The Bahamas Financial Services Board (BFSB) and the Association of International Banks and Trust Companies (AIBT) have published a joint letter calling for the government's proposed minimum 15 per cent global corporate tax to be rethought.
The new tax was announced in February 2024 as part of the jurisdiction's strategy to comply with the OECD's Pillar Two framework for international business taxation. It will apply to multinational enterprises (MNEs) whose annual group turnover exceeds EUR750 million, as part of the OECD's base erosion and profit shifting (BEPS) initiative.
The Bahamas government plans to release draft legislation implementing the tax at the end of May 2024, with a view to introducing a Bill to parliament later in the year following further consultation.
However, the BFSB and the AIBT oppose it, claiming the idea of a global minimum tax infringes on the autonomy of sovereign nations to establish and manage their own tax systems. The two bodies say international tax rules should instead focus on economic substance rules and standardised transfer pricing rules to prevent tax evasion through profit shifting.
Their views are set out in an open letter to a UN committee that is drafting a new international tax co-operation convention being put forward. The as-yet incomplete UN convention is generally backed by smaller jurisdictions and developing countries.
The joint BFSB-AIBT letter argues that it is wrong for the OECD to try to counter avoidance and evasion by large MNEs by establishing a uniform tax rate for all countries. They suggest the move would eliminate tax competition between nations. If instead the rules were based on economic substance in a jurisdiction, 'that country's tax rules should apply, whether 0 per cent or 15 per cent', it said.
The organisations also urge that a 'holding' period should be granted to countries that have indicated a willingness to participate in a UN tax convention. They argue that this would help 'streamline the adoption of new international tax standards and minimise any duplication of efforts that countries may experience as a result of competing international tax rules from different international bodies.