the sovereignty of other countries or the rights of taxpayers,ﾒ the OECD said.
The new article prevents bank secrecy from being used as a basis for refusing to exchange information. The confidentiality rules in Article 26, have been altered to permit disclosure of information to oversight authorities.
In line with the agreement signed between the U.S. and the Bahamas, Mr. Smith explained that the requesting country must show evidence that a crime has taken place before authorities react by exchanging tax information.
ﾓLegislation enacted after the (financial services) blacklisting removed the veil of secrecy because it permits the Bahamas to exchange information on client accounts under certain circumstances,ﾒ he added.
According to financial services law expert, Attorney John Delaney, the Bahamas is only obligated to exchange tax information with the U.S. in criminal matters only.
ﾓAlready that treaty does not allow bank secrecy to prevent information from being exchanged by the Bahamas to the United States in relation to a request for tax information,ﾒ he pointed out.
ﾓThis new provision is only of concern whenever the Bahamas has determined it would enter into a tax provision or tax exchange treaty with another country. If we donﾴt have a tax treaty with another country, itﾴs of no relevance.ﾒ
He noted that countries like Austria, Switzerland, Belgium and Luxemburg have already expressed their reluctance to give up their right to bank secrecy.
Said Mr. Delaney: ﾓIt would be important that the Bahamas ensure that it similarly reserves its position in the furtherance of maintaining a level playing field as it relates to those countries which are competitors of the Bahamas in the provision of international financial services. We donﾴt want them to be in a better position than us.ﾒ
Tosheena Robinson-Blair, The Bahama Journal
