It is becoming increasingly difficult for the Organization for Economic Cooperation and Development (OECD) to maintain its ‘holier than thou’ status, according to Minister of State for Finance James Smith.
The powerful grouping of industrialized nations blacklisted The Bahamas financial services sector in 2000, but Minister Smith said indications are that many practices for which offshore financial centers have been citied for deficiencies abound in OECD countries.
“Good examples of this are the proliferation of bearer shares and the failure to meet the same high standards for anti-money laundering as are generally found in place in [offshore financial centers],” said the minister, who addressed the recent monthly meeting of the Society of Trust and Estate Practitioners (STEP).
He said the final report of a special subgroup examining the level playing field concept will no doubt provide a wealth of information about the unevenness of the playing field which at present appears to be tipped heavily in favour of OECD members and non-member economies that were not named in any of the listing exercises.
Minister Smith was giving a report on the Melbourne Global Forum, held in Melbourne, Australia between November 15 and 16.
More than 130 representatives of 55 governments, the Commonwealth Secretariat and the European Commission attended the meeting to review progress towards a level playing field based on high standards of transparency and effective exchange of information for tax purposes.
Minister Smith told STEP that the Melbourne Global Forum was different from other fora as it was the first forum in which other countries and jurisdictions were invited to participate in discussions without first being required to give commitments.
He explained that the decision to open the Global Forum to countries that had not previously committed to the OECD process on transparency and information exchange was taken at the Berlin Global Forum in 2004, at which time it was agreed that the Global Forum had to be a more inclusive body in order to meet the objectives of a level playing field.
“This is the position The Bahamas has taken throughout this process,” Minister Smith reminded.
During the Melbourne meeting, the subgroup of which the Bahamas is a member, presented its report. Minister Smith said examining progress toward a level playing field was “an interesting exercise.”
In his address, he pointed to what he said were two of the more positive outcomes of the Melbourne Global Forum.
He said the OECD acknowledged that its 2000 list should not be relied upon to discriminate against jurisdictions appearing on the list, and that any list should be based on current facts.
Minister Smith explained that this arose from concerns repeatedly expressed to the OECD that its 2000 list was being used against jurisdictions appearing on the list even though many would have effected improvements to their regulatory frameworks since that time, and have also been engaged with the OECD in discussions.
He said the important outcome at the meeting was the reaffirmation that exchange of information arrangements need not only take effect through a Tax Information Exchange Agreement but may also occur through a Double Tax Agreement, depending on the mutual interests of the parties.
Minister Smith said at the Forum, the majority of countries that contributed to the debate expressed their preference for Double Taxation agreements as the means by which to provide arrangements for information exchange.
He noted that the double taxation agreement that is used to facilitate trade by removing the possibility for taxing a business twice, essentially restricts its main focus to mutual assistance within the purpose of the treaty.
The model exchange of information on the other hand, he explained, simply calls for the provision of information for the purposes of assisting with tax administration and enforcement generally.
“To be sure, however, the OECD has encouraged contracting states to take account of mutual interests and benefits as part of arrangements for tax information exchange,” Minister Smith said.
He added, “Another inconsistency noted was that the override of bank secrecy for exchange of tax information is not universally accepted within the OECD. This would of course, have significant implications for the achievement of a level playing field.”
Minister Smith said as a major international business centre, it is important that The Bahamas maintains an awareness of global developments that may impact its services industry.
“The government is committed to sustainable growth in financial services through improving the competitive position of The Bahamas and the refinement of the regulatory framework,” he said.
“We believe that external engagements are an important aspect of these enhancements though we also believe that such engagements must be on a fair and even basis and will continue to work towards expanding our knowledge base while at the same time providing relevant input in the international decision-making process which affect the affairs of this country.”
The Society of Trust and Estate Practitioners is a professional body providing education, training, representation and networking for over 11,000 members working in financial services in some 60 large and small jurisdictions across the world, including many OECD “participating partners”.
Members specialise in trusts and estates, executorship, will writing, administration and related taxes.
By: Candia Dames, The Bahama Journal
