• Ex-PM says ‘answers seem obvious’ on tax reform
By NEIL HARTNELL
Tribune Business Editor
A former prime minister yesterday warned that COVID-19 has “only strengthened the resolve” of major nations to eliminate the competitive threat posed by The Bahamas and other Caribbean countries.
Perry Christie, making a rare public appearance in giving the keynote address at the Institute of Chartered Accountants of the Caribbean (ICAC) conference, warned that it was “not an option” for this country and others to lose financial services industries that have been critical to developing their societies’ middle classes.
The ex-PLP leader, who stepped down from the party’s leadership following the FNM’s 2017 landslide election victory, also suggested that there were “obvious answers” pointing towards the urgent need for tax reform in The Bahamas and wider Caribbean given concerns about fairness and whether existing systems are generating sufficient funds to finance essential public services.
Acknowledging that COVID-19’s devastating blow to government finances worldwide will only make G-7 and European Union (EU) members keener to drive international financial centres (IFCs) out of business, due to the perceived loss of tax revenues, Mr Christie argued that their initiatives over the past two decades have been more about eradicating competition.
He added that these powerful nation blocs and their forums are “using the perception of the Caribbean region being used for piracy to suggest that the Caribbean is more susceptible to being used for money laundering and terrorism financing.
“The real objective is to eliminate any competitive advantage IFCs have because of tax systems that are not identical to those of OECD countries,” Mr Christie said, in a nod to the G-7’s agreement on a 15 percent minimum global corporate tax rate.
“The global pandemic has only strengthened the resolve of those countries to eliminate IFCs. Protectionism has become the order of the day, whether they are likely to admit it or not.” He also agreed that it was especially troubling that the Biden administration is now ensuring the US provides “back up” for the initiatives already launched by the EU and Organisation for Economic Co-Operation and Development (OECD).
The former prime minister suggested it had been a mistake for The Bahamas and other IFCs to “got it alone” and seek “to negotiate with the big boys” alone, rather than as a bloc, as this had resulted in both themselves and their middle classes being whittled away by “1,000 cuts”.
Calling on the Caribbean to “sing from the same hymn sheet”, and use the high net worth residents living in many of its member states to lobby on behalf of regional IFCs, Mr Christie said: “Losing the facilitator of the middle class [financial services] is not an option.”
Some observers may ask why Mr Christie seemingly never implemented any aspects of this strategy when he had the chance while in office as Prime Minister. However, he yesterday agreed that The Bahamas and others in the region need to explore reform of their existing regressive tax systems for their own benefit and that of lower income members of society.
“We must all ask if our tax systems provide sufficient revenue to fund the public purse,” he told the ICAC conference. “Based on debt-to-GDP ratios and numbers, the answer appears to be obvious. Based on equity and ability to pay; based on the widening gap between the ‘have’s’ and ‘have not’s’, the answer appears to be obvious.”
Arguing that the Caribbean’s economic future remains linked to tourism as the primary jobs and growth driver, Mr Christie called for a data-driven approach that would enable The Bahamas and others to know “to the zip codes” where the majority of their tourists are coming from so that they can better dedicate scarce marketing resources to where they will have the most impact.
“At our own peril we pay scant attention to ensuring every resident understands and can assist in ensuring the best experience we can for our visitors,” he said, adding that a data-driven approach could also help to “personalise” the guest experience for tourists according to their personal preferences and tastes.
“Annual hotel occupancies are in the range of 60-70 percent,” the ex-prime minister said. “If we manage to use the new analytical tools the way we desire, and move occupancies to 90 percent, we will increase the contribution to GDP by 50 percent without building one roof.”
Mr Christie also revealed that he had been motivated to launch The Bahamas’ National Development Plan (NDP) after discovering that Jamaica had leapt ahead of this nation in the World Bank’s ‘ease of doing business’ rankings.
“It was a shocking realisation to me, and I needed no further convincing of a National Development Plan,” he added, suggesting this could serve as “a template for the region” over its response to the COVID-19 pandemic.