By KHRISNA RUSSELL
Deputy Chief Reporter
THE Minnis administration remains concerned that the goal post continues to shift when it comes to the Bahamas maintaining global tax standards, Finance Minister K Peter Turnquest said yesterday, adding this issue has been argued in international forums.
He made the comments during a press conference to announce the government is developing a new framework aimed at strengthening industry regulations and protecting revenue in the Public Treasury.
By doing this, the deputy prime minister said it was a demonstration of the Bahamas’ commitment to global standards to ensure the country maintains its competitive edge as a global leader.
The move also follows broad consultation with industry stakeholders from the private and public sector.
Under the new framework, all financial institutions will now be permitted to offer services to both domestic and international clients, provided that the financial institution meets the prescribed regulatory requirements in respect of the services offered.
Mr Turnquest said: “It will remove any difference in the fiscal treatment of financial institutions that cater primarily to the domestic markets and those financial institutions that cater to international clientele.
“This is essential to removing the preferential treatment of specific businesses as implemented under the recently passed Removal of Preferential Exemptions Act 2018.
“The new framework, which is intended to take effect as of January 1, 2019, proposes that financial institutions, including banks, insurance, trust companies, investment advisers, mutual fund administrators, broker/dealers and other regulated financial services entities, will be exempted from paying a business licence fee when renewing or applying for a licence, starting January 2020.”
He also said: “It is intended that these changes will . . . remove the appearance of preference for one sector over the other and so now you have a total level playing field between the offshore sector and the domestic sector in respect to the average Bahamian business person.
“They will find no changes in respect to the way that they do business and the cost of their doing business. In fact, some may find that there is actually a reduction in the business licence fee but at the end of the day it really is intended to be revenue neutral with very little impact on the local business community.”
Instead of business licence fees, financial institutions will be subject to a three-tier system.
The system will mandate that all financial institutions pay a flat registration fee, which will be set on a sliding scale between $2,250 and $250,000 per annum, although smaller institutions like credit unions will pay much lower fees, as is currently the case.
The applicable fee will be determined primarily by the operational complexity of the institution, which aligns with the level of resources expended to regulate financial institutions based on their respective size and complexity.
Financial institutions that are deemed systemically important, as determined by their degree of integration into the domestic financial system, also will be subject to an additional fee in respect of Bahamian dollar liabilities and contingencies.
This reflects the need to mitigate the threat that any domestically systemically important institution can pose to the entire Bahamian financial system.
Also, any bank wishing to access the domestic payments system, and/or wishing to operate as an authorised agent for Bahamian dollar transactions, will be charged fees reflecting the substantial supervisory and management costs of these arrangements for the Central Bank of the Bahamas and other public-sector agencies.
Mr Turnquest said companies incorporated in the Bahamas under either the Companies Act or the International Business Companies Act – with the exception of those financial institutions already mentioned – will be required to register under the business licence Act and pay a value-based business licence fee.
As a result of recent amendments made to the Business Licence Act to streamline the application process, companies will be able to apply for a provisional licence that can be processed in a matter of days.
Moving forward, a company’s business licence fee will be calculated by reference to the value of any positively rated taxable supplies made in that year, charged at a rate of between zero per cent and 2.5 per cent of that value, as may be prescribed by the Ministry of Finance, Mr Turnquest said.