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E-Commerce In The Bahamas: Friend Or Foe?

Lisa Ugur, Tax-news.com, London

27 July 2000

In an interview on Bahamas' radio this week, Mr James Smith, the Bahamas Ambassador for Trade and Investment, said that the blacklisting of the Bahamas in the recent FATF and OECD reports on offshore financial centres had come about because the jurisdiction is making a grand push into e-commerce.
Naturally, the blacklisting of the Bahamas has given cause for concern, and worries over the OECD and FATF reports have been reinforced by a subsequent advisory issued by the US warning of deficiencies in the Bahamas' controls on money laundering. Analysing the reasons behind the OECD/FATF intiatives, Mr Smith said that the OECD nations were trying to find alternative income, and were therefore picking on offshore jurisdictions as a potential source.

Mr Smith's particular concern lies with the growing e-commerce sector and the problems it is causing for countries seeking to collect sales taxes. He said 'At the same time while this is going on we have e-commerce going where companies can move offshore through cyber space and they can sell a product. You can no longer collect your sales taxes, let's say on a CD the sales tax is about seven percent in New York. You download a CD from a place in Freeport immediately the New York guy loses his seven-percent sales tax. Multiply that by numerous companies.'

Mr Smith also noted that in US states usually 40 to 50 per cent of revenue comes from direct sales tax: 'So you could see looking forward what this would mean, now the only way you could bring that back into the tax net would be to insist on all other countries where they can locate to, basically, be freer with the exchange of information.'

Also interviewed on the radio programme was Ian Fair of the Bahamas Financial Services Board who said '"Offshore","tax haven" and "secrecy" are the buzz words words that the world is gripping onto and saying these are why we don't want countries like the Bahamas. But the reality is they have woken up to the fact that the world has become very mobile. The large countries of the world have encouraged this mobility, they have encouraged world trade now, all of a sudden, they realize that their tax base is mobile too and they are very concerned about it.'

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