IMF Headquarters 1 in Washington, DC.
By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
The government has already started discussing potential income tax reforms, the IMF revealed yesterday, although it has admitted any changes will take “years” for The Bahamas to implement.
The International Monetary Fund (IMF), in its full Article IV report on The Bahamas for 2020, again sought to nudge The Bahamas towards more progressive and “equitable” taxation options such as an individual and/or corporate income tax.
And it disclosed that the government, in response to its findings, had confirmed that internal talks are already underway to explore the feasibility of an income tax system in The Bahamas. These revelations came as the Minnis administration voiced optimism it could achieve $300m in extra revenues and spending cuts if required - an increase upon the $200m it is targeting.
“The authorities reiterated their commitment to fiscal discipline once the crisis subsides,” the IMF report said. “Most of the COVID-19 measures have time limits, and thus the fiscal balance should swiftly improve once the recovery sets in.
“They have also started discussing property and income tax policy reforms, and are seeking technical assistance from the international community, but acknowledge that implementation will take years.”
Income, and/or corporate income, taxes have always been a controversial topic in The Bahamas which has no history of them. VAT was preferred as the central element of tax reform under the last Christie administration since its self-enforcement mechanism at each stage of the production chain, and reliance on businesses to collect it, was seen as one where compliance was easier to attain while administrative costs and complexities would be less.
However, The Bahamas’ present consumption-based tax structure is regressive in that it imposes a disproportionate burden on lower income Bahamians who end up paying a greater percentage of their income in taxes than their wealthier counterparts.
Data produced in the IMF’s Article IV report, which appears to have been taken from a Deloitte & Touche study conducted for the Bahamas Financial Services Board (BFSB) in 2018, suggested that a corporate income tax could generate revenues in excess of four percent of gross domestic product (GDP) or $400m if implemented.
“Tax policy reforms are essential to a robust and equitable fiscal consolidation. Without income taxation, The Bahamas relies on VAT, stamp duties, business license fees and, to a lesser extent, property taxation,” the IMF said, calling for the latter to at least be made more progressive via increased taxation of high-value real estate.
“While there is scope to enhance revenues within the existing tax policy regime, staff also recommended building comprehensive real estate price indices to provide a basis for market value-based property taxation and consider strengthening the progressive features of the current system by increasing the rate on higher value residences,” the fund added.
“Over the medium-term, income taxation can help achieve a more equitable income distribution. The government should also review its tax expenditures.” The IMF said a “sin tax” on alcohol and tobacco remains among the potential short-term measures it can employ to increase revenues.
It added of the Government: “They remain committed to reaching the budgeted deficit target this fiscal year despite significant revenue shortfalls in the first quarter (a decline of about 45 percent compared to the same period last year).
“They are confident that, if needed, the various contingency measures could result in additional revenues and savings of up to $300m. The Ministry of Finance has begun hosting quarterly meetings with line ministries to prevent unfunded commitments.”
The Government is also more optimistic than the IMF about The Bahamas’ rebound prospects even though it is predicting a deeper recession than the Fund. “They have a lower growth projection for 2020 (-19 percent), but a higher forecast for 2021 (3 percent),” the Article IV report added.
“The authorities agree that the recovery will likely be gradual, with real GDP back at pre-pandemic levels by 2024. Confident about the Bahamian tourism sector’s attractiveness given the close proximity to the US, they see risks as tilted to the upside and are hopeful that the recent reopening could result in a significant pick-up in tourist arrivals over the next few months.”
“In tax administration, the Government should prioritise the review of the Department of Inland Revenue’s (DIR) organisational structure, completing the DIR Bill and appropriate amendments to existing tax laws to support the integration of the departments, develop strategic and operational plans, focusing on results-based management, and modernise core administration functions,” the IMF added.
“For Customs, priorities include establishing an effective exemption monitoring and verification unit, strengthening risk management functions, and developing capacity in post-clearance audit, while establishing a trusted trader programme that gives defined benefits to programme members.”
Comments
Proguing 3 years, 2 months ago
This is ridiculous. The government can’t even collect the simplest form of taxation, such as property tax (you can’t hide your house), how are they going to do it with the most complex form of taxation? The only form of taxation that works in the Bahamas is VAT, because it is collected by the private sector, at the cost of the private sector. You can bet that the cost of implementing income tax in this country will be higher than any tax collected. Do we really need more civil servants doing nothing except driving around in government owned cars on weekends? Why do we keep digging deeper the whole that we are in?
tribanon 3 years, 2 months ago
Fully agree.
bcitizen 3 years, 2 months ago
I said this for a long time as you stated property tax is the easiest tax in the world to collect and they cant even do that. It is so comical you want to laugh and cry at the same time.
C2B 3 years, 2 months ago
Income taxes are withheld by employers and remitted like VAT; there is no difference. Governments do that to avoid the issue you identified.
proudloudandfnm 3 years, 2 months ago
NO NEW TAXES WITHOUT SEVERE GOVERNMENT REFORM. Time to reduce government staffing. Time to go to a merit based system, you don't perform you lose your government job. No new taxes. We need to rise up and demand better. They want more of our money to waste, might as well just burn it.
ThisIsOurs 3 years, 2 months ago
hey maybe we can have a national protest.. "NO TAXATION WITHOUT REPRESENTATION"... on 2nd thought I think someone took that already...
bahamianson 3 years, 2 months ago
So true, beforw VAT, if you walked into NIB , you had scores of employees walking around doing nothing but gossiping. Fire employees from each govetnment agency that are not needed also. Too many political appointees sucking up money for just showing up , not to work, just showing up.
The_Oracle 3 years, 2 months ago
Tax the people out of existence or tax the companies out of existence, oh my, what a difficult position. The people suffer either way. Transparency in Government operations and relaxation of the ever present "control" freak mentality of Government. The rule of law provides for processes to achieve permits/licenses/approvals, eliminate the Ministerial "discretion" that is always exercised as a denial unless shingles are involved.
rodentos 3 years, 2 months ago
going to get like everywhere.... tax tax tax
avidreader 3 years, 2 months ago
Wealthy people are experts at avoiding paying income tax. Our buffoons will try to call it a payroll tax so that the beneficial owners of the company can claim that they don't have to pay since they are not drawing a salary and are therefore not (technically) on the payroll. Might as well invite some Greeks and Italians into the country so that they can set up tax evasion schools. They are proven experts in the field and surely will find motivated students. The old way of doing things has come to an end. Welcome to the new reality for the country.
rodentos 3 years, 2 months ago
The problem ist the government has no track of record of spending taxes in any fovor of the tax payer.... so even with taxes the infrastructure will be rotting, school will be D grade, power grid failing all the time and so on. And their "key investment product" residence for investment will also fail because the rich gringos come here exactly fr not paying income taxes.
donald 3 years, 2 months ago
Bahamas already ranks as one of the least friendly places to do business. It's already almost impossible to attract foreign investment to The Bahamas. Implement an income tax on top of aan already bureaucratic nightmare and you can kiss the little business the Bahamas have goodbye!
John 3 years, 2 months ago
Government seems to let these (just as corrupt or even more corrupt) countries and agencies force anything down their throats with the threat of blacklisting. So when are these countries going to reveal to the Bahamas government and the people of the Bahamas, those Bahamians and/or residents who have stashed Billion$ in Swiss and other bank accounts? Government should then investigate the source of these funds to know if they were derived from the sales of assets or resources of the Bahamian people and if they should be seized and/or taxed
truetruebahamian 3 years, 2 months ago
Already recurrent costs to maintain buildings and pay basic bills with no income has stripped any savings from property owners in the downtown ghost town. Property taxes and all other licenses are far higher than any income (which has ceased) from tenants who have left, quit their leases -or stay closed because of the absolute shut down in custom. Inability to pay is not appreciated by the government - as it is they will have to learn that wnen there is nothing to give then there is nothing to give. Appreciation of this and accommodation is absolutely necessary if there is to be anything to offer tourists when the boats arrive again. Trying to wring income tax or corporate tax from any situation in such dire straits is inconceivable and outright nuts!
sheeprunner12 3 years, 2 months ago
Only politicians, civil servants, and SOE workers are collecting regular aka "full" salaries in this Covid19 era ............ will they be the ones who will pay income tax?????
longgone 3 years, 2 months ago
For goodness sake, if the Government could only collect at least half of the outstanding Real Property taxes it would be in great shape. There is no way on earth the they could collect income tax!!
sheeprunner12 3 years, 2 months ago
I agree ........ but why don't they collect taxes NOW????????
FrustratedBusinessman 3 years, 2 months ago
Ridiculous, absolutely ridiculous. We, the Bahamian taxpayers, have to pork out over and over for these corrupt governments, yet we hardly see where any of our money goes (except into making politicians fatter). Say what you want about the government of that time, but the country was much better off when politicians didn't collect salaries. Their business fates were tied with the economic outlook of the country at the very least, unlike these jackasses who will get fatter whether the Bahamas sinks or swims.
There is no way these government idiots would ever last a day in the private sector, they cannot even produce a single spreadsheet detailing where our tax money goes. No other ideas than taxing their way out of debt (hint : it won't work when there will soon be no one to tax).
BONEFISH 3 years, 2 months ago
I am not surprised at all by the IMF recommendation. There has been some discussions over the years about the Bahamas system of taxation. It also tIed in to the Bahamas attempting to join the WTO.
There was an attempt to go after tax evaders with the revenue enhancement unit. It collected ninety million dollars in back taxes after hurricane Matthew. It was disbanded by Marlon johnson and Peter Turnquest. It was one of their idiotic decisions. In fact all Marlon Johnson is doing now is restarting the programs he and Peter Turnquest cancelled ,that were started by Simon Wilson. Somebody outside the Bahamas with a real PHD told me that.
rodentos 3 years, 2 months ago
probably the cost for the government was twice the amount lol
sheeprunner12 3 years, 2 months ago
Where is Simon Wilson????? .......... Did Minnis dem pay him out (after firing him) as yet??????
Simon Wilson was a straight shooter, but he was under Perry dem ...... he got the bad end of 2 sticks ........ He was a real economist with a real position (FS), while Marlon Johnson is a BS artist who is a puppet.
tom1912 3 years, 2 months ago
IMF umm isn't that the organisation that is run by a ex French Finace minister who I believe has been convicted of negligence in a French Court while in charge of the French Finance Ministry and I believe, I stand to be corrected, but aren't the salaries and gold plated pensions income tax free! She like, the now exposed incompetent bullying EU commisoners are debunked politicians sent out to pasture, but unfortunately into powerful positions! Eh aren't the EU bullying the Bahamas? ;-)
Bahama7 3 years, 2 months ago
Voly / Porcupine - where are you hiding?
Listen to the facts gentleman.
Fred Smith just wants his pay day... this is the reality.
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