By NEIL HARTNELL
Tribune Business Editor
The Bahamas “must be open” to discussing “more progressive taxation” reform options that could include a personal and/or corporate income tax, a local economist is arguing.
Rupert Pinder, who lectures at the University of The Bahamas (UoB), reiterated to Tribune Business in a recent interview that he remained firmly behind more fair and equitable options for reforming the country’s consumption-dependent tax system.
“I have been, and I’ve said that in a number of forums, that I’m certainly of the view that one should be open to discussions on taxation; a more progressive form of taxation, let’s put it that way,” he said.
“I think that is what a lot of the international agencies are alluding to when they talk about a relatively low tax burden: A more progressive form of taxation.” The International Monetary Fund (IMF) has been especially vocal in urging The Bahamas to adopt some form of income tax, repeating this consistently in its Article IV report annually.
“The other thing about it is that it’s no secret the international agencies have been saying for a while that as a proportion of GDP are taxes are relatively low,” Mr Pinder added.
“There is the suggestion that the tax burden as a proportion of GDP is low compared to the regional average, which suggests there may be scope for additional tax revenues. Of course, nobody wants to discuss that in the context of an economic downturn.”
The IMF’s latest Article IV report said the government has already started discussing potential income tax reforms, although it has admitted any changes will take “years” for The Bahamas to implement.
While Kwasi Thompson, minister of state for finance, swiftly ruled out income tax’s imposition in The Bahamas, the IMF again sought to nudge The Bahamas towards more progressive and “equitable” taxation options such as an individual and/or corporate income tax.
And it disclosed that the government, in response to its findings, had confirmed that internal talks are already underway to explore the feasibility of an income tax system in The Bahamas. These revelations came as the Minnis administration voiced optimism it could achieve $300m in extra revenues and spending cuts if required - an increase upon the $200m it is targeting.
“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.”
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.