By NEIL HARTNELL
Tribune Business Editor
Bahamian businesses need “a friend in government” if they are to successfully compete post-WTO accession, with one entrepreneur arguing: “What does it matter if we have income tax?”
Peter Bates, The Sign Man’s principal, told Tribune Business he could not understand why the private sector was “so jittery” over potential import tariff eliminations/reductions because it would enable businesses such as his to “compete at a new level”.
With corporate income tax among the potential revenue replacements for Customs duties, Mr Bates said the Bahamas needed to “bite the bullet” and become a full World Trade Organisation (WTO) member to prevent potential economic isolation that would leave local exporters exposed. Among those asking questions at last week’s Chamber of Commerce-organised WTO breakfast, Mr Bates emphasised that the Government needed to truly partner with the Bahamian private sector if local firms are to compete and prosper in a liberalised, rules-based trading environment.
He argued that the preferential treatment extended to foreign companies needed to stop, and said the Government needs to address the lack of “trust” the private sector has in it for the Bahamas’ overall good.
Praising the presentation given by Raymond Winder, the Bahamas’ chief WTO negotiator, Mr Bates told Tribune Business he did not fear tax reform - and even the possibility of a corporate income tax - unlike many in the Government and private sector.
“What does it matter if we have an income tax?” he told Tribune Business. “Every country in the world has income tax. We have to bite the bullet.
“Let’s get it done, let Bahamian businesses have a friend in the Government, so there’s help and support, and we have a way to build our businesses. It’s very difficult to do that.
“I’m very supportive of moving to the WTO, primarily because we have no choice... If so, let’s figure out how to survive and live with it. Everyone wants protectionist tariffs, but there are many types of taxation. We have to get rid of duties.”
The WTO, European Union (EU) ‘blacklisting’, and the Organisation for Economic Co-Operation and Development’s (OECD) anti-tax avoidance initiatives are all uniting at the same time to drive the Bahamas towards substantial tax reform that will impact virtually every business and resident.
In the WTO’s case, it views the Bahamas’ existing import tariff regime as a ‘barrier to trade’, meaning that this nation will have to eliminate or reduce numerous duty lines - and the revenue associated with them - as part of the membership commitments it will make.
The extent, range and phased-in timing of the eliminations/cuts will be agreed with the WTO Working Group that the Bahamas must negotiate its accession terms with. Yet with the Government needing to replace the revenue foregone, and the current EU and OECD pressures, corporate income tax - as recommended by the International Monetary Fund (IMF) - is starting to loom large as a replacement option.
“Everybody in this country is so jittery about removing Customs duties and imposing income tax,” Mr Bates told Tribune Business, “but I don’t know why because we can compete at a new level without any duties. It’s up to me to source out the best price and negotiate the same trade discount” as overseas rivals.
He explained that duty reduction/elimination would make businesses such as his more competitive on freight and import costs, but acknowledged that it was critical for the Government to improve the business climate if Bahamian businesses were to be competitive post-WTO.
“We don’t need protectionist tariffs; we need protection from our government,” Mr Bates argued, “as we’re not competing on a level playing field. Our government is not a friend to the Bahamian businessman.
“It’s a friend to the foreigner; the foreigner can come in the front door, while the Bahamian has to scrape at the side door.... The Government doesn’t buy from local industry. The Government comes to me when the signs they import don’t come in right, and their shop doesn’t do it right.
“I get pretty big contracts when their signs aren’t right. I’ve met every government ministry and agency, and can’t get off the ground. I’ve submitted a lot of applications for 12 years. All the billboards, I’ve been denied.”
Keva Bain, the Government’s director of trade, told last week’s Chamber meeting that there had been a lack of participation by the private sector in WTO and other trade-related meetings over the years.
This provoked immediate push back from many in attendance, including Mr Bates, who told Tribune Business: “Nobody shows up because we don’t trust you. I said to her that we find you [the Government] don’t listen to us anyway, and half the time you’ve decided what to do already by the time of the Town Meeting.”
The Sign Man’s principal, though, pointed to the greater protection WTO membership will provide to Bahamian goods and services exporters, given that this nation would then have a forum to resolve trade-related disputes with other nations.
“We really don’t have a choice, so we might as well get it done,” Mr Bates said of WTO accession. “We’d be truly isolated otherwise. It’s a WTO, it’s a common market, so if we don’t join we’d be truly isolated. We don’t have any courts to got to for disputes. We could be cut out of any export business through others’ protectionist tariffs.”
He added that he had instructed his staff to start sourcing from the European Union (EU), rather than China, given that the Bahamas has already signed on to the Economic Partnership Agreement (EPA) with the former, thereby providing some security when it came to market access.
“There’s a niche for The Sign Man, and I will survive and flourish,” Mr Bates said. “It would be nice for the Government to sit down and tell us things we’d not figured out for ourselves.”