Bahamas Leaks: An Overview

The Bahamas Leaks: An Overview

The Bahamas Leaks will be one of many topics we will discuss with our distinguished panel of experts during our October 20th webinar on BEPS Action 13 & Other International Tax Issues in the Caribbean. To register for this event, follow this link.

The Bahamas Leaks is the latest in a series of document leaks that have rocked the international taxation world.

1.3 millions files from the Bahamas company registry were anonymously released to German newspaper Süddeutsche Zeitung about a month ago, jeopardizing the financial interests of a veritable cornucopia of VIPs.

Information on approximately 175 thousand shell companies, trust and foundations made the rounds and these details have been collected in Washington DC by the International Consortium of Investigative Journalists (ICIJ) to create a public Bahamas leaks database.

Among the myriad of prominent figures affected by these leaks are UK Home Secretary Amber Rudd, former EU Competition Commissioner Neelie Kroes, former Mongolian Prime Minister Sukhbaatar Batbold, current Argentine President Mauricio Macri and former Chilean dictator Augusto Pinochet.

Plenty of wealthy individuals and companies have chosen to set up in the Bahamas thanks to its multiple tax breaks on company profits, capital gains, income and inheritance, and the anonymity awarded to its users.

According to James N. Mastracchio and Sanpreet Dhaliwal of Dentons, “The Bahamas claims to be a transparent jurisdiction with a public register of companies, but the information shared from the seat of government in Nassau is limited.”

Furthermore, they write, “Although the Bahamas Corporate Registry is supposed to contain the names and addresses of all directors and officers, there is no requirement to register the owners of a company with the authorities.”

Bahamas Leaks: The Government of Bahamas Responds

The Government of Bahamas Responds!

As a result of these revelations, the government of Bahamas has moved to strengthen its efforts against tax avoidance and evasion, pushing up by a full year its plan to comply with the automatic tax information exchange agreement.

Minister of Financial Services Hope Strachan said “that acting to meet its Common Reporting Standard (CRS) obligations ahead of schedule was the best way for the Bahamas to respond” to the leaks.

In other words, says Strachan, “offense [is] the best form of defense” when confronting recent developments.

Bahamas Attorney General Allyson Maynard-Gibson, however, denounced the information dump.

According to a statement released to the press, Bahamas “[takes] this matter of an unauthorised publication by the International Consortium of Investigative Journalists (ICIJ) of data held by the online companies registry very seriously. A review of our systems is currently underway. Based on the findings, all necessary action will be taken to ensure that we maintain the requisite data protection as we understand the importance of this to our users."

Many Caribbean analysts also believe such leaks are detrimental to local business.

In a lecture as part of the 5th annual Anti-Money Laundering/Counter-Financing of Terrorism Conference in Jamaica, Cheryl Bazard, a lawyer and former banking executive, said these leaks frighten “those who wish to come to the Caribbean to do business. Because it portrays our countries as places that are not safe, especially when one looks at data security and client confidentiality."

Mirroring Maynard-Gibson’s remarks following the leak, Bazard said these developments have led to “just another piece of sensational journalism."

Bahamas Leaks: Europe and the UN Discuss

Europe and the UN Discuss the Bahamas Leaks

At a European level, indignation among Members of Parliament also ran high but for other reasons.

During a meeting in early October, Danish MEP Jeppe Kofod said about Kroes’ involvement, “When former top commissioners are discovered to be linked to overseas tax havens, and the global financial companies that benefit from them, the EU’s credibility takes a justified hit.”

“The fact that she was a director of a holding company in the Bahamas only came to light after she had retired from the Commission. That proves that the vetting process for Commissioners simply is not working,” he added.

The European Commission is still unsure as to whether or not pursue its case against Kroes for failing “to declare her directorship of a company that negotiated to buy billions of dollars in assets from the energy giant Enron.

Furthermore, in light of the Bahamas leaks, several UN rights experts urged governments to work together “to eliminate tax haven secrecy and offshore tax avoidance and evasion.”

Led by Juan Pablo Bohoslavsky, a member of Special Procedures of the Human Rights Council, this group of UN experts called for greater “transparency and accountability for offshore financial activity,” “uniform minimum taxation floors to prevent individuals and business entities from shopping for the lowest possible tax rates,” legally binding “public disclosure of beneficial ownership information,” an annual report ranking “the financial transparency of all banking jurisdictions,” and the automatic sharing of information between banks and foreign tax bodies.

What are your overall thoughts on the Bahamas Leaks? Is this growing trend of document leaks worrisome?

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