By NEIL HARTNELL
Editor-in-chief of the Tribune
The Bahamas “cannot lose sight” that members of the G-7 and other high-tax European states want to “wipe out” international financial centers (IFCs) such as this nation, a prominent accountant warned yesterday.
Craig A “Tony” Gomez, managing partner of Baker Tilly Gomez, told Tribune Business that the Bahamas must keep this goal in mind when determining how they will respond to the agreement of Group finance ministers. Seven (G-7) on a minimum of 15% of the global corporate tax rate.
He added that the weekend’s announcement was likely to have more of an impact on rival IFCs such as Bermuda, Cayman Islands and British Virgin Islands (BVI), as they researched precisely the type of relocation multinational revenue / profit corporation that is the main target of the G-7.
The Bahamas, on the other hand, has largely focused on managing private wealth through structures that typically use corporate vehicles as passive investment entities, making them less vulnerable to the proposed minimum global corporate tax. by 15%.
However, Mr Gomez suggested that the main impact could be to stifle any future flow of business or investment that the Bahamas may seek to attract multinational entities and companies. He indicated that the G-7 proposal, if adopted as a global standard, could mean that there is little benefit to using this country’s current “no tax” platform if income / profits are still subject to a 15% levy.
“You are attacking international jurisdictions that house multinational corporations. I do not know if the Bahamas has a significant part of this activity, ”explained Mr. Gomez. “But when multinationals in a jurisdiction start to restructure, it impacts their thinking about each country that operates in that orbit.
“While the Bahamas may not be well known or popular for multinational companies, once these types of companies start to strategize or rethink, it will impact any business the Bahamas could have done. get from a multinational entity. “
Urging the Bahamas not to ignore the overarching goals that many G-7 countries have nurtured for two decades, Mr. Gomez added: “We cannot lose sight of the fact that the stated intention remains the same among the G-7 and G-20 countries. It remains to eliminate the so-called tax havens.
“Countries and homes considered as tax havens, it remains the same strategy there. But our main activity is private wealth management, and the Bahamas is not a main center for multinationals. These are the institutions the Bahamas hasn’t really attracted over the years.
Mr. Gomez also questioned the impact of the G-7 proposal on countries like Barbados, with its network of double taxation treaties. These ensure that businesses domiciled in Barbados are taxed at the island’s lowest rate rather than the home country’s higher rate when profits and income are repatriated, which is why so many Canadian companies have headquartered there in the Caribbean, but the minimum rate of 15% would seem to trample all of these deals.
Much work remains to be done to enforce the G-7 minimum global corporate tax of 15 percent. Few details on how this will work in practice have yet to be released, and there were several signs yesterday that global unity is already unraveling and will be difficult to achieve.
Members of Congress and Republican senators in the United States called the proposal “crazy” and threatened to block its passage by the legislature. Pat Toomey, a Republican senator from Pennsylvania, was reported by the British Guardian newspaper as saying: “The fact that they had to try to persuade all these other countries to make sure they raise their taxes is an admission of the damage. that we suffered. do to our own country.
And Republican Senator John Barrasso of Wyoming called the plan “anti-competitive, anti-American and harmful to us as we try to continue growing the economy as we emerge from a pandemic.”
The Bahamian government, in its response to the G-7 decision, pledged that it would not be intimidated by the minimum 15 percent global corporate tax deal. The finance ministry, in a statement, said it was assessing whether there were implications for the Bahamas’ national tax system and the international financial services industry.
He added that this country “reaffirms its sovereign right to determine the tax structure best suited to the country’s ongoing development” in response to the declaration of the world’s most powerful economies that they have reached an agreement on how to fight against tax evasion by large multinationals. – in particular those of the so-called “digital” economy.
“The Ministry of Finance is assessing the impact of these proposals and the implications they may have for the Bahamian national tax system,” he said in response to the G-7 announcement. “The Bahamas reaffirms their sovereign right to determine the tax structure best suited to the country’s ongoing development.
“Nonetheless, the ongoing multilateral discussions are timely given the Prime Minister’s recent announcement in the budget speech regarding the ministry’s impending comprehensive tax study. The outcome of this in-depth empirical assessment will inform ongoing tax reform efforts in pursuit of greater justice and fairness in the country’s tax system.