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    ARTICLE - Bahamas

    Bahamas Financial Sector Appeals for Review of 15% Global Corporate Tax

    23 Mar

    Bahamas Financial Sector Appeals for Reevaluation of 15% Global Corporate Tax - Introduction

    On 21 March 2024, the Bahamas Financial Services Board (BFSB) and the Association of International Banks and Trust Companies (AIBT) have come forward with a significant plea to the government. In a joint statement, these key industry stakeholders have voiced their concern over the proposed enactment of a minimum 15% global corporate tax, a move aligned with the OECD's Pillar Two framework aimed at modernizing international business taxation rules.

    What's the problem?

    The Bahamas' decision to introduce this tax comes as a strategy to adhere to the OECD's base erosion and profit shifting (BEPS) initiative, targeting multinational enterprises (MNEs) with a group turnover exceeding EUR750 million annually. The government's plan includes unveiling draft legislation by the end of May 2024, with a legislative Bill anticipated to follow after further consultations.

    The Industry's Stance

    However, the BFSB and AIBT have raised alarms over the proposed tax, arguing that it challenges the sovereignty of nations to manage their tax systems independently. Their contention is that international tax regulations should pivot towards reinforcing economic substance rules and harmonizing transfer pricing standards to curb tax evasion and profit shifting. An open letter has been dispatched to a UN committee currently penning a new international tax cooperation convention. This emerging UN convention garners support mainly from smaller jurisdictions and developing countries, advocating for more equitable tax cooperation frameworks.

    The Argument Against One-Size-Fits-All Tax Rates

    The joint letter criticizes the OECD's approach of instituting a uniform tax rate as a means to tackle avoidance and evasion by large MNEs, suggesting it would unfairly eliminate tax competition among nations. The BFSB and AIBT propose a model where tax rules of a jurisdiction are applied based on the economic substance present, whether the tax rate is 0% or 15%.

     A Call for a 'Holding' Period

    Furthermore, the BFSB and AIBT recommend the introduction of a 'holding' period for countries willing to engage in the UN tax convention. This grace period aims to streamline the adoption of new international tax standards and prevent the overlapping of efforts resulting from competing tax rules set by different international bodies.

    Conclusion

    As the Bahamas prepares to navigate through these proposed tax changes, the financial sector's plea highlights a critical conversation about sovereignty, economic competitiveness, and fairness in the global tax landscape. The coming months will be pivotal as the government contemplates these feedbacks and moves towards legislating this global tax initiative.

    Final thoughts

    If you have any queries about this article, the Bahamas Financial Sector Appeals for Reevaluation of 15% Global Corporate Tax, or tax matters in the Bahamas more generally, then please get in touch.
    BEPSInternationalOECD

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