The Bahamas has been an independent member of the British Commonwealth for more than 35 years, with a long history of political stability. The basis of the Bahamian law and legal system is English common law tradition. There are resident justices appointed to the bench of the Supreme Court, inclusive of the Chief Justice, and resident justices appointed to the Court of Appeal, inclusive of the President, however, the final court of appeal is the Privy Council which is seated in England.
The developed world has always had a fickle relationship with the offshore jurisdictions, and with the advent of the global financial crisis the leaders of the G20 nations looked to these markets with torches lit and pitchforks held high. Though the infamous blacklist failed to materialise, a so-called grey list of non-co-operative countries includes the Bahamas in its ranks....
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The developed world has always had a fickle relationship with the offshore jurisdictions, and with the advent of the global financial crisis the leaders of the G20 nations looked to these markets with torches lit and pitchforks held high. Though the infamous blacklist failed to materialise, a so-called grey list of non-co-operative countries includes the Bahamas in its ranks.
The increased pressure has sparked strong discussions as to the future of the offshore industry, and businesses operating in these jurisdictions may have to resign themselves to greater scrutiny in the increasingly-interconnected world of international finance. As one lawyer says: "In the end, you have to accept the world for what it is and you have to change."
In response to calls for greater transparency the Bahamas government announced last March it intends to comply with transparency standards set forth by Organisation for Economic Co-operation and Development. This process will include signing more Tax Information Exchange Agreements like the one the Bahamas has shared with the US since 2002.
In October 2008, the Bahamian government signed an Economic Partnership Agreement with Europe, opening the way toward free trade with the European nations. The agreement, which forces the Bahamas to phase out its duty tariffs over the coming months, marks a substantial sea change in the Bahamian economy, which relies heavily on tariffs and import duties to fund its operations. The elimination of tariffs is also crucial for the nation's entrance into the World Trade Organization, in which the Bahamas currently has only observer status.
In lieu of this source of income the government will be challenged to create new revenue streams, and may consider changing its tax neutral status to the low tax structure adopted by Barbados in 1997. These taxes could come in several forms- a sales tax, value-added tax or a tax on registering an incorporation, which in essence already exists in the form of a business licensing fee. Financial lawyers expect some important decisions regarding the nation's tax status to be made this year.
While a low tax structure would mark a substantial shift for the Bahamas, lawyers foresee this model will have the benefit of removing the stigma created by the current tax neutral status. Even if businesses will have additional costs associated with doing business there, the sophisticated nature of the financial services industry in the Bahamas will continue to be attractive to investors.
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