By NEIL HARTNELL
and NATARIO MCKENZIE
Tribune Business Reporters
Chamber of Commerce executives have warned that business licence reforms cannot take place “in a vacuum” after it was excluded from consultation over recently-announced changes.
The chamber, which represents the widest cross-section of private sector interests in The Bahamas, in a statement last night called for the Government to adopt “an holistic approach to tax policy, legislative reform and fiscal management” that embraced collaboration with all relevant stakeholders.
While backing the Minnis administration’s efforts to keep The Bahamas off the European Union’s (EU) upcoming “blacklist” of countries deemed uncooperative in the fight against tax evasion, the chamber added that this nation’s competitiveness is more dependent on its productivity and “relative value” that it offers.
“The best way to mitigate possible economic losses emanating from EU and OECD-influenced reforms is to improve efficiency and lower the cost of doing business in The Bahamas for Bahamians,” the Chamber asserted, arguing that this nation always retained the right to act in the best economic interests of its citizens.
The chamber’s statement came after Tribune Business sources suggested it was not involved in consultations over the Christmas period on the new financial services regulatory regime, which was unveiled last week by the Government to bring The Bahamas’ into compliance with EU demands to end preferential tax benefits for non-resident entities and foreign investors.
The reforms included a change in the way Business Licence fees will be calculated from 2020 onwards, altering the definition from gross annual turnover to those revenues that VAT is levied on. Given that all businesses paying Business Licence fees will be impacted, it appears surprising that the Chamber was not involved.
Tribune Business understands that Michael Maura, the Chamber’s chairman, met Prime Minister Dr Hubert Minnis on the matter prior to yesterday’s statement, as other Chamber executives reiterated calls for a “holistic” approach.
Christel Sands-Feaste, head of the Chamber’s ease of doing business committee, and a member of the Government’s ease of doing business committee, told Tribune Business: “I think that, from the Chamber’s perspective, the view is that any reform to the business license tax regime certainly needs to be considered holistically as opposed to one specific tax in a vacuum.
“Business licence is just one of the taxes that businesses in The Bahamas would be subject to. Any discussion regarding reform has to involve a holistic consideration of the entire tax exposure to a business in The Bahamas. “
Mrs Sands-Feaste added: “While the Chamber welcomes The Bahamas’s proactive response to the international obligations of The Bahamas, I think at the same time those have to be balanced with the impact on the domestic economy and the impact on Bahamian businesses. Any streamlining or reform to the process of obtaining a business license is welcomed.
“Still, at the same time any reform to The Bahamas tax regime must be considered holistically. It must be based on empirical data and after consultation with all the stakeholders; not just industry-specific stakeholders but island-by-island and industry-by-industry. The impact of the change to the Business License tax will be different on New Providence versus another island. It will impact one industry different from another.”
The Chamber, in its statement yesterday, called for “intentional, timely, strategic and inclusive” collaboration between the Government and all affected parties to achieve what is best for The Bahamas.
It added: “[Chamber] members, for the most part, acknowledge the pressure placed on The Bahamas by the European Union (EU), Organisation for Economic Cooperation and Development (OECD) and, most recently, the Dutch Government.
“Furthermore, the [Chamber] appreciates the significance of our current circumstance which includes not only potential ‘blacklists’ but also the prospect of the introduction of National Health Insurance, an increase in National Insurance contributions, accession to the World Trade Organisation, high energy costs, a global economic slowdown, increases in Value Added Tax (VAT) and legal challenges to the elimination of existing tax exemptions among others.”
Turning to the Business Licence reforms specifically, the Chamber urged the Government to “codify the registration requirements that will apply to companies engaged in commercial activities and those passive entities utilised as holding companies; streamline the renewal and registration process; and identify any sectors that will see a change in their treatment.
It also called for details to be provided on the financial services industry’s fee structure, while backing the Government’s efforts to keep the impact “revenue neutral” following last summer’s VAT rate hike.
Meanwhile Gowon Bowe, the Bahamas Institute of Chartered Accountants (BICA) president, told Tribune Business that the new financial services regulatory regime and associated Business Licence reforms will not cut across or undermine the prospects for wider tax reform.
Deloitte & Touche’s UK arm is already undertaking a study on potential Business Licence reform, but he said: “These ones, it’s fair to say, are the steps necessary immediately based on the existing tax structure and trying to make sure there is no preferential treatment.
“The tax structure 2100 is still to be decided. As we work through this process this is not a substitute for the wider tax analysis and tax that is appropriate for The Bahamas. This is dealing with matters at hand, and forms part of the analysis we do for the wider tax structure of The Bahamas going into the 21st century and beyond.”
Arinthia Komolafe, the Democratic National Alliance’s leader, yesterday questioned whether The Bahamas had missed such an opportunity, saying: “Long overdue reforms that are required to usher The Bahamas into the 21st century cannot be ignored or delayed until external pressures force the Government into these initiatives.
“The recent press release on financial sector reform is a prime example of this phenomenon. We have once again kicked the proverbial can of comprehensive tax reform down the road, thereby ignoring the need to move from the current regressive tax system to a more progressive and equitable one. The current system places undue and unfair burden on the working and middle class as well as those who can least afford it.”
She added that the Business Licence reforms did not address the business community’s main concerns about the tax being levied on turnover, as opposed to profits. “It is imperative that the actual details underlying the proposed changes to our tax regime are provided to stakeholders and the public for scrutiny and feedback,” Mrs Komolafe said.
“We urge the Government not to shove this down the throats of domestic entities in the same manner as the significant increase in the VAT rate. There must be transparency and disclosure in relation to the criteria for determining the proposed new taxes and/or fees.”
She also questioned why the Government was taken by surprise by The Netherlands’ “blacklisting” of The Bahamas, given that the Dutch government announced a month-long period of consultation over the list that lasted from September 25, 2018, to October 22, 2018.