0

Businessmen slam IMF’s ‘disastrous’ income tax plan

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian businessmen yesterday slammed the IMF’s income tax proposal, demanding: “Don’t even talk to us about more taxation until the Government’s cleaned its house.”

Robert Myers, a principal with the Organisation for Responsible Governance (ORG), blasted the idea of new and/or increased taxes as “short-sighted and irresponsible” given the Bahamas’ present economic and fiscal condition.

Warning that an income tax would only further weigh down already-overburdened Bahamian businesses, Mr Myers described the IMF’s proposal as akin to “putting the cart before the horse” because the Government has yet to curb its spending and deliver on promised fiscal reforms.

The IMF, in its statement on the Article IV consultation with the Bahamas, called on the Government to implement a “low rate income tax” to both improve taxation system fairness and replace revenue lost as Customs tariffs are slashed.

The Bahamas has to cut, or eliminate, many tariff rates as part of its international trade commitments, but Mr Myers warned it was dangerous to implement an income tax “in a vacuum” where just one factor is considered.

“I think it’s irresponsible and short-sighted,” he told Tribune Business. “The IMF’s suggestion to introduce income tax into the Bahamian tax structure is putting the cart before the horse, and does not show an understanding of the local socioeconomic structure.

“Adding any further taxes ahead of the Government’s [planned fiscal] reform is unacceptable, and the suggestion of it is downright irresponsible.

“In effect, what the IMF suggests by this is that if the Government taxes its citizens more the IMF will lend it more money. The Government does not need more money; it needs to learn how to live within its means, like the rest of us.”

Mr Myers agreed that the Bahamas’ potential accession to full World Trade Organisation (WTO) membership would require further reviews of its taxation system, but changes should not be made on this basis alone.

“We can’t do this thing in a vacuum,” he told Tribune Business. “We’ve got to do things with an eye to improving the socioeconomic conditions and economy of the nation. We’ve got to look at the tax structure, but not just to increase government revenues.”

Suggesting that the IMF proposal reflected an outsider’s opinion, and the Fund’s “limited view of the Bahamas”, Mr Myers said there were numerous tax reform options besides income tax.

To replace revenues lost to tariff cuts and eliminations, alternatives included increasing the VAT rate or imposing real property tax on Bahamian-owned properties in Freeport and the Family Islands.

Mr Myers added: “To focus on tax as a means to fix the nation’s socioeconomic and fiscal crisis is, as Winston Churchill put it: ‘I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle’.

“First and foremost, clean up your house,” the ORG principal said of the Government. “Don’t tell me to tax the citizens more, and slow the economy more, when there is all kind of waste, inefficiency and corruption in government.

“Don’t talk to me about any more taxes until you’ve cleaned up your own fiscal house. I don’t want to know. I don’t even want to hear it. We took VAT on the chin, and the former government said they would do all that, but they did nothing.”

Michael Maura, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman, last night echoed Mr Myers by warning that it would be “disastrous” to introduce an income tax now - even if it was intended as a revenue replacement mechanism.

“The IMF speaks to the need to improve the ‘ease of doing business’, for the Government to complete its fiscal overhaul, to reduce the cost of energy. We also need to improve productivity. All these and others must precede any new tax,” Mr Maura argued.

“To introduce a new tax at a time when the cost of living is unbearable, at a time when a small business can hardly keep its doors open, would be destructive. Furthermore there remains much work to do in the area of tax compliance with the taxes on the books today.

“I will say this: After meeting with the new Financial Secretary [Marlon Johnson] today I am confident that he will do all he can to address this matter. There is also great opportunity for the Government to automate its processes and engagement with the taxpayer so as to become more efficient at tax collection, and simultaneously lower the administrative cost.”

Rick Lowe, an executive with the Nassau Institute think-tank, also slammed the IMF’s income tax proposal for “going in the opposite direction we should be taking”.

“How ridiculous,” he told Tribune Business. “Just tax us into oblivion, tax us all out of existence. That will solve the problem. They’d better figure out ways let people get into business a little bit easier to rejuvenate the economy and take the pressure of existing businesses with the current tax framework they have in place.

“You’re killing the economy through regulation and taxation, and it is already slowing with no growth. We cannot keep finding new taxation without finding economic growth. You will take more and more out of the economy. There’s less and less to spend, and people are less inclined to invest.

“As long as you keep taxing, that’s not going to change the situation very much. I don’t support the idea of taxation simply for the sake of taxation. To me, it’s the opposite of the approach we should be taking.”

Comments

John 4 years, 11 months ago

What Bahamians need to know is why they have to be burdened with more taxes when their quality of life is deteriorating.

1

ashley14 4 years, 11 months ago

I guess that means your sure your government will not improve the Islands and your quality of life. If that's the case nothing will change until these people are out of office.

0

sheeprunner12 4 years, 11 months ago

VAT was touted as the saviour of the government ..... and what happened???? ............. $3 billion extra burden on us in PLP 5 years

1

TheMadHatter 4 years, 11 months ago

John...the answer to your question is....because they wont stop having tons of children. Those children, along with those of immigrants, cost money for schooling, medical clinics, subsidized bus transport & the same with mailboat shipping, enforced price controls on food items and fuel - ALL because people refuse to stop having children they cant afford. The rest of us have to pay more and more in taxes to cover their shortfalls.

Govt now talking about expanding pmh delivery ward....to make more unemployed people even easier and more convenient for the ignorants.

2

DDK 4 years, 11 months ago

"To replace revenues lost to tariff cuts and eliminations, alternatives included increasing the VAT rate or imposing real property tax on Bahamian-owned properties in Freeport and the Family Islands."

Only the financially secure ever advocate the raising of taxes to increase the burden on the less fortunate. VAT WAS IMPOSED TO REPLACE REVENUES LOST TO TARRIF CUTS. VAT was imposed on MANY items not previously taxed, even on tax itself, e.g. fuel surcharge, which was unconscionable.

The Family Islands have already lost many second home owners, and therefore sources of both tax revenue and income for family island businesses, which converts to lost employment for The People. The second home owners are exiting because of high costs and poor utility services. Even seasonal boaters are finding other ports. Many Bahamians who have the means have already exited the Bahamas. If the Bahamian home owners are further taxed many will not be able to make it. The cost of living on the Family Islands is high enough as it is to one and all. THINK, THINK!

1

sheeprunner12 4 years, 11 months ago

The Minnis Cabinet needs to present Bahamians with a White Paper on Taxation ..... what we have now ...... how it is affecting the 3 classes ........ how it can be improved/optimized ........ how it can be reformed ....... This can be done before the next Budget cycle ...... This is a PRIORITY

1

sheeprunner12 4 years, 11 months ago

Rick Lowe ........ Robert Myers ......... Michael Maura ........... Why would they want income tax???? ....... Can they stomach the government taking 30-40% of their wealth to take care of the poor????? ........ The white countries of Europe and N.America tax their rich ...... hmmmmmmmm

0

DDK 4 years, 11 months ago

Though not the great U.S. of A.

0

banker 4 years, 11 months ago

Rick Lowe isn't that rich -- just saying. Great guy. Honest as the day is long. Thinker. Happy guy. But definitely not rich.

0

sheeprunner12 4 years, 11 months ago

It is time for the government to streamline government services by putting ONE central complex, seaport, airport, high school, clinic etc in each Family Island and stop duplicating services all over the place ....... Ragged Island and any island with less than 1000 inhabitants must be developed by PPPs to lower direct costs to government ...... The central government must cut the National Budget by 25% by next 2 years to escape the OECD/IMF hammer.

1

sheeprunner12 4 years, 11 months ago

If Grand Bahama has one seaport, one airport, one hospital, one govt.complex etc. ....... why do Eleuthera, Andros, Abaco,Cat Island, Long Island, etc need more than one of each????? ...... We already have the template of how to centralize the services on the islands ...... stop playing politics and bowing to old practices ......... Nassau needs to move to the same model and stop renting government offices all over a 21x7 rock...... #cutthepork

2

C2B 4 years, 11 months ago

Can someone explain why a country that has no export industry needs to join the WTO?

1

sheeprunner12 4 years, 11 months ago

Pose this question to the economics/finance gurus of the country ...... I have never heard it discussed before

0

banker 4 years, 11 months ago

To prevent the levy of unfair duties that is regularly imposed on non-WTO countries. It means cheaper goods for an economy that must import everything.

0

BONEFISH 4 years, 11 months ago

The WTO is the successor body to the GATT.(General Agreement on Tariffs and Trade).It is a rule making body that governs international trade. The Bahamas not being a member hurt the plastics factory in Freeport who when exporting items to Mexico, found their products were taxed at a higher rate. It affected their sales.You don't know what future industries will be dveloped in the Bahamas. The Bahamas should have joined years ago. But like in so many areas, we have lagged behind our regional counterparts.

0

ohdrap4 4 years, 11 months ago

i think the crawfish industry is severely affected as well.

0

TheMadHatter 4 years, 11 months ago

Bonefish...i must disagree. That plastics company should have been making and recycling plastics for our own bahamian water and juice companies. We need to GET OUT of all kinds of stupid "trade" agreements so that we can tax the Hell out of all kinds of things that are imported when we make them here. At the same time, those industrues must be monitored carefully to ensure they are paying their VAT.

1

banker 4 years, 11 months ago

Wrong kind of plastics. They were making foundation polymers for polystyrene manufacturing. Water bottles need high density polyethylene polymers-- different machines -- different processes.

0

Sign in to comment