Frederick A. Mitchell said his country is not going to shield people who are trying to hide their money from legitimate tax.
The Bahamas, a small chain of islands in the Caribbean, has got some unwanted attention in recent weeks thanks to its frequent mention in the Panama papers. Panamian firm Mossack Fonseca has favoured the Bahamas as the third largest destination to incorporate offshore firms after the British Virgin Islands and Panama. Among the many names with offshore funds in the Bahamas, the one that stood out was that of British Prime Minister David Cameron’s father. With offshore banking being the next largest mainstay of the Bahamian economy after tourism, the leadership has been worried of the fall-out from the Panama papers leak, with more revelations still to come from the large cache of documents.
Bahamian Foreign Minister Frederick A. Mitchell, who was in the Indian capital this week after a gap of 10 years, spoke to The Wire about why he objects to the term ‘tax haven’. Mitchell feels that there was “moral panic” in the western countries’ insistence on increasing regulations for offshore banking. He asserted that the Bahamas had no reason to conduct any inquiry into the Panama papers allegations, since these were mainly domestic issues.
India had signed a Tax Information Exchange Agreement with the Bahamas in February 2011, which allows the two countries to solicit queries relating to civil and criminal investigations. Mitchell revealed that India has not activated the agreement to seek information for any individual or entities since it was signed.
During his interview, he also spoke about the purpose of his visit – to solicit support for candidates seeking election to multilateral bodies, as well as the difference and similarities with India on topics such as the UN Security Council (UNSC) reforms and climate change.
Excerpts:
Are you apprehensive about the fall-out of the revelations in the Panama papers?
I think that people are bit nervous, as names get called. But, we are a well-regulated sector and there is a difference of opinion amongst us – the developed world and us.
First of all, they keep on talking about tax havens. That is not the terminology we use. We are taking advantage of tax competition in a free market that is a legitimate activity. Secondly, there is a genuine reason why people want their wealth shielded from other people’s eyes. One is their own physical security. The other is just sensibleness of not having all your assets in one place, in case something happens in the jurisdiction that you are in. You don’t lose everything. So you diversify your assets around the world.
Third is that most people return the money parked overseas back to their countries anyway. You see that latest example being David Cameron. When he sold the holdings that they had, it went back. And that’s what we always said. Fine, it is taking advantage of lower taxes, but it goes back to the developed countries.
So, are you implying that this is a form of moral panic among the developed countries?
Yes. I think that’s what it is. Everybody ought to take a deep breath probably.
Do you expect the uproar from the Panama papers to dissipate soon?
No, I don’t. It is like the Wikileaks. I won’t say that they are a nine-day wonder, but they have a way of coming in the press and then you know… I am told the volume of document is really quite big and it will take some time to mine them and we will find various things coming up from time to time.
Is your government planning to conduct an official probe?
No. It is not something that affects us at all. This is an argument that is confined to the centres of wealth and is a domestic political argument.
With India clearly siding with the West in calling for greater transparency in offshore banking, is this also a matter of discussion with your Indian interlocutors?
It’s not a topic of contention. Whatever the best practices are by the Organisation for Economic Co-operation and Development (OECD), the Bahamas subscribes to it. So long as we fit within those strictures, I think it is not going to be any issue with any country. We are not going to shield people who are trying to hide their money from legitimate tax. We are not going to be part of it.
The fact that the Tax Information Exchange Agreements (TIEA) was negotiated means that that at some time it was a concern for India, which we are happy to meet. If it is raised with us, we will try our best to see what we can do. But, we have two Indian banks and they don’t seem to be pressurised in any way.
How would you describe the extent of the Bahamas’ relations with India?
Typically, we have interacted with India in the commonwealth context. We were one of the early supporters of Kamlesh Sharma as Commonwealth Secretary General. He has now retired, but is a distinguished diplomat and gave a lot of support to countries like the Bahamas who describe themselves as small island developing states. We came to India first in 2005, while I was minister. One of the reason is that India is a big player in the commonwealth and the international community and we wanted to be sure that as a small country, we made contact and had a set of cooperative agreements with India. Since that time, India has assisted us in IT and training of diplomats.
Do economic ties play a significant role in bilateral relations?
The major player form the economic point of view is Campbell shipping, which is a shipping company registered in the Bahamas and headquartered in Mumbai. They have significant tonnage and fleet around the world. Some of the ships are in fact built in India, but the management of the company is in the Bahamas. So, that is the major economic player between us.
Trade in goods is not so significant. From our point of view – we are a small country, we have an Indian community of 300 families. The state bank of India is in the Bahamas, and so is Bank of Baroda.
You have come to India after a long time. What is your agenda for Delhi?
We have a laundry list… One is obviously climate change and the issues surrounding that. Our prime minister just signed the agreement last weekend in New York. More specifically, we have a candidate for election to Committee on the Elimination of Discrimination against Women coming up in June. There are 24 candidates and we are asking for India’s support. We have pledged our support for India’s candidate for the International Law Commission in exchange. Our candidate is Marion Bethel.
We plan to make a run for the UNSC in 2032, which means an election in 2031. And we have pledged our support for India’s bid for the UNSC for the non-permanent seat. We are also very disposed to India in the reform measures having a permanent place in the UNSC. We are also asking for support for election to International Maritime Organisation in 2017 and we are running for UN Human Rights Council in 2019.
But apart from those specific things, we are basically here to show our presence and renew friendships and try to build on the efforts that were made 10 years ago. We have a private sector. We are in the midst of visa abolition agreement between the two countries. So, we are waiting on the exchange of views on this. We have had a back and forth discussion on this in the last one year.
Why is the Bahamas offering visa-free travel to Indian nationals?
In 2015, there were 1455 (Indian tourists to the Bahamas). One of the things we know is that India has a huge middle class with a lot of discretionary income, so we want to make the process of travelling to the Bahamas easier.
India and the Bahamas had signed the TIEA in 2011. Are you planning to upgrade it?
No, that is standard. With the measures in place, we are moving towards the automatic information exchange, OECD standards, which we pledged to do on a bilateral basis. I am not sure that the TIEA has been actually used, but it exists.
Are you saying that India has never sought information about an individual or group from the Bahamas on tax-related matters?
No. Not so far.
The Bahamas supports India’s initiative for the passage of a Comprehensive Convention on International Terrorism at the UN. Do you expect to see any forward movement on it soon?
I wait to see what is raised. Right now, the Bahamas broadly supports the aims and objective because we understand India’s sensitivity on this issue. Checking in hotels here, we find that security is very specific, which doesn’t exist in the West as such. But, that has to do with the circumstances and we are very sensitive to that.
The last visit by an Indian prime minister to the Bahamas was by Rajiv Gandhi in 1985 for the Commonwealth Heads of Government Meeting (CHOGM). Are you expecting a bilateral visit by Prime Minister Narendra Modi?
We always are. But you have to set it around something. With the new prime minister perhaps when he is at the UN, he might come to the Bahamas.
The Bahamas has also backed India’s bid for UNSC reforms. Do you see any optimism here?
We have taken a position that this is a business of big countries like your own country. We play a supportive role. We have said that Germany, Japan and India must be considered for a permanent role, but it is bogged down at negotiation. China is very concerned about Japan and we are sensitive to that also. At the end of the day, we think that it is a matter that big countries will have to sort out among themselves.
Do you still have differences with India on climate change post the Paris agreement?
Remember the Indian government took the position that it did not want a cap on the carbon emission, unless the developed country found a mechanism for them to pay for the fact that India has a lot of catching up to do. I guess that even in the commonwealth context, that was a difference between us. But, we managed to find an agreement that everybody can work towards.
Everybody sees that (something has to be done). Look at the atmosphere outside (gesturing at the view outside the big windows in his suite at the Taj Mansingh hotel). Obviously, this can’t continue. The temperature here is in the forties. You have a searing heat wave. You have drought. So obviously, you have to contribute to make sure that the situation is checked into. The developed countries have to provide the money.
For us this is existential. 80% of the Bahamas is below sea level. In 50 years, we are looking at half the country disappearing under water if nothing dramatic is done to deal with this issue.