BFSB Newsletter ~ Part 2

The future of the financial services industry of The Bahamas will undoubtedly evolve as a function of our accomplishments in this sector over several decades, and the decisions we make over the next several months. It will also depend on whether powerful developed nations, that profess to observe and prescribe best standards for this sector, will exert the will to respect ideals of democracy for which, we believe, they stand, and sit down with us to address differences in a spirit of co-operation and fair play for the benefit of global progress.

I do not exaggerate when I say that undermining the reputation and international credibility of a nation such as The Bahamas, in a sector which contributes so much of its GDP, is a significant act of aggression. It is an act which should not be left unchallenged. It is an act which demands responsible comment.

That our financial services industry has had the benefit of low tax and high regard for client confidentiality is fact. That these regimes, which developed in The Bahamas over centuries, were contrived to unfairly grab financial services market share is not fact. These are not regimes developed to help those of criminal intent launder or hide proceeds of crimes.

Throughout much of the last century, our financial services sector grew with such vigor that it now supports thousands of high-end jobs in our economy. But, it has also endured corrections along the way. We have made mistakes of inexperience, and errors of judgment. At other times, we have felt the hand of external circumstance and the vagaries of judgment by others beyond our shores.

The OECD's declared intent seems reasonable, when expressed in terms which recognise national sovereignty. Frances M. Horner, Head of its Tax Competition Unit, Fiscal

Affairs, in a paper entitled "The OECD, Tax Competition, and the Future of Tax Reform" declared that: "The fight against harmful tax competition is the future of tax reform. This is not a fight against lower tax rates. A country must be able to choose what level of public services it wishes to provide, and set its tax rates accordingly. Business enterprises must be free to relocate if they prefer lower tax rates, e.g. at the cost of a lower level of public services or because the government simply operates more efficiently. "

We are hopeful that, as this process with the OECD plays out, there will be thoughtful repudiation of the intended attack on developing economies of the world. We are heartened by recent pronouncements attributed to an influential U.S. legislator who noted that "tax competition is a strong factor in both maintaining and increasing the vibrancy of economies across the globe." He is reported to have stated, further, that the OECD "is trying to impose its will on nations that are not members of the organization, calling for draconian sanctions against so-called tax havens. American citizens would not respond well if other countries tried to dictate our tax laws, and it hardly seems right for us to participate in a campaign to force other nations to change their tax laws."

If this coincidentally well-sequenced show of power was intended to influence our efforts to solidify the position of The Bahamas as an outstanding financial centre, it has had some effect. We are undaunted, and firmly believe that whatever obtains in resolution of the present crisis, The Bahamas must do as its best judgment and the needs of its economy dictate. Our country saw it as important to condemn vigorously those allegations that unjustly impugn the reputation of our centre. With equal vigor, The Bahamas is facing the responsibility for what we can and must do to improve or change.

The Bahamas is seizing the very real opportunity the current situation presents. Major stakeholders in The Bahamas financial services industry are all contributing their insight and expertise to defining the new direction of the industry. This crisis has sharpened our focus. Drawing on the input of both private and public sectors, we are applying our collective know-how to mapping a sustainable way ahead for The Bahamas as a financial centre. Not only are we refining old and writing new legislation, we are resourcing old and establishing new regulatory bodies, and developing new products and services to compete more effectively in a changed marketplace.

There are two major issues for us. We anticipate a future in which globalization of trade, closely allied with technology, will bring heretofore-unknown opportunities to small countries, and we are actively preparing to take our rightful place at the banquet. But as a people of reason, we also know that if globalization is to bear positive fruit, it will dictate widespread changes in the domestic and international arenas, especially in the area of trade.

We recognize and support the idea that globalization will also call for agreement on standards worldwide to promote the profitability and sustainability of the financial services industry. Additionally, we share in the worldwide concern for the harmful effects of unrestrained proceeds of crime on financial systems. I can say with assurance that The Bahamas is fully prepared to make its contribution to harmonizing best practices globally.

History is fairly consistently inclined toward repetition. Under cloak of high ideals, nations have been known to trample the rights of other, usually smaller, sovereign states. I most sincerely hope that current initiatives, in the transparency of history, will not be seen as such a repetition.

We sincerely hope that the current deportment of the OECD countries in this matter of tax competition is not merely a new flavor of imperialism, of which small states across the globe have so often tasted, in other forms, in the past.

Whatever the case, Bahamians as a proud and independent people will continue to work hard at fostering a culture of probity in our dealings, and we will strive to be a model for the resourcefulness and dignity of small states.