Several Caribbean countries including some member states of Caricom are reportedly regarded by the Organisation for Economic Cooperation and Development (OECD) as uncooperative offshore tax havens and are facing mounting pressure from G20 member states to comply with robust anti-tax haven regulations.
The Bahamas has become the latest Caribbean offshore financial jurisdiction to feel the effects of the crackdown by rich countries following the recent publication by the OECD of a so-called grey list of countries that serve as tax havens.
Other financial centres in the region have reportedly been told bluntly that they run the risk of facing strong sanctions unless they move to comply with international tax regulations.
Last week the French banking giant BNP Paribas announced that it will withdraw from several countries, including the Bahamas since those countries have failed to meet international regulations set out by the Paris-based OECD. BNP Paribas says that it will leave the Bahamas by year-end.
Last week’s announcement by BNP Paribas came just days after leaders of the G20 vowed to keep up the pressure on tax havens to improve transparency and exchange tax information, according to a BBC Caribbean Report documentary monitored by Stabroek Business.
Affected Caribbean countries have reportedly reacted strongly to G20 pressure to suppress offshore tax havens with Bahamian junior Finance Minister Zhivargo Liang describing BNP Paribas’s plan to quit that country as “regrettable”. Liang is quoted by the BBC Caribbean Report as saying that the Bahamas is working “feverishly” towards signing the 12 Tax Information Exchange Agreements in order to meet the standards stipulated by the OECD.
“We know there might be those entities that will find it difficult to remain if the Bahamas remains on the grey list. We fully expect to meet that standard by the end of the year but that does not mean we cannot meet it sooner,” Liang is quoted as saying. Nassau has reportedly signed tax information exchange agreements with Monaco, San Marino and the United States, while negotiations have begun with other countries including Australia, Britain, Canada, Germany, France, the Nordic nations and Spain.
Head of the Bahamas Financial Services Board Craig Gomez has reportedly said the country cannot afford closure of its local operations by BNP Paribas. “Clearly European banks are sensitive, and G20 member countries that have banks headquartered here are sensitive to all that is going on,” Gomez is quoted as saying.
The United States claims that it loses around $100 billion each year to offshore tax havens and other Caribbean financial centres have reportedly lost the services of international companies in the wake of the announcement by United States President Barack Obama that his administration was cracking down on tax havens.
Late last month Willis Group Holdings, the world’s third largest insurance broker, announced that it was transferring its headquarters from Bermuda to Ireland, citing economic factors as the reason. In addition to Willis, about 10 non-insurance related companies are also reportedly planning to leave the British territory because of tax and other reasons.
While affected financial centres in the region are reportedly moving to comply with the OECD’s tax haven regulations, some Caribbean officials have reportedly branded the move by the world’s most powerful countries as hypocritical, accusing them of trying to shift the blame from their own failed policies and tax regulations. “It’s the fault of the onshore centres who taxed their own people. Money is running away from them now,” the BBC Caribbean Report quotes leader of the Cayman Islands, McKeeva Bush as saying.
Bermuda’s Finance Minister Paula Cox has also chipped in stating that she suspects the G20 nations may be seeking “extra-territorial solutions” to their economic, fiscal and financial challenges. “There is now a strong suspicion that the G20 has an undisclosed agenda item to drive forward a global corporate tax policy,” she said.
Several Caribbean nations including Aruba, Bermuda, the British Virgin Islands, the Cayman Islands and the Netherland Antilles have reportedly moved to complete the stipulated 12 tax exchange agreements and have all been taken off the OECD’s grey list in recent weeks. Others like Caricom members the Bahamas and St Kitts and Nevis have reportedly begun negotiating similar accords in an effort to get on to the white list.