Bahamas: US tax treaty 'hasn't created Armageddon'

By NEIL HARTNELL
Tribune Business Editor:


THE Bahamas' Tax Information Exchange Agreement (TIEA) with the United States "hasn't created the kind of Armageddon" many feared when this nation signed that treaty back in 2002, a senior Ministry of Finance official said yesterday, adding that the number of requests submitted by Washington had not been "exorbitant".

Rowena Bethel, in-house legal adviser at the ministry, told a Society of Trust and Estate Practitioners (STEP) luncheon yesterday that the Bahamas' first-ever TIEA, which took effect with the US for criminal tax matters from January 1, 2004, onwards, and New Year's Day 2006 for civil matters, had "been a fairly smooth process to date".

Responding to questions from STEP members as to how the US TIEA had worked and been administered in practice, Mrs Bethel said the Bahamas' "long-standing relationship" with Washington in many areas had ensured the tax information exchange process had been relatively hassle-free.

"I'm not aware that there have been any issues in terms of processing of requests from the US, and that speaks in the Bahamas' favour," Mrs Bethel said. "It hasn't been an exorbitant number of requests, to my knowledge.

"We have a long-standing relationship, and it [the US TIEA] hasn't created the kind of Armageddon spoken about" when the Bahamas signed the agreement back in 2002.

The Bahamas' experience in responding to US requests for assistance under the Mutual Legal Assistance Treaty (MLAT) had served it well in dealing with TIEA requests, she suggested, as the processes involved had their similarities.

Referring to the wider TIEA network the Bahamas had signed up to, Mrs Bethel added: "What we're looking at is the new norm, and operating within the scope of the new norm, recognising certain obligations have to be met, and the parameters to work within."

Analysing the TIEAs' likely impact on the Bahamas financial services industry going forward, Mrs Bethel said this nation was "very good at adjusting", as it had shown throughout its history, and the key was its response to the new international financial services regulatory climate and whether it "takes advantage of the opportunities" now presenting themselves.

"It's a foregone conclusion that things have changes, and in many ways they've changed irreversibly," she told STEP members. "It's important to see how we can benefit from the new opportunities that have emerged from these changes.

"What is important is building a strategy to ensure the Bahamas remains a viable and competitive centre."

Moving forward, Mrs Bethel said the Organisation for Economic Co-Operation and Development's (OECD) 'Peer Review' programme, which would assess the Bahamas and 90 other nations on their compliance with global standards for tax transparency and information exchange, was they key consideration this nation had to be aware of.

The review would take place in two phases, the first of which would assess whether the Bahamas had the legal, administrative and regulatory framework to achieve the desired standards. The latter would assess whether this nation was effectively implementing them, and exchanging tax information in an effective manner.

Asked why several TIEAs, including those the Bahamas had agreed with the UK, France and the Netherlands, included a provision that made information exchange on criminal tax matters retroactive to January 1, 2004, Mrs Bethel replied that based on the OECD model agreement, the earliest tax year for which information could be shared was the one that began on that date.

She added: "The Bahamas hasn't done anything outside the standard, except set a floor in terms of how far back it goes in providing assistance in criminal tax matters."

March 17, 2010

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