Bahamas can't circumvent AEoI

Bahamas abusing CRS bilateral option

"Compliant non-compliance"

Bahamas Minister of Financial Services, Hope Strachan remains defiant in the face of OECD warnings and will not consider signing the multilateral Convention on Mutaul Asssistance of Tax matters as the legal basis for CRS Competent Authority Agreements.

Further recommendations to expedite AEoI agreements with the EU to reduce pressure of threat of EU blacklisting are futile. The OECD knows the bulk of clients utilising Bahamas is from LATAM.
Bahamas is ignoring the following OECD concerns

  • Small number of effective TIEAs: Only 25 TIEAs excluding those with Greenland, Faroe Islands, USA and other tax havens. Half of these are with EU members states and only two with LATAM.
  • Bahamas points to other countries such as Singapore and Hong Kong electing with bilateral route without being critisized by OECD: Yet those countries have 80 - 100 DTAs. The OECD has also mentioned UAE as being a concern.
  • No proof of commitment to CRS: Not a single ratified TIEA since 2013. Considering Bahaams elected the TIEA route as the legal absis for CRS in 2014, oe would have expected new TIEA since then.
  • No existing TIEA contains Automatic Exchange of info clause: The handful of existing TIEAs with bahaams was expedited in 2010 due to the balcklisting of Bahamas for not agreeing to exchange on demand. Hence none of teh existing TIEAs have automatic exchange of info clauses. Hence the existing TIEAs are useless for CRS.
  • Bahamas still insists on its own criteria for deciding if apartner if appropriate to exhange info with. It is known that these criterea are fabricated data security and confidentiality concerns
  • How many years would it take to negotiate TIEAs: It would take decades for Bahamas to negotiate TIEAs with over a hundred jurisdictions. This tiea bilateral route is seen by te Economist as dragging its feet.
  • Bahamas claims signing the multilateral Convention would overwhelm such a little country: Yet many other smaller nations, such as Panama has signed the Convention. In any event the Convention is merely the legal basis of CAAs which can be done on a bilateral basis.
  • Bahamas repeats it is in a good position with its unique method of implementing CRS on a bilateral basis, indcating it has an advantage in selecting partners instead of having to automatically exchange with all jurisdictions implementing CRS.
OECD's Pascal Saint-Amans publically relays to Bahamas the only choice now is to sign the Multilateral option

21.9 - Pascal said in a conference in Spain that Bahamas must go the Multilateral route. (Google translation follows)

"The Bahamas continues to head towards the g-20 blacklist" said Pascal Saint Amans" of the OECD who was commissioned by the group of the 20 most powerful countries, to make a list of "jurisdictions that have not advanced yet enough to a satisfactory level of implementation of international standards of fiscal transparency". The French official said, "for now it is the case of the Bahamas, which is one of the countries that refuse to sign the multilateral agreement on automatic exchange of information". It refuses to open to the rest of automatic data exchange of non-residents with assets on their territory." It's positive that the Bahamas has made progress since 2009 in information exchange agreements, but the downside is that now it does not follow the steps a hundred other countries around the world are implementing" he complained.

Saint-Amans explains that not enough bilateral agreements exist with countries that wish one with Bahamas because "it would have to start from scratch with all of them, including Spain" and takes a long time with uncertain outcome, in his view. Bahamas came off the official list of tax havens for the Spanish Treasury in 2011, but continues to rank as a tax haven in other countries of the European Union.

OECD Concerned About the Bahamas' Progress on Automatic Information Exchange

Although the Bahamas has committed to starting its first exchanges under the common reporting standard (CRS) on automatic exchange of information in 2018, the OECD still has concerns that the archipelago won't be able to meet its commitments in time, said OECD tax chief Pascal Saint-Amans.

Speaking September 22 during the third installment of the OECD's Tax Talks webcast series, Saint-Amans responded to a question about the OECD's stance on the Bahamas' transparency compliance in the wake of the Bahamas Leaks.

The International Consortium of Investigative Journalists, the same group behind the Panama Papers exposé in April, published on September 21 the names of directors and some owners of more than 175,000 Bahamian companies, trusts, and foundations. The Bahamian data, which comprises about 1.3 million files, was leaked to Süddeutsche Zeitung, the German newspaper that originally received the leaked data contained in the Panama Papers and later shared them with the consortium.

The new leak names prime ministers and other politicians, princes, and convicted felons; chief among the names found in the documents is Neelie Kroes, a former EU competition commissioner. Kroes recently penned an op-ed in The Guardian criticizing the European Commission's controversial August 30 decision, which found that Apple received up to €13 billion in unlawful state aid from Ireland as the result of a 1991 advance pricing agreement that may have artificially lowered the company's tax bill.

The Bahamas "remains committed to the transparency of its corporate registry," said Bahamian Minister of Financial Services Hope Strachan in a September 21 statement. "The data required by law to be maintained in the corporate registry is available to the public."

With regard to tax transparency, Saint-Amans noted that the Bahamas had committed to exchange of information on request years ago, and has received a rating of "largely compliant" under the peer-review process of the OECD's Global Forum on Transparency and Exchange of Information for Tax Purposes.

However, despite the Bahamas' commitment to the CRS, the OECD has made clear its concerns to the Bahamian government that it may be delayed in starting those exchanges by 2018 because instead of signing the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, it has chosen to adopt the standard on a bilateral basis, which is a slower process. "It is now looking like the Bahamas will not meet its commitment and will not be able to implement it," Saint-Amans said, although he added that he was sure that the government will now react and move more quickly on the issue.

The OECD tax chief was recently quoted in a September 10 article in The Economist, entitled "The holdout: the Bahamas cocks a snook at the war on tax dodgers." The piece focused on the Bahamas' choice to use its tax information exchange agreements to establish automatic exchange relationships and drew attention to the archipelago's low number of TIEAs. The article also implied that the Bahamas was dragging its feet on automatic information exchange while still advertising itself as a place to hold undeclared assets. Saint-Amans was quoted as saying the Bahamas' lack of response was disappointing, and that he planned to write a stern letter to the Bahamian government.

The Bahamas had cited concerns about the data security mechanisms of other tax authorities as a reason for its slower bilateral approach, according to the article. The government also argues that the multilateral approach was more suitable for jurisdictions with direct taxation regimes, which the Bahamas lacks.

Machiavellian : Cunning, scheming and devious, especially in politics

Bahamas is using the bilateral route to circumvent the OECD's Common Reporting Standard. Their strategy is to commit to the CRS so that it doesn't incur the OECD's wrath, but then implement the CRS in such a manner so that it doesn't enter into any automatic exchange of information agreements with the authorities of its Financial Institutions' clients. Exacerbating this, the Bahamas market their "compliant non-compliance" strategy globally to attract assets looking for refuge from the CRS.

The Bahamas has elected the bilateral option as the legal basis for CRS Agreements. However it abuses this option by:

  1. Not signing any bilateral arrangement since committing to the CRS two years ago. Keep in mind, a bilateral arrangement is the legal basis to sign a CRS Competent Authority Agreement ("CAA") to exchange info. Without a bilateral arrangement, Bahamas cannot sign a CAA as it won't have the legal basis to exchange info. The CAA only states what information will be exchanged. A CAA still requires a legal basis to exchange info. This legal basis could be either (i) Multilateral Convention, or (ii) Bilateral arrangement such as a Double Tax Agreement (DTA) or Tax Information Exchange Agreement (TIEA). Bahamas refuses to sign the Mulitilateral Convention, electing to go the bilateral arrangement route. However, deceitly Bahamas is not signing any new signing arrangements for the past few years.
  2. Wrongly claiming the bilateral option means it can decide which countries to exchange information with. So even with a few bilateral agreements in place, Bahamas claims it can still decide which of these few countries it will exchange info with (e.g. rejecting AEoI with Mexico even if it it has a bilateral agreement with them)
  3. Wrongly concluding it can determine "the criteria" that will determine which countries it enters into automatic exchange negotiations
  4. Rejecting exchanging information with countries due to imagined past present and future data security and confidentiality concerns.

Bahamas says it cannot enter into a Multilateral Competent Authority Agreement because then it would have to first enter into Multilateral Tax Information Exchange Agreements first, which would overwhelm . This is hogwash confusion. If Bahamas first signs the Multilateral Convention on Adminsitration of Tax Matters as the legal basis for CAAs, then the Bahamas can still choose sign CAAs on a bilateral basis. Just because the Bahamas would legally base their CAAs on a Multilateral Convention, they would not have to sign a Multilateral CAA. However, what Bahamas is deliberately confusing, is if they are forced to sign a Multilateral CAA, then we would have to sign Multi TIEAs simultaneousy. No-one is forcing Bahamas to sign multilateral CAAs. First, sign the Multilateral Convention instead of relying on bilateral arrangement as the legal basis for CAAs, and then sign CAAs with each country.

More than any CRS Participant, Bahamas abuses the bilateral option using fallacious arguments:

The Bahamas propounds phoney data security concerns to protect its existing offshore industry. Egrigiously, it is actively attracting untaxed assets from around the world. Egregiously, by marketing it will not sign competent authority agreements with most countries, under the guise of being a committed member to AEoI.

It refuses to sign CRS agreements or bilateral arrangements on which to base the Competent Authority Agreements. This refusal is based on fictitious data and security confidentiality concerns, despite the update that the Global Forum AEoI Group will undertake assessments of data security and confidentiality of committed jurisdictions, reducing the need for each jurisdiction to conduct its own assessment of the information security practices of each of the many jurisdictions committed to implementing AEoI.

The Bahamas often repeat that they have a "unique approach" to the implementation of the Standard in the best interests of the jurisdiction and the clients they serve. Of utmost importance to The Bahamas is that the receiving country is an "appropriate" country for the receipt of such information, including that such country has in place the safeguards necessary to ensure the confidentiality, safety and proper use of the information exchanged.

The Bahamas has elected to use a bilateral approach to implementing the standard "similar to the process of exchange of information upon request or the intergovernmental agreement approach used under FATCA.

"The AEoI Standard and the OECD Convention are very different documents and serve different purposes. The AEOI Standard can rely on either a bilateral legal instrument or a multilateral legal instrument as its legal basis. The AEOI Standard sets out the key principles and obligations towards operationalizing the automatic exchange of information from one country to another. Unlike the OECD Convention, the AEOI Standard is not an international legal instrument."

Promoting bilateral AEoI weakness
The Bahamas government delegations travel globally, sponsoring seminars, attracting new business by assuring financial industry intermediaries that Bahamas will categorically not undertake exchange of information with many countries, especially Latin America, due to bogus security concerns.

"The Bahamas has chosen to embrace the OECD's AEoI by entering into such treaties (CAAs) on a bilateral basis rather than a multilateral one. Adopting the latter approach could overwhelm the Bahamas, as it would require this nation to enter into multiple automatic TIEA agreements with different countries simultaneously. And these nations may include countries that could misuse, or be incapable of protecting, the private financial data belonging to high net worth clients of the Bahamian financial services industry. These concerns explain why the Bahamas has decided to embrace automatic tax information exchange on a bilateral - not a multilateral - basis."

A critique of Bahamas Financial Services Board view
We're In a Good Place.

These views are confirmed in the BFSB update dated 30 May 2016.

Developing a regime to comply with global automatic tax information exchange standards is “the immediate priority” for the Bahamian financial services industry. “We’re in a good place.”

Why in a good place? What is advantageous for Bahamas?
Tanya McCartney, the Bahamas Financial Services Board’s (BFSB) chief executive says the Bahamas needed to finalise “the criteria” that will determine which countries it enters into automatic exchange negotiations with come 2018.

There is no criteria to determine which countries to AEoI with. the OECD publishes the list of participants which are deemed safe to exchange info with.
The immediate priority for the industry will be to collaborate with the Government on implementation of automatic information exchange and the CRS. Ms. McCartney said the Government had confirmed its intention to create a joint private-public sector Task Force to determine the approach it should take. “Our work on this initiative is key to the survivability of the sector, and I commit to working assiduously to ensure its success.” So why is survivability at stake due to automatic exchange. .... does this mean surviveability is based on maintaining untaxed assets?
“We have a foundation. We’re in a good place. The question is to decide the criteria for determining which countries we will enter into negotiations with for bilateral agreements.” Bahamas cannot decide the criteria for determining which countries we will enter into negotiations with for bilateral agreements.

The Bahamas has agreed to automatically exchange tax information on a bilateral - as opposed to multilateral, basis - which allows it to determine the countries it will reach agreements with.

Absolutely not true. The bilateral option means Bahamas can use DTAs or bilateral treaties as the legal basis to exchange information stipulated in the Competent Authority Agrrements. It does not mean Bahamas can choose which countries to exchange information with. Choosing is abusing the bilateral privilage.
This was previously a key concern for the financial services industry, with Mrs. Strachan’s predecessor describing it as "difficult if not impossible" for the Bahamas to implement the CRS standard on a multilateral basis. "Difficut", "Impossible"... It's not difficult or impossible for rest of the world to implement. Why that is it impossible to implement AEoI. Bigger and smaller countries manage.
Ryan Pinder told the 2014 Nassau Conference that if there were 80 signatories to the CRS, the Bahamas and its financial services industry would need to instantly know structures designed to avoid tax in each of them and provide the relevant information instantly. “Tell me: Is that possible?” asked Mr Pinder then. “That’s an impossible request on a multi country basis, certainly for a country like the Bahamas.”

This reply is balderdash, senselessn, onsence, claptrap, drivel, poppycock, tripe and mindless.
Describing the multilateral approach as “fundamentally flawed”, Mr Pinder said the OECD itself had conceded tax information exchange should not take place unless countries had legal and administrative frameworks in place to ensure the details provided were kept confidential and used properly.

A tax haven proclaiming AEoI is "fundamentally flawed". The Multilateral Convention is merely the legal basis of exchanging information defined in the Competent Authorit Agreement. It would still allow Bahamas to reject exchanging if confidentiality was a valid issue, not a imagined or fabricated concern.
Forcing the Bahamas to enter into automatic information exchange with multiple countries, he warned, could expose it - and the financial services industry’s clients - to nations where details would be used improperly or shared with the wrong people, jeopardising their safety and security.

The Multilateral Convention does not force exchanging information. It is merely the legal basis for exchanging according to the CAA. Using the bilateral route severly limits the countries Bahamas can exchange information with as its based on the bilateral agreements it has,
Mrs Strachan acknowledged the importance of the Bahamas being able to resist the multilateral approach saying: "The bilateral path that we have chosen toward implementation is courageous and ambitious, and will require much work and focused attention.” Resist? "Courageous and ambitious" to try resist and circumvent the OECD CRS.
Bahamas Minimal Bilateral Treaties

Bahamas has only 32 bilateral arrangements on which to base a CAA on. Notably, only one new one (with indonesia, not yet ratified) since committing to AEoI in 2014. This shows Bahamas is not committed to the CRS at all, despite is public statement that it is.

None of the TIEAs have automatic exchange of info clause as they were establsied in 2010 in response to OECD threat of grey listing because Bahamas did not agree to exchange on demand. Hence the TIEAs in current format are useless for AEoI.

Furthermore, seven of these "bilateral agreements" are with other tax havens or useless for CRS purposes, namely:
  • Aruba (Tiny Dutch Caribbean Island)
  • Faroe Islands (Them fishermen must be hiding tax)
  • Greenland (Them eskimos must be hiding tax)
  • Guernsey (Them low tax paying dodgers)
  • Monaco (Them zero tax dodgers)
  • San Marino (A prior tax haven with 32,000 residents)
  • USA (Not party to CRS)

This is a complete farce. Bahamas has only 25 relevent bilateral arranements on which it can use as a legal basis for AEoI. Even if Bahamas decided to do a CAA with one of these 25 countries, Bahamas still opines it can decide on criteria to sign a CAA. For example, Bahamas has a bilateral arrangement with Mexico, but Bahamas has indicated it will never exchange info with Mexico because Bahamas has a disk of data proving that there was a leak of data a few years ago! There are over a 100 committed CRS participants. It would take Bahahams decades to do bilateral treaties with only a fraction of thes, and yet after that still decide if it wants to do a CAA with them.
Bahamas Many Levels of deception:

  1. Bahamas commits to CRS, electing bilateral agreement option as the legal basis for Competent Authority Agreements, yet not signing any bilateral agreements since committing to the CRS. Without bilateral agreements the Bahamas could not sign CAAs even if it wanted to.
  2. Opining that its election of bilateral agreements as the legal basis for CRS gives the Bahamas the "unique advantage" of being able to choose which country to sign CAAs with. (WRONG!)
  3. Bahamas thinks it can come up with criteria to decide which countries it will exchange info with. (WRONG!)
  4. Opining that data security concerns is a reason to reject signing a bilateral treaty, despite the OECD update that the OECD would undertake the data security and confidentiality assessments on behalf of the CRS participating jurisdiction.
  5. Even if Bahamas has an existing bilateral tax information exchange agreemet with say, Mexico, the Bahamas will still decide not sign a CAA with Mexico due to fabricated confidentiality concers.
  6. Outrageously, Bahamas Government travels the world to seminars, to market to financial intermediaries, to move the world's untaxed money fleeing the CRS to move to the Bahamas, guaranteeing Bahamas won't automatically exchange information due to its "unique position", viz bilateral agreement legal basis for CAAs.

In summary. Bahamas says it cannot enter into a Multilateral Competent Authority Agreement because then it would have to first enter into Multilateral Tax Information Exchange Agreements, which would overwhelm "such a small country. If Bahamas first signs the Multilateral Convention on Adminsitration of Tax Matters as the legal basis for CAAs, then the Bahamas can still choose to sign CAAs on a bilateral basis. Just because the Bahamas would legally base their CAAs on a Multilateral Convention, they would not have to sign a Multilateral CAA. However, what Bahamas is deliberately confusing, is if they are forced to sign a Multilateral CAA, then we would have to sign Multi TIEAs simultaneousy. No-one is forcing Bahamas to sign multilateral CAAs. First, sign the Multilateral Convention instead of relying on bilateral arrangement as the legal basis for CAAs, and then sign CAAs with each country.