By YOURI KEMP
Tribune Business Reporter
The private sector is urging the Government to eliminate wasteful spending, and collect all revenues currently on the books, before it hits businesses with new and/or increased taxes.
Corporate executives, though, were split on the introduction of an income and/or corporate income tax, with some vehemently opposed to the concept while others viewed it as "fairer" than The Bahamas' present regressive taxation structure and felt it should replace VAT.
Their views came after the International Monetary Fund's (IMF) recent Article IV report on The Bahamas revealed that the Government has been holding internal discussions on income-related tax reforms as an option. The Minnis administration, though, said it has made "no commitments" on introducing any kind of income tax.
Dwayne Higgs, WHIM Automotive's general manager, told Tribune Business: “Any additional taxes are going to stop any sort of rebound or growth. I really believe that there should be more attention paid to how taxes are spent. Instead of getting more taxes to waste, let’s spend what we're getting now properly. Reduce the waste or eliminate the waste.”
Mr Higgs acknowledged that seismic changes to a nation's tax structure, which in The Bahamas' case would involve an income and/or corporate income tax, can take years to implement. However, he noted: “The Government has been talking about this for a few years.”
His comments came after the IMF, again seeking to nudge The Bahamas towards more progressive and “equitable” taxation options, also admitted any changes will take “years” for The Bahamas to implement.
“The authorities reiterated their commitment to fiscal discipline once the crisis subsides,” the IMF report said. “Most of the COVID-19 measures have time limits, and thus the fiscal balance should swiftly improve once the recovery sets in.
“They have also started discussing property and income tax policy reforms, and are seeking technical assistance from the international community, but acknowledge that implementation will take years.”
Mr Higgs, though, said he was opposed to an income tax: “I’m not interested in an income tax, not with everything else that’s in place, and for the fact that there is a lot of waste. I’m not for it. You drive on the roads; the roads are terrible, so where is all of the money going?”
The Government last night sought to downplay the IMF report's contents, while moving to reassure Bahamians and the private sector there is no imminent prospect of income tax being introduced.
"As has been stated before, the Government is not contemplating the adoption of a personal income tax regime,” said Senator Kwasi Thompson, minister of state for finance, in a statement.
The Ministry of Finance itself added: "Calls from the IMF to broaden the tax base with income taxation are not new, as they have featured in all staff reports in at least the past ten years.
"While the Government has taken these recommendations into consideration, it has made no commitments regarding the prospect of income tax. Its internal discussion regarding tax reform is part of a previously announced exercise to review tax policies."
Income, and/or corporate income, taxes have always been a controversial topic in The Bahamas, which has no history of them. VAT was preferred as the central element of tax reform under the last Christie administration since its self-enforcement mechanism at each stage of the production chain, and reliance on businesses to collect it, was seen as one where compliance was easier to attain while administrative costs and complexities would be less.
However, The Bahamas’ present consumption-based tax structure is regressive in that it imposes a disproportionate burden on lower income Bahamians who end up paying a greater percentage of their income in taxes than their wealthier counterparts.
And The Bahamas is under considerable external pressure, especially from the likes of the European Union (EU), to implement some form of corporate tax amid persistent threats that jurisdictions with zero or low income tax rates will feature prominently on 27-nation bloc's so-called 'tax blacklists'.
Data produced in the IMF’s Article IV report, which appears to have been taken from a Deloitte & Touche study conducted for the Bahamas Financial Services Board (BFSB) in 2018, suggested that a corporate income tax could generate revenues in excess of four percent of gross domestic product (GDP) or $400m if implemented.
Many remain sceptical of an income tax. Brent Collins, chief executive of Freeport-based Power Equipment, said: “Hell no. You mean the money that I make they are going to tax some more? I don’t like that at all. So that means they are going to be taking out for National Insurance Board contributions and more money on top of that? That does not make any sense to me. No way do I want that.”
Yet Barry Kemp, owner/operator of A1 Lock & Key Security Specialists, said that he is in favour of an income and/or corporate tax - provided they replace VAT as the Government's main revenue source.
He said: “Income tax should be better than a VAT tax, and we need to move from the VAT and put the income tax there instead, and corporate tax as well. Because at the end of the day, most countries use income tax as well as corporate tax. It’s better and it should be a little fairer.”
Mr Kemp, though, said keeping VAT and putting an income tax on top would be a “no-no”.