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Economist: ‘Be Open’ To Discuss Income Tax

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

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.

Comments

DWW 2 days, 19 hours ago

why does tax always go up and not down? we already have almost half the available workforce of the country employed by Govt while the other half works to pay for the salaries of the other half. But hey, lets add more tax burden. Does anyone see the irony of the government collecting tax on the salary that it pays to its own employees to pay them that salary. talk about a circular economy...

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DWW 2 days, 19 hours ago

Therefore if we start income tax, the bahamas gov't will further tax itself making money out of literally nothing but air.

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rodentos 2 days, 14 hours ago

what's the problem LOL... I give you $100 for repairing my car, you pay with the $100 your barber, he pays with $100 his restaurant bill, and the restaurant owner comes back to me and pays me back the $100 buying 20lb of chicken..... problem solved

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Proguing 2 days, 18 hours ago

There should be no discussion of new taxes until all due taxes have been collected.

Then we can study how VAT which was sold to us "to pay down the debt" had the exact opposite effect, with exploding budget deficits and record new debt, so that we are now near bankruptcy.

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trueBahamian 2 days, 7 hours ago

Amen! Totally agree. It makes zero sense to talk about new taxes when every government has done a poor job collecting the existing ones. Real property tax, not collected. Issues with Customs with collection.

Even outside of tax collections, we have uncollected revenue at BPL and Water.and Sewerage. A couple of years ago Immigtstion said they were owed money. It's just ridiculous. The system is broken and instead of fixing it, the government wants to get another thing to break.

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bcitizen 2 days, 17 hours ago

While they may have degrees economists often spew out what is their opinion. When their supposed ideas/policy's/forecasts fail they face no consequences so they continue to spew out opinions as science. Conversely if a engineer builds a bridge that collapses their career is over finished and done. They may even face civil and criminal consequences. Sick and tired of people with certain degrees get away with screwing up things with no consequences. They may be a little more cautious otherwise.

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bahamianson 2 days, 17 hours ago

taxes, taxes, taxes. Is there anything else to talk about. people and governments always want more. more more more. when will it be enough? we are on a hamster wheel to no where. no money is in the pot. police officers , custom officers, teachers, nurses, etc all want more. the government needs more money to pay salary increases ,perks, and pensions. what do they do? they increase taxes to pay these increases.the wheel continues. it will never stop.

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proudloudandfnm 2 days, 17 hours ago

We don't need new taxes, we need to stop giving out government jobs for votes and reduce current staffing by 40%. Boom problem solved. Won't need any new taxes no mo. Might even be able to eliminate duty....

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Proguing 2 days, 17 hours ago

BTW income tax would not be be "progressive taxation”, it would be a "tax on the middle class" as the poor would be exempt and the rich would find ways to avoid it.

Can the middle class of this country survive with a 30% deduction of their income?

If Rupert Pinder can live comfortably with 30% reduction of his income, he should show the example and send a cheque to the Treasury on an annual basis along with other persons who support this tax.

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rodentos 2 days, 15 hours ago

these are proposals from an university professor, out of an ivory tower. Leftist stuff. He even cant define what is fair.

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rodentos 2 days, 15 hours ago

there should be no tax on your own labour. Thats theft. Tax the companies that make millions. Who "employ" people to make profit (aka exploit their workforce) he should pay taxes.

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jujutreeclub 2 days, 15 hours ago

Mr. Pinder as an economist should know that the international agencies are pushing for income tax because a lot of International Business Companies (IBC) are here. In 1989, the government of the day allowed for the enhancement of the International Business Company [ IBC ] Act, 1989, guaranteeing them exemption from paying all income taxes, local taxes or corporate taxes. Presently, and Mr. Pinder should know, is that the government can't introduce corporate or income taxes for fear of being sued by the IBC's.. Bahamian IBC's are exempted from small business license fees and do not require a license under the Business License Act. Shareholders are exempted from all income taxes, capital gains taxes and corporate taxes. This being said, it still comes down to the small man and the middle class to pay these taxes because the rich folks are all involved with the IBC's. All of the high paying jobs are held by these people who will be exempted from paying income taxes.

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rodentos 2 days, 15 hours ago

btw I Have a better proposal: send a cat.5 hurricane to European Union, or wait, send them two or three of them.

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sheeprunner12 2 days, 14 hours ago

CONSIDER THIS:

  1. Can the Bahamian Government realistically collect the present taxes that are on the books?

  2. What percentage of each major type of taxes was collected (on average) over the past TEN years?

  3. If there was no VAT or customs duties, HOW would the Bahamian Government finance itself?

  4. If VAT & customs duties negatively impact the poor Bahamian, what can the Government do to SHIFT the present tax burden onto the top 20% of the population?

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ohdrap4 2 days, 14 hours ago

Given that politicians are many lawyers, dictotors or businessmen, are not going to tax themselves.

They start talking this crap again because they want to bring back Perry Christie's PAYROLL TAX. Then they keep out of payroll.

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proudloudandfnm 1 day, 19 hours ago

If they try to implement income tax then we need a general strike, walk off your job and stay off until its recalled...

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sheeprunner12 1 day, 19 hours ago

Bahamian working people have lost the ability to have a General Strike ..... No union leader has the ONIONS or CREDIBILITY (like Randol Fawkes) to lead the common man against the bully politicians ........... The union bosses are in bed with the bully politicians ........ the small man is "screwed" in the 242

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tribanon 22 hours, 15 minutes ago

Someone please tell Rupert Pinder that what we desperately need is Government Reform, not Tax Reform. Without the former, the latter is meaningless.

We were told VAT would be used to replace customs duties and help pay down, not slow down the growth of, our national debt. Well that certainly did not happen. What we got instead was an even higher VAT rate and an even more bloated government along with greater than ever waste, fraud and corruption at all levels of the public sector, from our elected officials right on down.

Our country has been taken down by systemic corruption. It's accepted, rewarded and culturally ingrained throughout most of the public sector and among most of our elected officials. More taxes is definitely not the answer. We urgently need Government Reform. But instead Minnis seems quite content to standby and wait for the IMF to instigate and impose on us the most severe and draconian austerity measures imaginable. That's what I call failed leadership!

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