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Bill's $250,000 Threshold 'Inequitable' For Bahamians

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Commercial Enterprises Bill must not operate "to the detriment of Bahamian businesses", the Chamber of Commerce's chief executive warned yesterday, while rejecting claims it undermines 'Bahamianisation'.

Edison Sumner told Tribune Business that the Government needed to ensure Bahamian-owned companies could compete on a 'level playing field' with foreign rivals, and be able to access the same incentives - especially the 'fast track' work permit approvals - provided for in the Bill. While backing the legislation's progressive and innovative intent, Mr Sumner said the Minnis administration was looking for "volume and quality" in attracting foreign-owned businesses to domicile in the Bahamas through reducing the minimum investment threshold to $250,000.

The Government is hoping it may attract an eventual Google or Microsoft-type technology firm to base themselves in the Bahamas as a start-up, but the Chamber chief executive warned that the $250,000 threshold may be "inequitable" when set alongside the challenges Bahamian companies have to overcome.

The Bill's passage through the House of Assembly has provoked near-hysteria in some political quarters, with former PLP chairman and Cabinet minister, Bradley Roberts, branding it "the death of Bahamianisation" amid fears that a wave of foreign workers and companies will push out Bahamian professionals and entrepreneurs. The Minnis administration, though, has argued that the Bill largely targets high margin, technology and financial services-based businesses that are largely not present in the Bahamas, and Mr Sumner said he did "not see that as undermining Bahamianisation".

"I think it's primarily a case where we're focusing on international companies to come in, but it should not be to the detriment of Bahamian businesses," he told Tribune Business.

"The Bahamian business still represents the bedrock of the economy, and we have to do everything to ensure they thrive and, where they're having challenges, they overcome them so they make meaningful contributions to the growth of the economy."

Arguing that the Commercial Enterprises Bill's incentives should also be available to Bahamian-owned businesses in the same industries, Mr Sumner suggested the sectors under the legislation should "be looked at again to ensure they are fine-tuned and cover the areas we think will help us to diversify and bring in new jobs, industries and innovation and ideas".

The Government has said the Bill's provisions apply to Bahamian-owned firms and joint ventures, although the language does not specifically say so. Mr Sumner revealed that the Chamber and private sector had not been consulted or seen the legislation before its tabling in the House of Assembly, although they had been made aware a Bill was coming.

He added that the timelines and legal obligations imposed on the Department of Immigration for the granting of work permits should be extended "across the board" to other government departments and services, such as those that dealt with Business License fees and real property taxes.

"I'm hopeful we can see a similar situation and timelines applied on other government agencies and services as well," Mr Sumner told Tribune Business. "The Bill is being introduced to assist with the ease of doing business on one hand, but it's also to attract more foreign companies into the Bahamas to establish commercial enterprises.

"We think $250,000 [as a minimum investment threshold] is reasonable for Bahamian businesses, but may be undervalued for foreign ones. The Government is looking for volume and growth. They're looking for companies that might find business in other jurisdictions too restrictive, and if they lower the capital requirements hopefully they will come in.

"Putting the Bahamian business on the same level, having to come up with the same $250,000 to get the same benefits, we think is inequitable. That's because the Bahamian business is already here trying to do business in the economy. We think the amount for foreign investors and Bahamian investors should be different, as we're trying to incentivise Bahamian businesses as well."

Mr Sumner suggested that the Government "reconsider" and impose a lower investment threshold for Bahamian businesses, which were already at a competitive disadvantage against their foreign counterparts when it came to capital access and cost, and "struggling to make ends meet" in a sluggish domestic economy.

Comments

banker 2 weeks ago

Most Bahamians who oppose this bill, do not have the worldview enlightenment to appreciate how it will help the Bahamas. This includes the personalities listed in the article - Sumner, Roberts, et al.

1) The businesses that are targeted in the bill will be selling goods, services and intellectual property outside the Bahamas.

2) They will not compete domestically with Bahamian businesses. They are not a threat to Bahamian businesses.

3) Bahamian businesses cannot operate or compete in the same niches that these businesses will occupy.

4) These businesses will outstrip the profitability of all Bahamian businesses except the webshops and perhaps even those -- all the while making money in an honourable way, instead of being societal leeches like the webshops.

5) These businesses will employ Bahamians at higher salaries than Bahamian businesses.

6) These businesses will bootstrap Bahamian businesses into new markets either by making them pivot into unfamiliar but more profitable areas to service the new businesses or they will open windows of opportunities that are currently unavailable because knowledge-based businesses are not here now.

7) These businesses will create new forms of higher paying jobs.

8) The current Bahamian consumer business area is over-exploited now, and no reasonable businessman wants to invest capital in a tired, declining market of 350,000 consumers (the current Bahamian scene) but rather wants to sell to the world.

It reminds me of a conversation that was reported to me by a colleague who once visited the Bahamas. He was traveling with his wife, and as the taxi was passing by a homeless, shirtless man with a rusty cutlass, chopping coconuts near a dumpster on Shirley Street, the wife said "What a miserable place this is" and the taxi driver turned to her and said "Yes, but it is our miserable place, and we are proud of it." I een proud of a miserable place. I want the best possible for this country, and this bill is a step in the right direction.

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ThisIsOurs 2 weeks ago

Your goals are great goals, if theyd brought a bill that clearly targeted those goals independent Bahamians would be behind it.

I don't think your goals will be accomplished by this bill. I think the bill as structured does exactly what OldFort articulated,he said without prompting, some rent a few guys (expats, under 5 total) and a few computers, "what more do you need?". I don't know how that scenario bolsters the middle class or creates jobs.

Listen, I have a proposal that wil actually create jobs and it looks different to a wholesale giveaway. I'm pretty certain if I described it to you you would support it. It will give Bahamians the ability to compete with the world and market services to the world in a direct way. Not this trickle down fallacy in the bill

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JohnDoe 2 weeks ago

Ok, if I accept all of your points above, please help me with why, based on the contents of this Bill, would they re-domicile their businesses here?

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OldFort2012 1 week, 6 days ago

Let me help you. With a concrete example.

5 German guys have an online software distribution business. They pay about 60% of net profits in tax in Germany, between corporation and income tax.

If those 5 guys relocate here and set up a company, they can leave all operating staff in Germany and communicate with them online, issuing instructions, etc.. The local company will contract the German company to perform services and pay it just enough to cover overheads, leaving almost nothing to pay in German corporation tax. Since they now live here, they are no longer tax resident in Germany and pay no income tax. Their net take home pay has just doubled. Do you get it now?

Ahhhh....ThisisOurs will say: but what do WE get? Let's do the maths. Each buys a $3m house. That is $1.5m in property sales tax. Another 150k a year in property tax. Each spends $200k/year in living expenses. That is $75k in VAT. Not enough? They will employ maids, cleaners and a secretary. Still not enough? Personally, I wish we could attract a million of them.

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banker 1 week, 6 days ago

You are totally right OldFort. People in the Bahamas are what Econs call narrow framers. They ascribe losses to only what they can see and cannot ascribe gain to unknowns that they cannot imagine.

For those of you who doubt what OldFort says, google the term "Double Irish Sandwich". Google uses it. All of the major tech companies use it. It is high time we were on the receiving end of a double Irish sandwich.

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JohnDoe 1 week, 6 days ago

You forgot to mention that it is now dis-allowed in Ireland.

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JohnDoe 1 week, 6 days ago

Trust me I get it my friend, but is doubling down on our tax haven status or promoting tax avoidance schemes really a viable business model for our financial services sector? That approach is why the industry is now being choked by these onshore jurisdictions. Further, based on your example the net local jobs are maids and cleaners. Are you serious? Is that our strategy! Stop joking, how does that produce sustainable job creation or economic development. A fella with $250K ain't buying no $3 million house.

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OldFort2012 1 week, 6 days ago

You do not understand. The $250k is only the capital you have to put in the company. It has nothing to do with any other personal spending.

Second, there is no law that says that these people, once here, will not find suitable Bahamians to add to their staff instead of adding to staff in Germany. I very much doubt they could find anyone suitable at the moment, but that is the fault of the Bahamian education system, not theirs. Let Bahamians educate themselves and they will have opportunity. Now they have nothing.

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JohnDoe 1 week, 6 days ago

You say I do not understand and maybe this is too complex for me but what I do understand is that there is no legal requirement for other spending in this particular Bill and also there is no requirement to hire a single Bahamian for that matter. The question should not be whether or not there is some law that prevents these foreigners from hiring Bahamians the question is and should rightly be whether this proposed Bill (Law) requires and mandates them to hire Bahamians. We are not evaluating some law we are evaluating this Bill.

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OldFort2012 1 week, 6 days ago

Is breathing mandated by law? No. Yet we all do it. When someone relocates here, what is he going to do? Stop eating? Do we have to mandate by law that he has to eat 3 times a day? Therefore the personal spend is something that necessarily comes with being here.

As to your slightly more sensible point, yes, there is no mandate to hire Bahamians. You try hiring a Bahamian in the field of nanotechnology. Business will do whatever makes sense. If they find a local, they will hire him! Why? Because it is CHEAPER!! Bahamian workers are as cheap as chips compared to bringing in an expat. The problem is: there aren't any!

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JohnDoe 1 week, 6 days ago

This Bill was touted as a jobs and investment Bill, except that by your own words it would provide employment only for "maids, cleaners and secretaries", it includes no provisions or commitments to actually hire or train Bahamians, it includes no provisions to incentivize domestic spending beyond the $250K capital, it throws into further disarray our ambiguous and administratively unworkable immigration policy whereby we are saying to some foreigners no matter your contribution to our country leave by December 31 but to other foreigners please come and we will welcome you and your friends for a mere $250K.

The intent may be in the right place but this Bill is simply inadequate and the approach must be more comprehensive to deal with more aspects of ease of doing business and our relative competitiveness.

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OldFort2012 1 week, 6 days ago

It will provide employment for maids and secretaries NOW because that is currently all we have to offer. But it will provide OPPORTUNITY in the future to any Bahamian who educates himself and fulfills the knowledge requirements of those companies. Whose fault is that we did not suitably educate the population? OURS! Now we are paying the price. Let us at least lay the foundation for opportunities tomorrow! As to the $250k...I keep repeating this and it is like talking to a wall. What does a software company need? An office, some desks and some computers. How much money do you need to fund that? Not even $50k. Gone are the days when you needed massive capital investment for business. Look at silicon valley. All businesses each worth 10 times the whole of the Bahamas with negligible capital requirements.

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Porcupine 2 weeks ago

All the bills, laws, economic incentives and tax breaks will not do anything substantive to change the situation here. Until Bahamians learn to cooperate, and truly wish to see their fellow countrymen do better and succeed, we will remain a backwater. Things will continue as they are where a "chosen" few get all the breaks and rush to take as many pieces of the pie that they can grab. The spirit of selfishness in this country, from the way we drive, to the way we do business, says it all. The vast majority of Bahamians loudly claim to be Christian. The bible, even in its English translation, appears to be wholly incomprehensible to all but a handful. Our business leaders and politicians, perhaps being a bit brighter than the average joe, see the writing on the wall. They are rightfully scared for their country and for their own tenuous jobs in a country that is on the brink of economic disaster. Until we can evolve past the childish and selfish ways of thinking here we will be doomed to rapid extinction. No need for foreign enemies. When people tell me how Bahamians thrive and succeed in the outside world, it makes me realize how well we do at keeping our own people down in their own country. It is not a shortage of talent, it is a shortage of the maturity and helpful spirit that it wholly lacking here. Pass all the bills you want. Until we change our short-sighted selfish mentality, Bahamians will be forever disadvantaged in The Bahamas.

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banker 1 week, 6 days ago

The reason that we are like that, is that the forward progress of the middle class has been arrested. Nine out of ten Bahamians believe that what their situation will worsen rather than get better. As a population, we have lost hope. The way to fix the behaviour that you describe, is to make the entire populace have a decent standard of living that lends decency, dignity, prosperity and hope to the people -- except the PLP diehards -- they belong in cesspits.

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