A letter appearing in your column of Friday the 17th of December, written by a Kim Sawyer, displays a common misunderstanding of the nature of the Bahamian economy.
This misunderstanding then forms the premise of the writer’s assertion that we are somehow uniquely unsuited to a progressive income tax, which every country in our wider region, from the USA and Canada to Barbados, Trinidad and Antigua manages to make work.
Local economist James Smith made similar assertions in a story in your business section recently. While Mr. Smith’s ill-conceived views can perhaps be understood (though not excused) in the context of who employs him, it is unfortunate when such views take root among ordinary Bahamians.
Firstly, an income tax has nothing to do with the wealthy expatriate community, which Ms. Sawyer wrongly suggests forms part of our Gross Domestic Product (GDP) and somehow boosts it.
Secondly, there is no rule preventing government, upon introducing it, setting personal income tax so as to affect only those on high salaries, of say, $100,000 and up – a category that includes very many Bahamians, but not the majority.
GDP is the aggregate of economic activity generated within the local economy - hence “domestic”. A billionaire living in an out island will have made his billions elsewhere and his income (and that of the companies that made him rich) is factored into the GDP of that country, not The Bahamas.
And since expatriate residents are generally prohibited from working in the Bahamas, their personal income neither impacts our GDP nor would be taxable here. Rather, they pay taxes back home on it.
So (despite what ignorant politicians sometimes claim), The Bahamas’ high GDP does not reflect the presence here of foreign billionaires.
Rather, it reflects exclusively the wealth that is generated locally, mostly by our success in mass tourism. Money from the frontline, bottom end worker in tourism then trickles up through the domestic economy, enriching those at the top (merchants, professionals, etc.). That is how the Bahamian economy works.
To suggest that this wealth at the top should then not be taxed, but that the wage-earner’s consumption (which created it) should be taxed instead, is simply perverse – both economically and socially. But that is exactly the tax system that we have at present.
The so-called ‘Joe Blow average Bahamian’ to whom Ms. Sawyer refers, is, by virtue of his captive consumption, the ultimate generator of the wealth that is reaped by insurance companies, private healthcare providers, automobile dealerships, food retail giants, hardware outlets, telecoms providers and all the other local companies whose annual profits you can easily track courtesy of BISX.
Yet, unlike their American or Caribbean counterparts, these wealthy companies pay zero tax on their profits, while the same Joe Blow who enriches them is hammered with consumption tax.
In the 9 months ending in September 2021, Colina Holdings, the parent company of CFAL, of which James Smith is the Chairman, posted net profits of more than 13 million dollars. Yet it paid not one penny in tax on it. Moreover, as a proportion of gross revenues, it would have paid far less than a chicken shack in the inner city in such regressive charges as business license and annual registry fees.
That is the ugly and backward reality that Mr. Smith feels it necessary to defend our right to retain.
Likewise, those of us in highly paid professions, who benefit from an essentially captive market and consequently often earn far more than our counterparts in so-called “developed” countries, are also spared taxes on personal income, which is passed off onto our consumers. Is that fair?
So the answer to the letter’s eponymous question, ‘who can afford an income tax?’ is simple: I certainly can - as can Mr. Smith and his employer. But the poor consumer cannot afford to keep subsidizing us.
ANDREW ALLEN
Nassau,
December 19, 2021
Comments
sheeprunner12 2 years, 4 months ago
That's one sensible "rich" Bahamian ..... The others need to join him and convince the rich politicians to see it too
Hobo2500 2 years, 4 months ago
We are still waiting on sensible politicians, unfortunately I think we still have a long wait.
joeblow 2 years, 4 months ago
... what's the point of anymore taxes if governments continue to tax and waste while deepening the national debt? When citizens have some measure of confidence that politicians are fiscal adults, we can have a conversation about alternative forms of taxation!
LastManStanding 2 years, 4 months ago
Buddy, you are free to give the government a portion of your salary at any time. Nobody is stopping you.
As far as I am concerned, anyone who has not paid income tax before has no room to speak on the topic. I am a Bahamian that has lived abroad, and understands how the system works. Since you brought up Canada, I will leave the link below :
https://www.taxtips.ca/personaltax/re...">https://www.taxtips.ca/personaltax/re...
Income tax is 100% based on residency in literally every jurisdiction, except the US (that has an exemption up to 100k if a taxpayer is not living in the country), despite what this author claims. Unless we have taxation treaties, it is very possible that expats could end up being double taxed both here and in their home countries (depends on the particular circumstances). Furthermore, it should be noted that income does not only comprise what you earn from your job. Collect NIB or other government assistance? You will pay a tax on that. Collect alimony or child support? You will pay a portion of that in tax. Own your own business or are self employed? Get ready to be audited down to the very last penny. "income" literally means every dollar that you get from any source. People who have never had to pay simply don't know what they are signing up for.
Can you image our childlike, petty politicians staffing the Bahamian IRS with their lackeys and running audits on anyone that they don't like? You have to be insane to think that this is a good idea. Al Capone, big bad gangster as he was, didn't die in prison for murder, smuggling, or anything of that nature. No, he died in prison for "tax evasion". Let the reader understand the implications of that story.
I haven't even discussed the fact that the informal economy is still huge here, and would not be subject to taxation at all.
Since all of the pro-income tax crew care so much about the consumers, surely they will support scrapping VAT in it's entirety if they could theoretically get their wish of an income tax, right?
Bobsyeruncle 2 years, 4 months ago
Income tax is 100% based on residency in literally every jurisdiction, except the US (that has an exemption up to 100k if an taxpayer is not living in the country), despite what this author claims.
I think the author knows that. Also, residency for tax purposes differs between countries depending on the number of consecutive days you are resident outside of your 'home' country (for tax purposes). Additionally, some countries tax you on your worldwide income (e.g. US) while others tax you on your income solely from within your county of residence (e.g. UK)) as long as you meet the criteria for not being resident in that country for tax purposes.
Furthermore, it should be noted that income does not only comprise what you earn from your job. Collect NIB or other government assistance? You will pay a tax on that. Collect alimony or child support? You will pay a portion of that in tax.
I think most of the population that derive their income from the sources you mentioned, would be well below the income threshold suggested by the author, for paying taxes. Having said that, you are correct. And don't forget to add tips & gratuities to the list.
Since all of the pro-income tax crew care so much about the consumers, surely they will support scrapping VAT in it's entirety if they could theoretically get their wish of an income tax, right?
Most developed countries have both an income tax and some sort of VAT, GST, or Sales Tax etc. so it wouldn't be unusual to have both, although it would be extremely cruel and unpopular to have both initially.
LastManStanding 2 years, 4 months ago
The thing is that we all know there isn't going to be a threshold. Any government that implement income tax will use the "rich people need to pay their fair share" argument solely to convince simple minded Bahamians that it is a good idea. The frog will boil, and it will eventually come to every single Bahamian (if not right away), while the government continues to piss it down the drain with nothing to show for it. This is literally how it played out in America, these exact same arguments were thrown about in 1913 just like they are being thrown about today. History has a funny way of repeating.
Bobsyeruncle 2 years, 4 months ago
An excellent letter and right on point !!.
Although, I would disagree slightly with his comment "So (despite what ignorant politicians sometimes claim), The Bahamas’ high GDP does not reflect the presence here of foreign billionaires". As Mr Allen points out, the income of wealthy expatriates who live here doesn't contribute to the Bahamas GDP, but their spending here does. Therefore they do contribute to the GDP. Maybe I'm reading it out of context, in which case I'm sure someone will let me know.
LastManStanding 2 years, 4 months ago
Also, the Bahamas cannot be, and was not designed to be, an America or Canada. We don't have the natural resources or industry for that. Neither were we designed to be a shithole third world nation like Jamaica or Barbados. Go to Kingston and let me know how safe you feel when not behind a walled compound (sadly, this applies to a good portion of Nassau as well). The Founding Fathers of the Bahamian economy designed us to be what the Cayman Islands is today. We were designed to be a two pillar economy with no-low taxation, with not nearly the amount of civil servants and government expenditures that we are seeing today. We are in debt up to our nostrils because we have deviated from that plan, and the old PLP strategy of using government employment to suppress unemployment is coming back to bite everyone in the behind.
There is no bloody taxing our way out of this mess. You can add corporate tax, income tax, inheritance tax, TV tax like the UK in all, and we will still be in blasted debt because of the financially illiterate and irresponsible governments that have plagued our nation since 1967. Feeding the monster is not going to get us out of this mess. Perry them were shocked at the amount of money they first got from VAT + tariffs, and what do we have to show for it today? Not a blessed thing. All of that was blown on grift or government salaries. At least Papa redid the roads, despite Bahamians complaining 24/7 about it. Taming the beast is our only option.
Proguing 2 years, 4 months ago
Well apparently this writer wants us to take for model shitholes like Haiti Jamaica and Trinidad that have income taxes...
Proguing 2 years, 4 months ago
I stopped reading at “which every country in our wider region, from the USA and Canada to Barbados, Trinidad and Antigua manages to make work.” Comparing the Bahamas to the USA or Canada is ridiculous. Also contrary to what is being stated not every country in our wider region has income taxes (think Cayman Islands which is doing much better than Barbados and Trinidad...)
sheeprunner12 2 years, 4 months ago
Agreed that the source of Bahamian taxation is not the problem ...... It is the fiscal mgmt of Govt. It has been a disaster since Pindling took over. HAI tried, but he failed as well. There's just too many hands in the cookie jar
longgone 2 years, 4 months ago
Income Tax?? Give me a break. The Government can't collect Real Property Taxes when they have the property right in front of them. Any accountant with a sharp pencil will beat the Government on income taxes!
Dawes 2 years, 4 months ago
The letter write is wrong when he says CFAL paid not one penny in tax. What he means is not one penny in corporation tax. If you bring corporation tax then you need to get rid of the other taxes companies pay, and work out which one will give you more money in the long run. In addition the letter writer keeps saying that the ex-pat communities contribute nothing (this and other letters), whilst conveniently forgetting that many of them do work here, and all of them spend here which produces GDP for the country. Now if the Government brought in the income tax and reduce other taxes to make the hit a little less bad, then this would benefit the ex-pats who don't work here. As Government would not be taxing their income (though they could try but overnight they would be gone).
bahamianson 2 years, 4 months ago
Income tax when contracts are awarded for someone to sweep the streets thrwe times.a month for a 17,000 salary. Stop talking garbage and stop the overspending tiefin contract people. Oh, how about the rich paying their fair shar , again. Utter nonsense.
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