The Bahamas Braces Itself As International Business Companies Pull Out

Amanda Banks, Tax-news.com, London

08 February 2001

The latest figures from the Bahamas' Office of the Registrar General have shown an alarming downturn in the number of International Business Companies (IBCs) registering on the island since the International Businesses Companies Act 2001 came into force at the start of this year. Under the new act, IBCs are required to submit their identities, addresses and names of directors and owners to the Registrar General's Department.

In January 2000, 3,368 IBCs were registered, but only 781 of them were incorporated in January 2001. This has the potential to result in millions of dollars in lost revenue for the Bahamas' government, and many local businesses which have depended on the IBC sector have expressed grave concerns over their future. Traditionally IBCs have been a significant source of revenue - it is expected that the immediate fiscal period will suffer with a shortfall of around $20m which will result in reduced government expenditure.

In the Bahamas media this week, Chief Executive Officer of Bahamian company Sunshine Holdings Ltd, Franklyn Wilson, stated: 'A decrease of 2,587 IBCs in one month on a year-to-year basis would be impactful for the entire financial community.'

He added: 'It is also relevant that this fall-off in revenue would be taking place at the same time as all the participants in the financial services sector are being obliged to increase their operating costs, simply to comply with the new laws recently introduced by the government.'

Mr Wilson is of the opinion that social costs will increase as local companies review their overhead spending and business strategies: 'In each such review, there is likely to be pressure to reduce the costs wherever possible. In the short run at least this is likely to include staff terminations, reductions in the levels of bonuses which are paid to employees who are retained and reductions in the level of support for community and charitable causes,' he said

However, before the government implemented the new IBC legislation as part of a series of measures designed to bring the Bahamas' financial services sector into compliance with international standards and best practices, Prime Minister Ingraham warned of the consequences of the new law, saying: 'The reality is, IBCs, as we knew them, can be no more. And because of this, there are going to be substantial consequences to persons and entities engaged in this business and the individuals employed in this sector of our economy. There is no question that the amount of revenue the government receives from IBCs will be reduced.'

Up to December 12 2000, the number of incorporated IBCs in The Bahamas stood at 16,910, with the government receiving at least $250 for each year they operate. The Prime Minister said that January 2001 would normally have been a 'a big, big month for the government in terms of revenue from IBCs, the time when they normally pay their fees. This is not a propitious time to do what we are doing. If we had a choice, this would not be the time. But this is what must be done.'

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