In his annual New Year’s Address to the nation in January, just prior to the official signing of the TIEA in Washington, Prime Minister Hubert A. Ingraham pointed out that The Bahamas was singular among independent countries in the region in not having concluded a tax information exchange arrangement with the United States. He said, further, *”Switzerland, upon which all other international financial services jurisdictions such as The Bahamas are fashioned, also cooperates with the United States on criminal tax and tax fraud.”*
Although signed in January, the Agreement will come into effect when the U.S. and The Bahamas have exchanged diplomatic notes confirming that the necessary constitutional and statutory requirements have been met. Additionally, Articles (2-3) relating to the provision of information with respect to US federal taxes will take effect for the taxable period beginning January 2004 for criminal matters and for the taxable period beginning January 2006 for civil matters. Article (5) relating to the convention tax benefits will become effective January 2006.
In commenting on the Tax Information Exchange Agreement, Minister of Finance Sir William Allen said the Bahamas Government was pleased to have been able to reach a balanced TIEA, which takes full account of “fundamental interests” of both The Bahamas and the U.S.
The Finance Minister further stated that The Bahamas wishes to ensure its financial sector will enjoy the respect and confidence of the international community, and that it will always provide a level of confidentiality appropriate to a “respected financial system”.
*”The Bahamas is firmly against the use of its financial system for illicit purposes. We are determined that the same financial standards apply in The Bahamas as apply in other recognised financial centres”*, said Minister Allen.
At the signing of the agreement in Washington, U.S. Treasury Secretary Paul O’Neil said *”The Bahamas leaves no doubt that it should be counted among the financial centres of the world that are committed to upholding international standards, and simply will not tolerate the abuse of its financial institutions for illicit purposes”.*
Sir William pointed out that The Bahamas and the United States historically have had very close relations based on shared values and strong democratic traditions. *”We have in recent times strengthened our cooperation in the fight against terrorism, drug trafficking, money laundering, financial crimes and alien smuggling”,*
Referencing The Bahamas’ stated interest in a level playing field, the Minister concluded, *” ..we are especially encouraged by the stated commitment of the United States Government to the principle of a level playing field in matters of international cooperation”.*
It is to be noted that it is in this regard the Government of The Bahamas continues to call for a commitment by the OECD to provide a level playing field in its Harmful Tax Initiative. The principle of the level playing field has been the position of The Bahamas since 1999.
The call for recognition of The Bahamas Government’s long standing policy to continue to raise revenue through indirect taxes rather than the imposition of income, capital gains or inheritance taxes, has received support from the United States and has subsequently seen a clarification in the OECD’s Harmful Tax Initiative.