||Last Updated: Dec 10, 2018 - 7:51:41 PM
CONTRIBUTION – FINANCIAL BILLS
10TH DECEMBER 2018
SENATOR THE HON. JOEBETH COLEBY-DAVIS
OPPOSITION SENATOR AND SHADOW ATTORNEY GENERAL, SHADOW MINISTER OF LEGAL AFFAIRS AND YOUTH.
Madame President I stand today to bring a contribution to the following compendium of Bills: The Register of Beneficial Ownership Bill, the Commercial Entities (Substance Requirements) Bill, the Removal of Preferential Exemptions Bill, the Penal Code Amendment Bill, the Non-Profit Organizations Bill, and the Business License Amendment Bill.
To avoid confusion throughout my contribution, I will go through these bills one by one. Madame President, may I just state from the onset, that I know that there is a need to act in an effort to avoid blacklisting and protect the financial services. We have been here before, and I am quite certain this is not the end, where we have had threats from the the European Union (EU) or Organisation for Economic Co-Operation and Development (OECD). Nation. However, one must ask, at what point will the Bahamas draw the line in order to ensure adequate protection of the country’s second- largest industry.
Madame President, we must be careful not to tow the line, without making some hard and fast decisions to protect the financial services industry. Some are of the belief that the OECD has an ulterior plan to destabilize our offshore centre’s, in an effort to redirect businesses to their shores. And I believe this would be my second time contributing to this sort of legislation regarding changes to the legislation to satisfy the OECD request. During my former contribution I queried why there seems to be this outright compliance with the OECD request, with no sort of push back?
This is our financial services sector we are referring to, there must be some greater form of protection of this industry by the Government, and more must be done.
Whilst there is an important requirement to act to avoid blacklisting, the suggested pieces of legislation are not to my opinion, drafted to the best of our ability as a Country, so I will examine the bills and provide brief comments and in some case suggest amendments.
Madame President, I am not here to oppose for opposing sake, however, I am not prepared to support these bills as they are presently drafted, if the opposition amendments are taken into consideration and inserted into the bills, then I will support this legislation.
Penal Code Bill 2018.
The Penal Code Bill makes a provision that if your information to the Government via Customs form is falsified, you will be subject to imprisonment for up to six months or a fine not exceeding 100,000 or both. Why such harsh stipulations? Is there a specific person or persons this Government is trying to rid themselves of? This is such a steep fine, and there are presently laws for various Government agencies that cover this sort of falsification of documents, so why the harsh punishment, unless of course there is some information known to this Government about some particularly wealthy people.
Madame President, while it is good for the government to ensure there is no fraudulent activity and to discourage tax evasion, I would like the AG to explain to me and the Bahamian people, why was this clause necessary, when the Penal Code has clause 243 which covers deceit of a public officer?
It states: 243. Whoever, with intent to defeat, obstruct or
pervert the course of justice or the due execution of the
law, or to evade the requirements of the law, or to defraud
or injure any person, endeavours to deceive any public
officer, acting in the execution of any public office or duty,
by personation, or by any false instrument, document, seal
or signature, or by any false statement, whether verbal or in
writing, shall be liable to imprisonment for three months.
I ask again, Is there some information received that cause it to be necessary to take such extreme measures?
The Bahamas Customs and the Inland Revenue Department is responsible for collection of revenue, so why this added penalty? Is the Government struggling to make ends meet?
Madame President, I recall querying as to why the Government had disengaged the Revenue Collection Department of Inland Revenue, and if I am correct, the AG mentioned that persons where being rehired and trained to carry out the task, I take this opportunity to point out that if there is a decline of incoming revenue or a decrease in the revenue collection, it can only be due to this STOP, REVIEW, CANCEL system that this FNM government is adamant on continuing when they should be getting on with the business of this country.
The Business License amendment.
Madame President, this amendment does not seem to be related to the EU and the OECD requirements for the fianancial sector. However, Madame President, this goes back to what I mentioned in this place last week, that this FNM Government is making errors in policy and legislation that could be avoided if they are focused on governing this country. Last week, we were debating increasing the electricity bill ceiling from $200 to $300 for the VAT exemption, had this FNM Government consulted then it would have been clear that $200 would not be sufficient. Now, Madame President, here we are debating a change to the Business licence, and to be clear this was completely unnecessary and obviously came about without consultation of the Business Community.
It is just ironic, that the Government no longer requires an audited financial statement or bank statement for business licenses purposes, when you only recently made that amendment and request on to businesses earlier this year.
Madame President, as I stated last week, if this FNM Government would consult the people and be more considerate when drafting and changing policies and legislation, there would be no need for this backtracking.
I trust that it’s a lesson learnt for next time.
The Commercial Entities (Substance) Bill 2018,
Madame President, what I understand by this legislation is that there is a requirement for commercial entities engaged in certain business activities in The Bahamas to demonstrate that they have real economic substance through having substantial economic presence and real economic activity in The Bahamas.
At the onset, this legislation could prove very beneficial and a positive thing for The Bahamas.
The fact of the matter is that we are not alone in having to implement such measures.
In addition, Madame President, while this legislation may create growth and potentially numerous opportunities for Bahamians, we must be sure as a Country that we are not making demands without providing the resources for business to be successful.
This may be positive for trust entities and create family office type business growth.
It must be noted that, the country cannot force anyone to do business in The Bahamas.
However, policy, legislation and ease of doing business in the Country will persuade them.
The Bahamas must capitalize on the new opportunities, but the focus should be on improving how we do business, the ease of doing business in the country, and the costs of doing business, especially in lowering the cost of electricity – as I discussed last week during the debate regarding BPL.
With respect to the Removal of Preferential Exemptions Bill 2018, this will most definitely change the way we do business with International Business Companies.
Madame President, in a nutshell, the Bill removes all preferential exemptions on the payment of taxes and other fees given to companies and other entities whose operations are carried on exclusively outside The Bahamas.
The Bill mandates that key legislation be amended to remove such preferential exemptions. In particular:
-the International Business Companies Act;
-the Exempted Limited Partnership Act;
-the Investment Condominium Act; and
-the Executive Entities Act.
Whilst the Bill satisfies the demands of the EU, it poses a MAJOR issue in section 5(1) and its reference of the Second Schedule of the Bill, together saves all exemptions already enjoyed by the IBCs and entities for a period of 3 years from the commencement of the Act; after which these companies will no longer enjoy those exemptions.
Madame President, now this is a major problem, because various pieces of legislation would have vested certain rights in the IBCs. And as such the companies would have had a legitimate expectation to enjoy those rights for the period stated in the legislation. For example, the IBC Act vested a right in IBCs to enjoy a 20 year exemption on stamp duty.
Therefore, Madame President it is arguably unconstitutional and certainly bad form to take away rights that have been accorded by an Act of parliament.
International companies and high net worth individuals value certainty around their business and financial planning. Taking away these rights would signal to the international community of businesses and high net worth individuals that there is no guarantee of certainty in financial and business planning in The Bahamas.
This legislation shows that the FNM Government is bad for business. It further shows that all in all, the Bill satisfies the demands from the European Union.
Further, Madame President, aside from the potential of losing future business, this legislation opens up the Bahamas government to a multitude of legal challenges. Companies would have incorporated themselves in the Bahamas because of the guarantee of these exemptions for a 20 year period. Businesses do financial planning for a wider period than 3 years. With legitimate expectation as their legal cover, thousands of IBCs and other entities could mount legal challenges to the government for taking away rights vested in them.
Madame Precedent, it is a very bad precedent for the government to set. To vest rights in companies and individuals and then take those rights away. It is a generally accepted principle that laws are not to be retroactive.
Madame President, the Opposition would suggest an amendment to this Bill that states that all companies currently enjoying exemptions will continue to enjoy them until the expiration stated in the particular legislation -- and that from the commencement of this new Act all new companies will not enjoy said exemptions.
The Register of Beneficial Ownership Bill
Madame President, this Bill will create a private/non-public database for the collection and retention of demographic information of the beneficial owners of all incorporated entities.
Now Madame President, I am not opposed at the creation of this register, except that we must be careful not to just make changes as requested by the EU, and be certain that the changes once enforced in this Country makes sense to our archipelago.
Will this registry be offline and confidential? Guarded against data protection risks?
If not, then there is a need to amend the data protection laws if necessary.
Is the necessary framework in place to closely monitor and secure the data and information once collected? Madame President, the industry must feel confident that the information will remain private and not easily accessible.
Madame President, industry stakeholders are very concerned that despite how secure the data base is, it will be capable of being hacked.
Additionally, Madame President, I understand from the legislation that the data will be managed jointly by the government and the private sector, with it only accessible by designated persons, however, at Clause 12 (7) and subsection (8) there is some request for a certification for information, but it doesn’t state who will provide this certificate?
This bill, has the potential to be problematic for The Bahamas.
The database, as I understand it, is to be managed jointly by government and the private sector and it is anticipated to be extremely secure and only accessible by persons designated under the Act.
However, Madame President, this will become one of the major things we are judged on by investors considering The Bahamas as a financial service jurisdiction.
We must be careful not to kill our industry to please the EU, a balance must be struck!
Madame President, as I prepare to take my seat, I want to admonish this Government to stop marching to the Beat of the EU and OECD drum, and follow your leader by marching to the beat of the goat skin drum! I say that to mean as the country leaders you must DO MORE to ensure that your policies and legislative changes and amendments to the industries are suitable and beneficial to what is good for the Bahamas and the Bahamian people. Given all the push back and the discourse throughout the Bahamas since the laying of these bills in the House, I cannot support these until a number of amendments are inserted that from the business side, make sense when it is applied and enforced.
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