Minister: ‘Leverage’ assets to protect offshore sector
Guardian Business Editor
Published: Oct 17, 2013
The Ministry of Financial Services is hoping to leverage The Bahamas’ assets, such as Freeport, to further market itself as a “full-service business center” that not only engages in tax planning and wealth management but hosts an increasing amount of commercial activity conducted by those whose assets are being hosted, according to the minister of financial services.
Ryan Pinder, speaking to financial services stakeholders at the eighth annual Nassau Conference at the British Colonial Hilton, said that The Bahamas “is ahead of the curve” in the offshore financial community as a country with a “diverse variety of operating entities” across the sector, which is already well placed to “insulate” itself from “attacks” emanating from the international community with respect to “aggressive” tax policy initiatives.
However, in an interview with Guardian Business following his address, the minister proposed that it will be strategic for The Bahamas to do more in the way of linking wealth management and tax planning to the establishment of commercial activity in The Bahamas.
This, he suggested, will further protect the offshore sector in The Bahamas by demonstrating the “physical presence” of entities in this jurisdiction, rather than just their wealth, which should have a “legitimizing” effect in the eyes of the international community.
“A key market for us is Latin America and countries such as Brazil, Argentina and Mexico. These countries are export countries, they produce, they have commodities they export.
“We believe we can manage their wealth, provide products and services, but also have a component of their global business here as well. It’s not a concept that’s pie in the sky; the assets exist, the location exists, the free trade zone exists, the container port exists, all of these things exist already.
“Making that interconnection and leveraging the location to these very successful entrepreneurs to use these things in their business environment, not just in their financial planning and wealth preservation environment, I think is a natural link to demonstrating that we are a full business center and financial services is just a component of that.”
The minister highlighted discussions on this theme, which took place on a panel in which he participated at the STEP Latam Conference in Montevideo, Uruguay, last week.
“The discussion was to utilize assets of The Bahamas, such as the free trade zone that we know as Freeport, our tax advantaged position and location as a preeminent logistics hub to attract not only the client from a wealth management perspective, but also a component of their business operations.”
The Nassau Conference event was held under the theme: “The shift has occurred. How are you positioned?”. Numerous speakers addressed the issue of the rapidly evolving financial regulatory environment in which offshore industries must now find ways to remain competitive.
Describing the international community as speaking in “a thunderous voice” on tax policy issues, having shifted from demands five years ago for “tax transparency” to this year’s consensus among the G20 and G8 nations that they would seek “automatic tax information exchange”, Pinder said responding to this evolution requires “vision”.
Referring to the OECD’s Base Erosion and Profit Shifting (BEPS) action plan, which has been touted as a plan to cut back on opportunities for multinational companies to evade taxation, Pinder said this might be a “most important international tax initiative affecting the global financial services industry”.
The BEPS plan released by the OECD on July 19, 2013, identifies 15 action points to tackle BEPS, setting an ambitious timeline of two years to achieve those actions.
In his earlier address, Francesco Vanacore, head of products and solutions for Credit Suisse Trust, Zurich, said the possibility for wide interpretation of some of the points in the action plan relating to “transparency” would create particular challenges for the industry as it attempts to remain compliant.
On his part, Pinder expressed some doubts about whether what is being proposed within these various initiatives – including automatic exchange of tax information among G20 countries by late 2015 – can realistically be achieved by those who are seeking it.
“What is proposed is a multilateral attempt between governments to achieve what the United States is attempting achieving through the private sector (via FATCA). If the international community is successful in this regard, which I personally have my own doubts (that it will be), then tax compliance and reporting will drastically increase. Imagine extending what you have been putting in place for FATCA to all G20 countries – an impractical measure for sure.”
Assuming that such initiatives are advanced, however, Pinder said that The Bahamas’ decision to structure itself as a “diversified” financial and business services jurisdiction can help to demonstrate critical “substance over form” as tax authorities the world over cast a hungry eye at offshore jurisdictions as they seek to shore up revenues.
“All of these operating companies, supporting our diversified product offering as a jurisdiction, demonstrates the credibility and substance of our industry, and is proof that we are a legitimate and credible trade in services jurisdiction,” Pinder told the conference.
Meanwhile, the minister added that the government also hopes to “work closely” with international agencies to shape a “sensible approach” to tax matters.
“As a responsible financial center, we must be at the table to discuss these matters and we are committed to not only adhering and meeting international regulatory requirements, but also participating in their design,” he said.