Bahamas' Nassau Institute Explains US Tax Agreement Worries

Tax-News.com, New York

08 February 2002

Bahamas-based Nassau Institute yesterday issued an update dealing with with new initiatives from G-7 nations and international organizations which affect financial services sectors, such as the Bahamas, and incorporating further comments on the tax information agreement recently signed between the Bahamas and the US.

The NI Executive Director, professor Dr. Gilbert NMO Morris said: "the objective is to demonstrate the pattern of developments related to world's financial system.to paint a picture, if you like, of where things are going.

Dr. Morris said: "obviously, the signage of the Tax Information Exchange Agreement (TIEA) is an immediate concern. As we have said, it was not part of a comprehensive restructuring programme, aimed at getting ahead of the international curve. That is partly the reason for our update.to assist firms and governments of Offshore Financial Centres in developing a strategy to move ahead of the curve". Asked what the Institute found troubling about the TIEA Treaty Dr. Morris replied: "Well it is not a treaty. It will be necessary to enact enabling legislation before it can become a treaty. It is merely an Agreement, and so subject to change. The object is to inform the financial services community, and governments so that they are not left to band-wagon their policies.but are exploiting competitive advantages. In respect of that The Institute will hold a conference on the TIEA next week here at Nassau".

Dr. Morris continued: "What we find troubling is again the absence of process. I know there were people from the financial services sector involved, but put simply the signage does not reflect the shifts in the international position financial services regulation or the possibilities of new initiatives in the pipeline. You see a curious thing in recent remarks from Mr. Owen Bethel, who so accurately points out the collateral problems in signing such agreements outside a comprehensive strategy." Asked what would be the strategy for signing, Dr. Morris said: "At the Nassau Institute our position has been to view these possibilities from the vantage-point of geopolitics. Look at the "war on terrorism".look at the Saudis' reaction. You have a serious conflict in loyalties brewing there. The Saudis are a monarchial dictatorship. They are leaning toward Iran, Iraq and Syria, since they fear them more than they love or need the West. Our policies in the West have been nearly ignorant in this understanding. The population of Saudi Arabia (and Egypt) meanwhile consider the West to be hypocritical for supporting dictatorship. This may mean more terrorism, and so the need for the US to maintain its coalition with a reluctant Europe. That may mean that Offshore Financial Centres will become the pawns to keep the Europeans happy. This will mean further squeezes on the financial services sector.and this is so, not at all because of terrorist monies which has been found more so in US and European banks, but the war gives an opportunity for those who have had it in for us all along".

Dr. Morris argued: "So you see Mr. Bethel is right. We have created no pretext for taking alternative directions based on our constitution and internal laws. And having failed to set a precedent in this respect, and without a comprehensive strategy, using any Agreement to inoculate us from the effects of new initiatives, our only role is to capitulate and refer to it as meeting "international standards".

Dr. Morris concluded: "at the Nassau Institute, we certainly believe that the Bahamas should have re-positioned its banking system years ago. These hodge-podge capitulations do not give definition to a direction. Now I will say, given the provisions of the TIEA Agreement as it is, I foresee that banks in Cayman and a few other places may move to the Bahamas. But that does not seem to be part of a strategy.it seems accidental.since the government is appealing in Justice Allen's ruling in the FIU case, exactly what may be beneficial to their move to the Bahamas."

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