Bahamas News

The Bahamas and other offshore financial centers like it in the region may be able to breathe a little easier after CARICOM has received an “assurance” that the Stop Tax Havens Abuse Bill will likely not bear fruit.

It was one of the issues that Heads of Government of the Caribbean Community discussed with members of the House Committee on Foreign Affairs and the Ways and Means Committee on a recent trek to Capitol Hill.

The bill, which was introduced by Senators Carl Levine, Norm Coleman and Barack Obama, came against the backdrop that there is an estimated $345 billion in unpaid taxes each year in the US owed by individuals, corporations, and other organizations. According to the latest estimate out of that $345 billion, offshore tax haven abuses account for as much as $100 billion.

But some Caribbean leaders and members of the financial services sector maintain that the bill unfairly targets the region and could mean disaster for the offshore financial services sector.

Financial services is the number two industry for The Bahamas, which is named in the bill as a target along with 33 other jurisdictions.

“We were given the assurance that the bill that is currently written, the experts have all agreed that it is inadequate for what is required and that the positions in relation to the Caribbean which are deleterious to the Caribbean interest would not, in their judgment, see the light of day,” CARICOM Chairman Prime Minister Dr. Ralph Gonsalves said after the meeting with US Congressmen.

“That is something which is very positive that has emerged. We have many friends on this committee who understand our position and who are prepared to work with us to carry forward a Caribbean agenda.”

He also made the point that the onslaught against tax havens has not come from the regime of US President George Bush.

Nonetheless, there continues to be a vigorous effort on the part of some in the Congress to stop the hemorrhage of unpaid taxes.

Senator Levine declared that offshore tax haven and tax shelter abuses are undermining the integrity of the US tax system and are shifting the tax burden from high income persons and companies onto the backs of middle income America.

He classified a tax haven as a foreign jurisdiction that maintains corporate, bank, and tax secrecy laws and industry practices that make it very difficult for other countries to find out whether their citizens are using the tax haven to cheat on their taxes.

“In effect, tax havens sell secrecy to attract clients to their shores,” he said.

“They peddle secrecy the way other countries advertise high quality services. That secrecy is used to cloak tax evasion and other misconduct, and it is that offshore secrecy that is targeted in our bill.”

The proposed law contains provisions that would authorize special measures against foreign jurisdictions, financial institutions and others that impeded US tax enforcement; increase disclosure of offshore accounts, transactions and entities and increase penalties for US interests failing to reveal offshore holdings.

Currently, the US Treasury has the authority under the Patriot Act to impose financial sanctions on foreign jurisdictions, financial institutions, or transactions found to be of “primary money laundering concern.”

The proposed Stop Tax Haven Abuse Act would authorize the Treasury to impose the same sanctions on the same types of entities if it finds them to be “impeding U.S. tax enforcement.” In addition, the bill would add to the list of possible sanctions the ability to deny foreign banks the authority to issue credit cards for use in the US.

The Prime Minister of St. Kitts and Nevis Denzil Douglas who was also a part of the meetings on Capitol Hill said he was assured that the bill that was introduced was not intended to hurt countries in the Caribbean region.

While the ongoing debate rages there are efforts underway to entice jurisdictions away from being tax havens. For instance the Global Tax Justice Network, an international non-profit organization dedicated to fighting tax evasion, is lobbying for these nations to be given financial assistance in that regard.

The network’s co-ordinator, John Christensen said the tax haven system only helps a select few rich people while poor people pay more tax.

“Our network is pushing also for the smaller islands that need funds to adjust away from being tax havens to be given compensation so that they can develop new development strategies,” he said, “but I think they now need to re-think what they’re doing.”

Congressman Levine noted that for many years, the Permanent Subcommittee on Investigations has been looking at the problem of offshore corporate, bank, and tax secrecy laws and practices that help taxpayers dodge their U.S. tax obligations by preventing U.S. tax authorities from gaining access to key financial and beneficial ownership information.

The Tax Justice Network, recently estimated that wealthy individuals worldwide have stashed $11.5 trillion of their assets in offshore tax havens.

The Bahamas financial sector contributes over 20% to GDP, with annual expenditures in the local economy of the banking sector alone exceeding $400 million, assets exceeding $350 billion, and with sizeable assets under management.

By Tameka Lundy
The Bahama Journal