The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

CORPORATE taxation is among the options being assessed for WTO revenue replacement, the Deputy Prime Minister has confirmed, adding: "It's a brave new world."

K P Turnquest told Tribune Business it was a case of "the sooner the better" when it came to determining how the Bahamas will replace up to $200 million worth of import duty revenue that will be foregone upon joining the rules-based trade regime.

He confirmed that the Government and its consultants, Deloitte & Touche's UK arm, were analysing corporate taxation as one potential option to see "if it makes sense". Mr Turnquest, though, said the Government was also looking to spending cuts as a means to bridge the gap caused by the elimination/reduction of numerous import tariffs, which are viewed by the World Trade Organisation (WTO) and other rules-based trading regimes as 'barriers to trade'.

Describing this as "the other side of the equation", the Deputy Prime Minister said the upcoming 2018-2019 Budget - which is now being finalised - would provide further clues to the Government's thinking on fiscal reform geared towards the WTO accession process.

Acknowledging that tax reform automatically generates "a lot of emotion", Mr Turnquest said the Government would assemble sufficient data to justify its preferred option then seek to take the Bahamian private sector and people with it."

"As we come closer to that [WTO accession] date, we'll obviously have to look at various levers available to us," he told Tribune Business, "whether it's increasing VAT or finding alternative sources of revenue to compensate.

"One of the things you'd know is we're doing studies on corporate taxation to see if it makes sense." Both the International Monetary Fund (IMF) and a recent-government commissioned study on WTO vulnerabilities have suggested the Bahamas implement a low-rate corporate tax as a means of revenue replacement, while many in the financial services sector see it as key to repositioning the industry and shedding the 'tax haven' label.

The same government-commissioned study suggested the Public Treasury will have to replace $200 million, or 10.5 per cent of its revenues, in "a realistic scenario" post-WTO accession as a result of tariff eliminations/cuts.

While some of this 'hole' will be offset by increased VAT and Excise Taxes, due to an increase in import volumes stemming from the tariff cuts, the Government will still be faced with finding a nine-figure sum. While the Bahamas may be allowed to phase-in tariff cuts, the time permitted could be as little as three to five months.

"We wouldn't be accessing or joining the WTO until 2019, so we still have some time to make the adjustments we need to make in order to compete," Mr Turnquest added.

"But the sooner we came around to making a decision the better, so we're doing the work to make the transition whenever the time comes, and will provide adequate consultation on what the plans and outcomes will be."

Emphasising that the Government is not just focusing on a revenue solution, the Deputy Prime Minister said: "We're looking at cost recovery strategies for state-owned enterprises (SOEs) and fee-based services we provide as a government.

"That's the other side of the equation. We have to rationalise some of these costs. We continue to work on that side, and you'll see some indication of what we're thinking in the Budget; how we want to lay out the future."

Mr Turnquest said the Bahamas planned to "take advantage" of carve-outs and other exemptions it will seek in the WTO negotiations, and added: "Whenever you start to talk about any kind of tax change, there's a lot of emotion and thought that comes with that.

"It's a challenging thing to accomplish given the emotion it generates, but that's why we must make sure we get the data to support the position we take, and bring the Bahamian public along with it.

"It's a brave new world; there's nothing to be afraid of. The data will drive us to a sensible decision. The rate at which we accomplish change; we have to keep up with change in global practices and global realities."