The Bahamas Financial Services Board (BFSB) said the new European Union (EU) tax blacklist - which includes The Bahamas - "means nothing if it fails to take into account the assessments of the true standards-setting bodies", and Financial Services Minister Hope Strachan said she is "disappointed" The Bahamas is included on the list. This despite a raft of tax information exchange agreements (TIEAs), the signing of an inter-governmental agreement (IGA) with the U.S. on implementation of the Foreign Account Tax Compliance Act (FATCA) and the decision by The Bahamas to adopt the Organization for Economic Cooperation and Development (OECD) Standard on the Automatic Exchange of Information.

"The ministry is expressing its disappointment that The Bahamas has been included on a list, released on 17 June, 2015, of 30 jurisdictions that the EU has identified as facilitating tax evasion," she said.

The EU's tax watchdog last Wednesday unveiled a plan for tackling corporate tax avoidance and ending the practice of "sweet deals" for multinational companies. The EU also published a blacklist of 30 countries it says are not doing enough to crack down on tax avoidance.

"These tax havens cover the five continents," said Pierre Moscovici, the EU's top tax official. He urged them to quickly adopt "agreed international standards" to fight against tax evasion.

The EU plans to ensure multinationals pay taxes where they generate profits, that tax rules in one country do not penalize others, and that honest businesses don't lose out to unscrupulous competitors. The blacklist is made up of countries that figure on at least 10 national lists of tax havens compiled by the 28 member nations. Luxembourg is not on it.

The full list is: Anguilla, Antigua and Barbuda, Bahamas, Barbados, Belize, Bermuda, British Virgin Islands, Cayman Islands, Grenada, Montserrat, Panama, Saint-Vincent and the Grenadines, Saint Christopher and Nevis, Turks and Caicos Islands, U.S. Virgin Islands, Andorra, Guernsey, Liechtenstein, Monaco, Liberia, Mauritius, Seychelles, Brunei, Hong Kong, Maldives, Cook Islands, Nauru, Niue, Marshall Islands and Vanuatu.

The Ministry of Financial Services released a statement over the weekend.

"It is disappointing that The Bahamas has been placed on a European Union (EU) blacklist of jurisdictions that have been identified as facilitating tax evasion.

"It is also regrettable that the EU blacklist does not take into consideration the significant efforts and accomplishments experienced by The Bahamas in the area of tax transparency, both within the EU and globally.

"This includes the many Tax Information Exchange Agreements (TIEA's) signed by The Bahamas, progress within the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes including the Automatic Exchange of Information," the ministry said.

The BFSB was a little more forceful, asserting that The Bahamas is compliant. BFSB CEO Aliya Allen said, "Given the full cooperation of many countries like The Bahamas on tax transparency it is highly disappointing that these types of blacklists exist today. The Bahamas has moved, in line with the rest of the world, to adopt the OECD Standard on the Automatic Exchange of Information.

"The Bahamas is white-listed by the OECD and its 4th round mutual evaluation indicated that it was either wholly compliant or largely compliant with the criteria on tax information exchange.

"We believe this type of a consolidated list means nothing if it fails to take into account the assessments of the true standards setting bodies. A consolidation of countries' blacklists says nothing of the reasonableness of the criteria involved in creating them."

Richard Hay, Co-Chair, STEP (Society of Trust and Estate Practitioners) International Committee, said in his introduction to the report "Deconstructing National Tax Blacklists: Removing Obstacles to Cross-Border Trade in Financial Services," that arbitrary blacklisting has the realpolitik advantage of enabling countries to threaten weaker and smaller states while avoiding affront to competitors powerful enough to retaliate.

"Blacklists also fuel a convenient perception that there is something inherently immoral about using tax-efficient structures in smaller states.

"Establishing a tax-free international business company (IBC) in a small blacklisted jurisdiction, for example, is often frowned upon. However establishing a similarly tax-free limited liability company (LLC) in the USA - never blacklisted because of its capacity to hit back - is seen as conventional. The perception is curious, as tax-free U.S. LLCs are permitted to operate with undisclosed ownership and no obligation to maintain financial statements, while IBCs in smaller states are subject to much greater transparency requirements," Hay said.

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