The Bahamas economy risks a heavy blow if the jurisdiction accepts rewriting cross-border corporate tax rules as the Organisation for Economic Cooperation (OECD) is pushing for worldwide.
James Smith, a former Bahamas finance minister, told local news outlet Tribune Business that pressure for the global reform by the OECD and its members is threatening to "drive us right into the ground as a sovereign nation".
"My own point of view is that The Bahamas elected its own economic model more than 50 years ago, and that did not include income tax," Smith said. "It seems the Europeans want to remodel our economy in their own image," he added.
To pattern our tax system after theirs [the OECD member-states] needs a lot of thought rather than capitulation"
The Paris-based OECD aims to rip up a century of taxing companies on their profits based on the locations in which they have a physical presence to take account of the digitalisation of economies, that has enabled companies to make money in places without boots on the ground.
The former finance minister urged The Bahamas not to "capitulate" to these demands without a thorough analysis of such a significant change to its taxation regime.
"To pattern our tax system after theirs [the OECD member-states] needs a lot of thought rather than capitulation. If we thought it was the best alternative, yes, but it should not be imposed on us from outside to satisfy the demand for things such as double taxation treaties. Things are going too far, and they ought to be resisted."
The OECD has said that the changes would have a significant positive impact on global tax revenues, by boosting corporate income tax revenues globally by about four percent. The OECD anticipates that the changes would increase tax payments by consumer-facing, digital economy businesses by about $100bn annually.
In terms of achieving a global consensus on the new rules, the OECD believes that the benefits will be relatively equal for high, middle, and low income economies.
In a statement released last month ago, the 137 countries that participated in the talks overseen by OECD, agreed to "affirm their commitment to reach an agreement on a consensus-based solution by the end of 2020", on the basis of the proposals for a new way to tax companies and a minimum corporate tax rate.