Minister Pinder Remarks at The Nassau Conference 2013 “THE SHIFT HAS OCCURRED: THE NEW THINKING ON TAX AND TRADE”

REMARKS

BY

HON. L. RYAN PINDER

MINISTER OF FINANCIAL SERVICES

 

ON THE OCCASION OF

THE NASSAU CONFERENCE

NASSAU, BAHAMAS, 16TH OCTOBER, 2013

“THE SHIFT HAS OCCURRED: 

THE NEW THINKING ON TAX AND TRADE”

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Ladies and Gentlemen,

 

It is indeed a pleasure for me to address you today at the Nassau Conference presented by the Association of International Banks and Trust Companies in the Bahamas.  For the second year in a row, the Ministry of Financial Services has agreed to be the lead sponsor of The Nassau Conference.  We choose to do so for a few reasons.  We certainly view The Nassau Conference as an event that promotes continuing investment in education of financial services professionals.  We also are pleased to, for a second year in a row, to partner with AIBT to advance one of the initiatives I am most proud of, the provision of opportunities in the financial services industry for students at the College of the Bahamas seeking to develop their careers, much like many of you have done. 

 

Today we have students from the College of the Bahamas who have been given the opportunity to attend the Nassau Conference at no cost.  Students, please identify yourselves.  Secondly, my partnership with AIBT has allowed for a summer internship program to be offered to COB students at institutions in the financial services field.  These real world experiences for future professionals in our industry is invaluable to their professional development.  AIBT also offers a language immersion program in Mexico for COB students to advance their opportunities.  This partnership between AIBT and my Ministry has made a lasting impression on the lives of these young students.  Before I begin my presentation, I would just like to ask two of the students to tell you the impact that the partnership has had on them.  (3 – 5 minutes)

 

Petra Armbrister – intern at St. James Bank and Trust

Justin Knowles – Spanish immersion program in Mexico

 

The theme perfectly captures the momentum of the day.  We at the Ministry of Financial Services have, for some time now, sensed this shift.  A shift in the way we do business; a shift in how we position ourselves; a shift in world expectations and a shift in expectations for ourselves.  We are pleased to be ahead of the curve, in our thinking and in our response to the world – but we have noted the shift nonetheless.

 

No room for complacency

The development of The Bahamas as a financial centre is a story that makes me proud as a Bahamian.  It makes me proud as a citizen of a small, sovereign island nation, that our forefathers were able to transform an economy into this vibrant financial center.   Our history as a financial centre shows progressive, forward-looking vision, constantly developing based on innovation. Our traditional comparative advantages, together with the common law tradition, an attractive legislative and cost structure and an investor friendly business climate, catapulted The Bahamas to a household name as an international financial and business center.

 

The Bahamas has seen tremendous benefit, in terms of incomes from this development strategy. We saw the development of an upwardly mobile middle class.  We saw the quality of life and standards of living breaking away from our Caribbean peers. Today, The Bahamas is considered a wealthy economy – a high-income country. 

 

Defining the Shift

The ‘Shift” today, however, requires continued innovative activity in order to maintain and grow our centre.  Gone are the days of The Bahamas competing against Cayman and Isle of Man.  The Shift has meant that The Bahamas must now compete against New York and Geneva. 

 

Ladies and Gentlemen, the “shift” requires for a Forward-Looking Vision that includes change.  As I said, I think that we have been ahead of the curve.  As such over the last decade, industry has been moving with the tide to reposition The Bahamas.  However, this Government is committed to tackling the changes that are necessary head on, to ensure that our growth trajectory continues to lead to a brighter future.  This mandate takes vision, it takes action, it takes cooperation between the private sector and the Government and it takes LEADERSHIP to Succeed in a Shifting World.

 

The changes which are occurring in our industry require serious introspection.  We have to begin at the beginning – why do clients come to The Bahamas?  The last 20 years have shown us that the answer is not what some in the international arena would have us to believe. 

 

Our clients are not coming to The Bahamas because of what has now become irreverent terminology.  Words like “secrecy” or “tax minimization”.  No, our clients come and continue to come The Bahamas because of a host of many special assets that we offer as a jurisdiction.  I speak of assets such as sovereignty; that is the ability to make our own decisions, in our own best interest within our country.  

I speak of the fact that we have sensible, flexible regulation and the commitment of The Government from the Attorney General’s Office and the Ministry of Finance and the Regulators to ensuring that we are top in class with respect to our international standards and commitments.  We are committed to regulatory excellence and efficiency.  These are important selling points to the clients that invest in our jurisdiction.

 

Finally, I speak of the close collaboration between private sector and the Government that enables us to introduce new legislation and create new products to grow the sector.  I cannot overstate the importance and the value that I place on my interaction with industry.  It makes no sense to drive this ship from the top down.  It is imperative that my Ministry is in tuned with industry to understand its needs and wants.  Our close collaboration with the AIBT is evidence of this.

 

Tax and Trade

Tax - The shift and our response to the shift in the industry is largely a result of the evolution of international tax issues, policies, and assaults.  We have seen the international tax policy reform progressively develop in the international multilateral organizations through the years.  We have seen the United States has advanced its laws and tax compliance requirements in tax matters through FATCA.  You will hear later today a panel on FATCA from experts so I won’t go into a detailed discussion on it. 

 

As a result of the FATCA and aggressiveness of the United States in this regard, we see momentum internationally for multilateral agreements on automatic tax exchange. It was 5 years ago when we acknowledged the aggressive position of the international community, and especially the OECD in its push for tax transparency and compliance. In July 2008, the G8 Heads of State and Government urged “all countries that have not yet fully implemented the OECD standards of transparency and effective exchange of information in tax matters to do so without further delay, and encourage the OECD to strengthen its work on tax evasion and report back in 2010.”

 

We have recently had a G8 meeting in London, and a G20 meeting in Russia where automatic tax exchange has been a primary agenda item for discussion and agreement.  In the communiqué in the G8 meetings we heard the declaration that “We commit to establish the automatic exchange of information between tax authorities as the new global standard, and will work with the Organisation for Economic Cooperation and Development (OECD) to develop rapidly a multilateral model which will make it easier for governments to find and punish tax evaders. On tax avoidance, we support the OECD’s work to tackle base erosion and profit shifting. We will work to create a common template for multinationals to report to tax authorities where they make their profits and pay their taxes across the world.”

 

At the recent G20 meetings we heard a similar declaration of commitment to this philosophy.  The G20 Declaration states a firm commitment when it provided “Calling on all other jurisdictions to join us by the earliest possible date, we are committed to automatic exchange of information as the new global standard, which must ensure confidentiality and the proper use of information exchanged, and we fully support the OECD work with G20 countries aimed at presenting such a new single global standard for automatic exchange of information by February 2014 and to finalizing technical modalities of effective automatic exchange by mid-2014. In parallel, we expect to begin to exchange information automatically on tax matters among G20 members by the end of 2015.”

 

The international community is speaking with a thunderous voice in this regard, the question remains whether it can be practically achieved.  What is being proposed is much different than FATCA, although FATCA clearly inspires their plan.  What is proposed is a multilateral attempt between Governments to achieve what the United States is attempting achieving through the private sector.  If the international community is successful in this regard, which I personally have my own doubts, then tax compliance and reporting will drastically increase.  Imagine extending what you have been putting in place to all G20 countries, an impractical measure for sure. 

 

We heard today a discussion regarding the new Base Erosion and Profit Sharing Action Plan by the OECD to minimize the international tax planning opportunities for international businesses.  Some say, and certainly this morning Francesco Vanacore, have predicted that this might be the most important international tax initiative affecting the global financial services industry. 

 

Trade – So what does all of these international tax policy adjustments mean for the Bahamas, and more specifically, in the context of trade.  I believe that the Bahamas is in the best position to actually take advantage of the changes in tax policy.  I began by describing some of our assets, well it is these assets that will cause us to proposer an advance, and especially in the context of trade, and particularly trade in services.

 

Trade in Services merely refers to the sale and delivery of a service between a producer and consumer that are, in legal terms, based in different countries, or economies.  Tourism and financial services are examples of trade in services industries.  People say the Bahamas is not a trading country, well that can’t be further from the truth, we may be proportionately one of the top trade in services jurisdictions. 

 

So how does this shift in tax policy internationally connect with the advancement of our trade in services?  I typically speak about the Bahamas as an international financial center that offers a diversified offering of product and services to support the products.  Many would hear me proclaim that unlike some of our regional competitors, the Bahamas is not a commodity jurisdiction, we don’t pride ourselves on having the most companies on our register, or the most funds in the jurisdiction.  What we do pride ourselves on is that we have the most diversified operating entities in all sectors of the financial services industry, operating banks, operating trust companies, operating family offices, operating investment advisors and managers, operating fund administrators, operating captive insurance managers.  I can go on and on.  All of these operating companies, supporting our diversified product offering as a jurisdiction, demonstrates the credibility and substance of our industry, is proof that we are a legitimate and credible trade in services jurisdiction. 

 

The fact that we have structured our financial services industry in this fashion provides opportunity and insulation against certain of the multilateral tax initiatives we have heard about.  Us tax attorneys operate under the belief and philosophy of “substance over form”.  This is a fundamental foundational element of tax planning and international tax administration.  We in the Bahamas, our international financial services industry, our trade in services is evidence of substance over form.   The Bahamas, a country of substance and credibility, is perfectly positioned to link the developments in tax policy adjustments to trade in services, we have done it for decades, and it is only going to grow as a result of the multilateral tax initiatives.

 

We heard this underlying philosophy on the way forward by Francesco Vanacore where he identified as one of the 3 options on the way forward positioning a jurisdiction for active business.  The Bahamas is proof of this philosophy – develops substance over form.

 

This philosophy can be extended to our client planning, not just the commercial substance over form.  I had the opportunity to speak on a panel in Montevideo, Uruguay at STEP Latam last week.  The point was made on my panel that, especially as it pertains to the client in Latin America, that the financial management of the client should be tied to, and a part of the business and external trade elements of their respective commercial activity.  The discussion was to utilize assets of the Bahamas, such as the free trade zone that we know as Freeport, our tax advantaged position and location as a preeminent logistics hub to attract not only the client from a wealth management perspective, but also a component of their business operations.  The argument is that for the client it is a natural connection between the business of the client and the financial management of the client, and ultimately the residence of the client.  One would think of this in the context of connecting trade in goods industries and wealth management of the principal, but this is likewise true for clients who are service providers.

 

We see this today.  We have high net worth individuals who began utilizing the Bahamas as a jurisdiction for banking, or for use of our products.  Their involvement with the jurisdiction evolved from use of the jurisdiction, to being a part of the jurisdiction.  Many high net worth individuals have decided to take up residency here in the Bahamas, and have decided to establish physical presence operations here in the Bahamas connected to their respective services businesses. 

 

We see these individuals with established family offices to manage their investments.  We have seen these clients of the Bahamas establish related businesses, for example those in the investment fund and private equity businesses have established their own financial and corporate service providers to manage their company structures and corporate obligations related to their private equity and investment businesses.  These and similar institutions and clients also look to establish physically present fund administrator institutions to likewise manage their structures that are a fundamental component of their respective global businesses.  Our business lines are likewise products of our financial services industry, physical establishment products, products of substance and credibility.

 

Conclusion

Upon first reading the topic I was asked to speak to I sat back and wondered how to address it.  The more I thought about it, the more I thought about the Bahamas as a preeminent international financial and business center, the more I realized that the Bahamas is the perfect example of the connection between tax policy evolution and trade, and particularly trade in services.  In an environment where all are intimidated by the tax policy initiatives we have heard much about, those jurisdictions where you find substance over form, where you find credibility, where you find diversity of industry you will find success and longevity.  In this environment that is intimidating, success is defined by what we have, the international financial and business services industry of the Commonwealth of the Bahamas. 

 

We continue to be committed, as the Ministry of Financial Services, to a pursuing a modern, “development-focused” and progressive financial services industry, constantly evolving within the context of substance over form.  Ladies and Gentlemen, this is part of the “Shift”.  Openness to trade and to international partnerships created our centre.  Continued openness will sustain and propel our centre.  These are the facts of this Shift that we discuss today, these are the defenses against the evolving and intimidating international tax developments.

 

In this regard, the Bahamas Government is committed to working closely with the international agencies in this work to shape a sensible approach for ensuring tax compliance, while respecting credibility and diversity of industry.  As a responsible financial centre, we must be at the table to discuss these matters and we are committed to not only adhering and meeting international regulatory requirements, but also participating in their design.  The Bahamas is well positioned, is the leader, and is poised for significant growth in the industry, because of who we are and what we are. 

 

Photo Courtesy of Eric Rose

 

 

People’s Republic of China National Day Remarks by Hon. Ryan Pinder, M.P.

People’s Republic of China National Day

Remarks by Hon. Ryan Pinder, M.P.

27th September, 2013

 

 

Your Excellencies Sir Arthur Foulkes, Governor General of the Commonwealth of The Bahamas, and Lady Foulkes; Your Lordship, the Honorable Sir Micheal Barnett, Chief Justice, and Lady Barnett;  Honorable Cabinet Ministers;  Senator, the Honourable Sharon Wilson, President of the Senate, and Mr. Franklyn Wilson;  Former Governor General Sir Orville Turnquest;  Lady Darling;  Dame Marguerite Pindling;  Your Excellencies, Ambassador of the People’s Republic of China, Hu Shan, and Mrs. Shan;  Your Excellencies the Heads of resident Diplomatic Missions;  Heads of International and Regional Organisations;  Deputy Chief of Mission at the Chinese Embassy, Counselor Zhai Xingfu;  Members of the Diplomatic and Honorary Consular Corps;  Vice President, Bahamas-China Friendship Association, Mr. Anthony Capron;  President, Chinese Community Association, Mr. Brian Wong;  Senior Government Officials;  Other distinguished officials and guests;

 

Good evening.   “Do the difficult things while they are easy and do the great things while they are small. A journey of a thousand miles begins with a single step.” These are well known words attributed to the ancient Chinese philosopher, Lao Tzu, who admonishes us to be pro-active in seeking opportunity and diligent in our pursuit of goals.

 

We are here, tonight, to celebrate the remarkable journey China has navigated since the founding of the People’s Republic in 1949. It is a journey that has been characterized by Chinese trademarks of industry, ingenuity, vision and perseverance.

Yours is a country that does not have to settle with just revelling in your rich heritage, though it still continues to captivate the world. Your literature, music, visual and marital arts, cuisine, inventiveness and your gifts to civilization such as paper, the compass and printing have all stood out as beacons of ingenuity. There is also, however, much for you to be proud of in recent times – your successes in lifting millions out of poverty, your dominance as the manufacturing hub of the world and your fashioning of a new model for sustainable development.

Today, President Xinping is promoting the “Chinese dream”, with its focus on prosperity, collective effort, national glory and a special emphasis on sustainable development, a model that can be considered for all developing countries.

I am also here, on behalf of the Bahamian Government and People, to pay homage to the journey our two Countries have sustained over the past 16 years.

We are different countries – different in size, different in culture and different in history – but our Peoples share many commonalities. We share a strong belief in sovereignty and territorial integrity, a purposeful spirit with a tendency towards ambition and a desire for comprehensive and sustainable development.

As a result of these commonalities, the friendship between our two countries continues to grow from strength to strength.

We have completed six major cooperation projects together, including the construction of our world-class Stadium which most recently hosted the CARIFTA Games and is set to host international relay championships next year; the funding of the Nassau Airport Gateway Project; and, perhaps most significantly, the partnership between Bahamar Resorts Limited and China Construction America, with loans in excess of $2 billion from the EXIM Bank of China, to create a world-class, multi-billion dollar tourist resort on Cable Beach.

The Bahamas has also benefitted from a variety of grants from the Chinese government. These grants will be the cornerstone of projects that will contribute significantly to the social and economic development throughout our archipelago.

The value of our cooperation is not only evidenced in investments of brick and steel alone, however. More than 100 Bahamian Government officials and managers of industry have been beneficiaries of training opportunities provided by the Chinese Government. Additionally, nearly 60 Bahamian students have been afforded scholarships for study in China, including 13 Bahamians just this year.

We appreciate the various forms of support received by the Chinese government and would also applaud the sustained support provided throughout the Caribbean region.

As we look to the horizon, our countries also are in the process of exploring a reciprocal visa waiver agreement that will facilitate freer flow of trade, commerce, people and culture between our two nations. This next step in the deepening of our relations is pivotal, not only to ensure that more Chinese nationals get the privilege of visiting our beautiful Bahamian shores, but also because both of our Countries have a vested interest in the success and sustainability of the Bahamar project.

Tonight, there is much to celebrate – the 64th Anniversary of the establishment of the People’s Republic of China and the 16th anniversary of the establishment of diplomatic relations between our two countries – as we both forge ahead with building a bridge to a future based on the principles of mutual respect, equality, mutual benefit and common development.

Ladies and Gentleman, join me in raising a toast to the achievement of 64 years of dynamic Chinese progress and development, to the continued deepening of relations between our two Governments and Peoples and to the mutual benefit that undoubtedly will spring from this journey of a thousand miles we have embarked upon together.

“Set SAIL on LeaderSHIP … Progress TOGETHER”

Remarks by L. Ryan Pinder

Minister of Financial Services

Institute of Internal Auditors Bahamas Chapter

“Set SAIL on LeaderSHIP … Progress TOGETHER”

September 27, 2013

 

Introduction

 

I want to thank you for the opportunity to bring brief opening remarks for Leader’s Workshop.  It is a privilege to be here and I want to congratulate the Bahamas Chapter of the Institute of Internal Auditors for organizing this event.  I want to personally welcome all of those visiting the Bahamas, and especially those who are here from throughout the Caribbean region.  Like all industries, charting your development through leadership is of utmost importance, ensuring a strong position in what seems to be an ever-changing application of standards. 

 

 

 

Internal Audit

As jurisdictions, and especially throughout the Caribbean, seek to attract international companies to do business in their respective jurisdictions, the role of internal auditors becomes more and more relevant. As we as policy makers look to further attract such institutions, it is important to recognize your role.  Internal auditors provide independent assurance and advice to help ensure the organization’s objectives are being met. 

 

Internal auditors identify and assess the organization’s risks to prevent bad things from happening, ensure good things happen, and help management and other stakeholders (the board of directors and investors) understand where the risks are and whether they are under control.  When internal auditors do their job, the organization’s internal controls are strong, reporting is accurate, ethics are maintained, oversight is effective, risks are mitigated, and investments are protected.  Internal auditors are the gatekeepers of the integrity of the operations of companies.

 

Leadership

In any profession, in all industries leadership is imperative to accomplish success and positive achievements.  You have set a framework for leadership and this symposium using your acronym SAIL:

 

Service – give your time, energy and abilities to help

Action – take initiative to implement solutions to address problems

Inspiration – unite and motivate the team to make a difference

Legacy – leave a lasting impact on your chapter and local community

 

Internal audit is your profession.  A profession is more than a job — it is a community and a culture.  Every profession has leaders.  I believe that successful professions and industries are based on professionals striving to be leaders; leaders can be in different areas within your profession.  It is important, however, to recognize that leadership is not developed overnight, it is developed through application of your skills and desire to be better to those around you in an unselfish way.  Leadership is developed through symposiums such as this one, where you get together and advance issues within your profession in a position of strength.  All here today strive to be leaders and by this your profession, your association will be stronger.

 

Regional Cooperation

I want to applaud the organization of this symposium at the regional level.  In many instances you advocate through strength in numbers, developing leadership and advocating for your profession requires it.  We see this in our region at the diplomatic levels where we look to regional cooperation of Governments in advocating for certain international measures.  We see it in advocating for economic development at large with trade and development policies decided at the regional level.  My Ministry, the Ministry of Financial Services is advocating for a regional approach in certain discussions and negotiations with the United States on important issues such as FATCA (Foreign Accounts Tax Compliance Act). Similarly to you at this symposium, we had a representation of ten countries at a FATCA conference, in efforts to approach the United States as a region, with regional strength and the inputs of regional professionals to modify the language of agreements that would be conducive to our professional strength as a region. As internal auditors it is important to generate that leadership at a regional level of which you are doing today.

In closing I would like to commend and congratulate you on your efforts to invest in regional leadership. The value that your profession brings to the table as the checks and balances of various institutions not in just one industries but a variety of industries in a region, to protect the integrity and ethics of an institution and being knowledgeable and flexible enough to understand when institutions and jurisdictions change, the scope and application of your profession must change as well.

Once again I welcome you to The Bahamas. I wish you well on this symposium, your efforts; I encourage you to advance yourselves professionally, and certainly you being represented here you are the leaders of your profession of this region. Thank you.

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GOVERNMENT NOTICE: MINISTRY OF FINANCIAL SERVICES REQUEST FOR PROPOSALS: FATCA MODEL 1 COMPLIANT ELECTRONIC REPORTING SYSTEM

 

 

 

 

GOVERNMENT NOTICE

MINISTRY OF FINANCIAL SERVICES

REQUEST FOR PROPOSALS: FATCA MODEL 1 COMPLIANT ELECTRONIC REPORTING SYSTEM

 

  1. The Ministry of Financial Services, in conjunction with the Ministry of Finance, invites sealed proposals from qualified firms to provide consultancy services related to the conceptual design, development and deployment of an electronic reporting framework to implement a proposed Inter-Governmental Agreement (IGA) between the Government of The Commonwealth of The Bahamas and the Government of the United States of America with respect to the United States’ Foreign Accounts Tax Compliance Act (FATCA).

 

  1. The Government of the Commonwealth of The Bahamas approved the proposal of the Ministry of Financial Services for The Bahamas to move ahead with a FATCA implementation strategy based on a Model I Intergovernmental Agreement.

 

  1. Under a Model I IGA, the Government of The Bahamas agrees to direct Bahamian financial institutions (as defined under the relevant legislation and the IGA) to compile the requested information on the specified United States persons and to electronically transmit this information to the Financial Secretary, the Ministry of Finance, in his capacity as the Competent Authority of the Government of The Bahamas for the purpose of facilitating the implementation of FATCA through the onward reporting of this information to the relevant US authorities on an annual and non-reciprocal basis. 

 

  1. The scope of work required is defined in the Terms of Reference (TOR) which may be collected from the Ministry of Financial Services on West Bay Street commencing Friday, 27th September, 2013 between the hours of 9:00 a.m. – 5:00 p.m.

 

  1. The Proposal should be enclosed in a plain sealed envelope bearing no identification of the bidder and be clearly marked as follows: “Tender for The Ministry of Finance and Ministry of Financial Services, FATCA System”.

 

  1. Sealed Proposals should be delivered to:

 

                        Chairman

                        Tenders Board

                        Ministry of Finance

                        Cecil Wallace Whitfield Centre           

                        West Bay Street

                        P.O. Box N-3017

                        Nassau, Bahamas

                       

  1. The proposals should be accompanied by copies of a valid Business Licence and Letter of Good Standing from the National Insurance Board.

 

  1. The deadline for the submission of proposals is Friday, 1st November, 2013 at 4:00 p.m. (EST). 

 

  1. All questions regarding the Terms of Reference should be sent to the Director of Financial Services, Ministry of Financial Services (email: FATCA@bahamas.gov.bs).

 

  1. The Ministry of Financial Services reserves the right to reject any or all proposals submitted.

                                                                                             Signed:

                                                                         

 

                                                                             Creswell Stirrup                                                                                                                                               

Permanent Secretary   

ImageMinistry of Financial Services

 

 

KPMG Island Infrastructure Summit

KPMG Island Infrastructure Summit

Remarks by Ryan Pinder, Minister of Financial Services

September 23, 2013

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Good morning, my name is Ryan Pinder, I am the Minister responsible for financial services, trade and industry in the Government of the Bahamas.  A key focus, and one that us as policy makers particularly find important, is how do you cause infrastructure development to be a key contributor to economic development of a country.  The Bahamas has made infrastructure improvement a national priority to position itself as a destination for investment and economic development regionally. We have recognized that Infrastructure development contributes to the development of economic growth by stimulating enterprise opportunities, generating employment, and providing citizens with access to basic needs.

 

Tourism

In the Bahamas, tourism is the key contributor to our economy, and to employment and economic development.  One must unsure that ones infrastructure can keep developing to support such an important industry.  As tourism environment change and become more sophisticated, and as the competitive environment further develops, countries and destinations will require adequate infrastructure to meet market demands.

 

Hotel projects in the Bahamas such as Baha Mar, a $3+ billion development, have promised to increase economic growth and create short- and long-term employment.  Recognizing this the Bahamas has invested in complimentary infrastructure, building a new airport to support the increased airlift, investing in new road networks, and ultimately putting in a plan to reorganize the electric utility and infrastructure of the Bahamas.

 

Financial Services/Investments

Another established industry in the Bahamas that required complimentary infrastructure development to be successful is the financial services industry of the Bahamas.  Technological and communication infrastructure is of paramount importance.  Governments alone cannot always meet the infrastructure needs and has to rely on private sector infrastructure development. 

 

A few years ago the Government of the Bahamas made the decision to privatize the telephone company to cause for private sector investment in the modernization and advancement of the telecommunications network of the Bahamas. This was necessary to support the growth and expansion of international financial services and business industries.  Privately provided infrastructure is necessary and desirable.

 

Trade

Infrastructure is not only important to ensure your current industries remain competitive and positive contributors to your economic development, but, as policy makers, we look to infrastructure investment to advance and help develop new industries to ensure that a country’s economic model is continually developing and growing.  The Bahamas seeks to leverage its location and be a preeminent trading hub, and value added jurisdiction.  In order to do so, key trade infrastructure has to be in place.

 

The deep-water shipping ports in Nassau and Freeport are major international transshipment centre is, servicing both tourism and commerce. In 1998, the harbor in Freeport, Bahamas was expanded and became a focal point of the 200-square-mile “Free Trade Zone”, making Freeport a modern container transshipment terminal.  The deep water harbour, the largest of its kind in this hemisphere, capable to day of servicing super-panamex ships, continues to invest in expansion. 

 

As a result of the Freeport harbour and related trade infrastructure we look for further industry and economic development in Freeport.  Ship repair facilities are already home to Freeport, leveraging the harbour asset.  We look for new industry to take advantage of this trade and logistics infrastructure and our free trade zone, new industry based off of ever expanding infrastructure, contributing to new economic development.

 

Likewise, BORCO, located in Freeport, is the 4th largest oil terminal for transshipment in the world.  BORCO continues to invest hundreds of millions of dollars in expansion of its facilities to remain competitive in the ever changing world of international trade. 

 

Infrastructure reduces physical barriers to trade, especially important for landlocked countries and fragile states. It lowers the costs associated with trading goods and, in doing so, increases competitiveness by opening up export and import markets. Approximately twenty-three seaports connect The Bahamas, allowing for regular shipping connections to the Americas and Europe.

 

Challenges of a Small Island State

Having to invest on a continuing basis a small island state presents a host of challenges to a Government.  Infrastructure projects are expensive and governments often seek co-financing through public-private partnerships and multilateral institutions.  If solutions are not identified, failure to maintain and deliver improvements to roads, airports, and energy supplies will undermine the economic recovery and development they are seeking to obtain.

 

The Bahamas provides unique challenges as a small island state with 25+ islands that are inhabited.  Frequently infrastructure investment has to be duplicated, which provides obvious challenges as to cost and ability.  For example, the island of Eleuthera has 3 international airports itself.  As investment and tourism development continue to happen in these family islands, it is our responsibility as a Government to ensure that on each island necessary infrastructure can keep pace.   Providing basic utilities on a constant and reliable basis in these many islands is a challenge and expensive.  We must look to innovative and progressive methods to duplicate the necessary infrastructure investment throughout our country.  Policies of comprehensive economic development throughout requires this innovation.

 

Conclusion

Each country can pose their separate challenges to developing infrastructure for economic development.  I have highlighted a few of the necessary infrastructure developments of the Bahamas to keep our current industries competitive, while looking to develop new industries such as international trade.  In island states there are particular challenges that need to be addressed, we hope this conference over the course of today and tomorrow can help provide some of those answers to thee challenges. 

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Higgs and Johnson – Annual Client Seminar Remarks by L. Ryan Pinder, Minister of Financial Services

Higgs and Johnson – Annual Client Seminar

Riding the Waves of Change:

Compliance, Confidentiality and More

Thursday September 26, 2013

Remarks by L. Ryan Pinder, Minister of Financial Services

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Introduction

 

Good afternoon.  I am pleased to be invited to bring opening remarks at your annual client seminar.  The topic today is on point and very timely – “Riding the Waves of Change: Compliance, Confidentiality and More”.  I note the relevant matters to be discussed affecting this theme include mental capacity concern, overdoing compliance, and are we seeing the end of confidentiality of information.  These are all relevant questions, especially in the ever-changing environment of financial services and international financial matters. It seems every day we hear about a new policy, a new piece of legislation, a new agreement entered into that effects, in some form or fashion, the financial services industry, and in general, compliance for your respective institution.  I am also willing to predict that we have not seen the end of the evolution of international tax transparency and compliance.  As such, there is a clear global expansion in compliance.  Change can be intimidating, can cause for operations to change and adapt, and can result in increased costs, but it can also result in new and additional opportunities, and allow for a jurisdiction and industry to be reflective of progressive evolution. 

 

Compliance

The financial services industry, and specifically the developments in what is regarded as international best practices in international financial services has caused for increased compliance requirements on institutions and clients.  Lawyers here today have had to advise their institutional clients and industry clients on the evolutions that are required.  I met with an investor last night who was asking me what was this form that his attorney gave him regarding access to accounting records of the company he was forming.  Compliance has increased institutionally, and throughout different industries.  This is change that has resulted in increased costs, and the continued investment needed in human capital development.  Is it regarded as overdoing compliance, I would think many would answer that as “yes”. 

 

Tax Compliance

We have seen this in not only the know your client and due diligence evolutions, but in laws of other countries and even discussions regarding multilateral requirements of information exchange.  Compliance is now extending beyond money laundering matters that has had the focus of the last decade, and now into international tax compliance matters.  FATCA is the first step where we see the requirements of additional compliance with respect to tax matters. 

 

The United States, because of its dominance in the financial industry, is imposing on the private foreign financial institutions, the obligation of tax compliance and reporting.  Many clients in this room have had to develop competence and capacity in tax compliance to be able to navigate in the world of FATCA.  The Government of the Bahamas is assisting in minimizing the affect by what we think is the best way, through a Model 1 Intergovernmental Agreement.  This will cause the Government, and specifically the Ministry of Finance to be the Competent Authority in transmitting information to the IRS.  The private sector will still be responsible for the gathering of information and the adequate compliance and due diligence, but will not have that added responsibility of sending it directly to the IRS. 

 

As a result of the FATCA and aggressiveness of the United States in this regard, we see momentum internationally for multilateral agreements on automatic tax exchange, which will naturally result in increased compliance obligations. It was 5 years ago when we acknowledged the aggressive position of the international community, and especially the OECD in its push for tax transparency and compliance. In July 2008, the G8 Heads of State and Government urged “all countries that have not yet fully implemented the OECD standards of transparency and effective exchange of information in tax matters to do so without further delay, and encourage the OECD to strengthen its work on tax evasion and report back in 2010.”

 

We have recently had a G8 meeting in London, and a G20 meeting in Russia where automatic tax exchange has been a primary agenda item for discussion and agreement.  In the communiqué in the G8 meetings we heard the declaration that “We commit to establish the automatic exchange of information between tax authorities as the new global standard, and will work with the Organisation for Economic Cooperation and Development (OECD) to develop rapidly a multilateral model which will make it easier for governments to find and punish tax evaders. On tax avoidance, we support the OECD’s work to tackle base erosion and profit shifting. We will work to create a common template for multinationals to report to tax authorities where they make their profits and pay their taxes across the world.”

 

At the recent G20 meetings we heard a similar declaration of commitment to this philosophy.  The G20 Declaration states a firm commitment when it provided “Calling on all other jurisdictions to join us by the earliest possible date, we are committed to automatic exchange of information as the new global standard, which must ensure confidentiality and the proper use of information exchanged, and we fully support the OECD work with G20 countries aimed at presenting such a new single global standard for automatic exchange of information by February 2014 and to finalizing technical modalities of effective automatic exchange by mid-2014. In parallel, we expect to begin to exchange information automatically on tax matters among G20 members by the end of 2015.”

 

The international community is speaking with a thunderous voice in this regard, the question remains whether it can be practically achieved.  What is being proposed is much different than FATCA, although FATCA clearly inspires their plan.  What is proposed is a multilateral attempt between Governments to achieve what the United States is attempting achieving through the private sector.  If the international community is successful in this regard, which I personally have my own doubts, then compliance will drastically increase.  Imagine extending what you have been putting in place to all G20 countries, an impractical measure for sure. 

 

Compliance and Entrepreneurism

With a changing international environment, a financial services industry that is experiencing shifting sands, new opportunities in compliance are available.  In the face of what seems to be overwhelming changes, we should explore opportunities as well.  We in the Bahamas have excelled in developing human capital and professionals in compliance.  As such, we have looked to develop opportunities for entrepreneurism in compliance. 

 

Some here would know that I would have encouraged and provided my support to the relevant regulators to cause for the concept of professional compliance to be properly advanced.  Earlier this year the Securities Commission of the Bahamas issued for consultation Draft Guidelines on the Approval of Outsourcing Arrangements for Compliance Officers. With the evolving needs for compliance because of proposed international mandates, the ability to specialize, and become an entrepreneur in the industry that we have successfully developed significant domestic human capital in is a tremendous opportunity. 

 

The defining of the framework for professional compliance outsourcing by the Securities Commission of the Bahamas is a significant step in the right direction for the jurisdiction.  We will now take the next step in the development of the financial services industry, what we frequently speak about, we will cause for Bahamian compliance officers to own their segment of the financial services industry, through the finalization of the Guidelines on Outsourcing Compliance Functions, through the development and application of the international initiatives, the expertise of our domestic human capital in the compliance function will be given the opportunity to be entrepreneurs.

 

Confidentiality

The question, and you will hear more on it later today, is what does this mean in the context of confidentiality of information?  Yes, this is a legitimate question.  We recognize that confidentiality is important for a number of reasons. Many of our new markets, such as Latin America, confidentiality is important for personal safety concerns and a lack of confidence in their respective governments.  This is am important distinction when we advance notions of confidentiality.  We advanced this argument in the context of FATCA for instance. My Ministry forcefully and articulately advanced The Bahamas’ concerns with the requirement that all trusts managed by professional trustees (even those without US interests) be required to register and enter into an FFI agreement with the IRS, this had significant confidentiality concerns to our #1 segment of the financial services industry.  Having advance this argument, the US Treasury updated its FATCA exemption Annexes (Annex II) of both Model IGA agreements to include an exemption for “trustee sponsored trusts” such that a trust with a professional trustee, would be exempt from the registration and FFI agreement requirements where the due diligence and reporting (where there are US interests) are carried out by the professional trustee which is an FFI under FATCA.  The significance of this amendment for The Bahamas trust industry cannot be overstated.

 

This demonstrates to me that with arguments grounded in legitimacy and credibility, confidentiality can be protected.  In the context of unlawfulness, that is another story.  We saw confidentiality being eroded with respect to money laundering, and now as we discussed being eroded in the context of unlawful tax evasion.  It is my opinion that we have to, and I am certain that we are, distance ourselves from the perception as a jurisdiction of tax cheats and a place to hide wealth, but demonstrate that we are a jurisdiction with a highly skilled workforce, a long history of integrity, a well regulated industry where wealth is managed and in turn positioned for international business and investment globally.  In this vein we remain committed to the philosophy and argument of confidentiality with legitimacy, and look to work hand in hand with the regulators to ensure that we are a jurisdiction sensitive to the operation of the private sector and an inviting jurisdiction to the international financial services participants.  We maintain that we are a jurisdiction of substance and credibility, always operating consistent with international best practices.

 

Conclusion

Yes, things are changing, changes that require additional compliance, in some instances you might believe overdoing compliance.  Yes, in certain instances confidentiality of information is being put at risk.  But, I believe in the context of legitimacy and credibility, opportunities exist in compliance, and protections can be maintained with respect to confidentiality.  The Bahamas as a preeminent independent international financial center well succeed, we will grow and we will advance.  We will identify new opportunities and stay in front of the evolution of the industry.  The Government of the Bahamas is committed to this notion.  Things may shift and evolve, but we will do all we can to ensure that opportunities grow as a result of that.  I wish you a fruitful and progressive seminar today.

 

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Bahamas Financial Services Board Annual General Meeting Opening Remarks by L. Ryan Pinder

Opening Remarks by L. Ryan Pinder

Minister of Financial Services

Bahamas Financial Services Board Annual General Meeting

September 25, 2013

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Good Evening All,

 

It’s my pleasure to be with you this evening at this your Annual General Meeting. Firstly, I must applaud the Bahamas Financial Services Board on this opportunity to bring remarks, as it is important that Public Private Partnerships like this continue to develop and are encouraged.

 

I applaud BFSB and all participating firms represented here as you continue to work with this administration, more specifically my ministry, in being a voice to the government on expressing both concerns and new opportunities in the industry that cause for the development of new products and joint promotional activities. 

 

I want to encourage all member firms to be active in BFSB efforts to advocate and encourage the advancement of the financial services industry. I also urge you to encourage other financial services firms and new entrants to the industry to embrace the membership benefits of the Bahamas Financial Services’ Board to expand the network and expertise available to BFSB’s efforts.

 

The Bahamas Financial Services Board has distinguished itself locally and internationally as an advocate for The Bahamas’ financial services industry, broad-based membership and continual opportunities to grow the industry.  Through the BFSB, you have been active in formulating guidance for issues such as FATCA implementation and choice of Inter Governmental Agreement, development of new products such as SMART Fund 007, and the development of new niche industries such as Captive Insurance which I am confident is on the verge of significant expansion.

 

FATCA

I want to give you a brief update on the status of FATCA implementation.  As you know, the Bahamas Government has chosen a Model 1 Intergovernmental Agreement as the framework on how FATCA will be administered in the Bahamas.  We have reviewed the IGA and have some suggested drafting changes.  We have been coordinating with countries in the region with the goal to obtain agreement on suggested revisions and to approach the United States on a multilateral basis with respect to our suggestions. 

 

We are issuing an RFP this week to request for bids by consultants on advising the Government on what is entailed to fully implement FATCA.  This would include recommendations as t o the structure of the Competent Authority, staffing, technological needs and administrative functions.  The timelines will be tight and we hope to be in a position early next year to know exactly what needs to be implemented and the cost of doing so.  We have also been in consultations with the Office of the Attorney General on the preparation of the legislation that will cause for FATCA to be implemented.  This is an ongoing process. 

 

VAT

I also want to give a brief mention of VAT, the process and the application in the financial services industry.  At the policy level the Ministry of Financial Services has been in discussions with the Ministry of Finance on the application of VAT to the industry.  The financial services industry can be either treated as zero rated or exempt depending on if it is defined as a financial services firm by legislation or regulation, or if it is an export services firm.  We at the policy level are discussing the best way to advance this issue.  Once Cabinet has approved the draft legislation and regulations, through the BFSB we will hold consultations with the industry explaining the agreed framework and get your input on how it will effect your business, and any recommendations.  We hope to do this in the coming month. You will have full opportunity to review the draft rules and provide your input and recommendations to Government. 

 

I would like to take this opportunity to commend Aliya Allen, Chief Executive Officer of BFSB on her advocacy and dedication to the financial services industry of The Bahamas. Ms. Allen has worked hand in hand with the government on various initiatives ensuring BFSB’s concerns and ideas are always represented. Her focus and dedication is to be applauded.

 

To the board of directors, I must applaud you on your high level of commitment and involvement in providing guidance and oversight to the Bahamas Financial Services Board and being a key body in promoting the importance of a relationship between the government and private sector. With the Bahamas Financial Services Board comprising of lawyers, bankers, fund administrators, trust officers and other specialists I applaud you on your comprehensive approach in governing BFSB.

 

As you’ve volunteered your time and service to BFSB and that of the financial services industry, you’ve demonstrated your love for country and love for the industry as you ensured that there are new opportunities for the industry to grow and develop, in our plans to become the preeminent international financial services center.

 

Aliya Allen and BFSB in cooperation with the Ministry of Financial Services has worked tirelessly to raise the profile of the Bahamas financial services industry and promote The Bahamas as the preeminent international financial services industry throughout the region and locally with hosting and attending landfall events.

 

It is important as these events are hosted by BFSB and the Ministry of Financial Services Industry that the membership firms support not only monetarily but also in their level of attendance, speaking participation and promotions.

 

In conclusion, I applaud BFSB, its hard working board of directors and all of the member firms that are ensuring that BFSB advocates for the private firms within the industry. I encourage all member firms to actively and tangible participate in all efforts of the government and BFSB to ensure that the industry grows.

 

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