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Gov’t eyes $140m ‘accrual’ over corporate income tax

Prime Minister Philip “Brave” Davis delivers the mid-year budget communication during a sitting of the House of Assembly yesterday. 
Photo: Dante Carrer

Prime Minister Philip “Brave” Davis delivers the mid-year budget communication during a sitting of the House of Assembly yesterday. Photo: Dante Carrer

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government is exploring how Bahamas-based companies that will pay the new 15 percent corporate income tax can “accrue” a projected $140m in revenues before the enabling laws are enacted.

Philip Davis KC, in unveiling yesterday’s mid-year Budget statement, laid out the road map for how The Bahamas plans to comply with the G20/OECD global “minimum” tax drive as failing to do so would cost this nation a valuable source of new tax revenues from economic activity conducted within its borders.

Other countries, which serve as host jurisdiction for the parents of Bahamas-based corporate entities, would instead be able to levy the 15 percent rate on profits remitted from this nation if it does not implement what Mr Davis described as the Qualified Domestic Minimum Top-Up Tax (QDMTT).

This will give effect to The Bahamas’ commitment, given under the previous Minnis administration, that it will fully comply with an initiative targeted at imposing a minimum tax rate on multinational entities and their subsidiaries who are part of a corporate group generating 750m euros or more in annual turnover.

With the Government aiming to bring legislation that will give effect to the 15 percent corporate income tax to Parliament after the summer recess, Mr Davis signalled his administration is seeking to ensure it loses none of the forecast net $140m in new revenues that will be generated while avoiding the imposition of “retroactive” taxation.

Confirming that domestic Bahamian companies which fall below the 750m euro threshold, or are not part of multinational groups that qualify, will not be impacted, the Prime Minister said: “This is a tax that affects only multinational enterprises earning more than 750m euros annually.

“We are talking about very, very big companies. The QDMTT is a way to make sure these very big companies pay at least a minimum amount in taxes on their profits in every country where they do business. The implementation of [the OECD’s] Pillar Two in The Bahamas would unlock a new revenue source, with initial estimates expected to exceed more than $140m annually.”

Mr Davis explained that failing to implement the minimum corporate tax would effectively mean The Bahamas handing over the right to collect taxes on economic activity within its jurisdiction to other countries.

“May I add here, Madam Speaker, that if we do not implement this Pillar Two tax on that multinational entity that is doing business in The Bahamas; if we don’t collect it here, they’ll have to pay that same tax in their home jurisdiction, and many of the multinationals doing business here prefer to pay us,” the Prime Minister said.

“We ought not to allow that opportunity to pas because they have to pay it anyhow. Why should they not pay it in the jurisdiction in which they are operating? We are thankful for our collaboration with those in this space...”

It is likely this ability of home country jurisdictions to tax if The Bahamas does not do so that has motivated the Government to explore how local companies that will pay it can “accrue”, or set aside in escrow, the funds that will be generated until Parliament passes the enabling law into statute.

“We are reviewing options that would entail the Pillar Two multinationals accruing those taxes for 2024 in The Bahamas,” the Prime Minister said, acknowledging the difficulties bound up with the Government’s desire to preserve its revenues as taxes are “really not retroactive”.

“We are trying to create a platform, or create an initiative, where they can accrue for 2024 what will come to us even though the law, which will probably be.....” he added, urging the Opposition to “understand it before you speak to it”. Chester Cooper, deputy prime minister, quipped: “Stay on the wall.”

Simon Wilson, the Ministry of Finance’s financial secretary, told Tribune Business that while the Government does not have “a true handle” on how many Bahamas-based companies will be caught in the 15 percent corporate income tax it is likely “a pretty small number”.

The candidates would likely include the major hotels and resorts such as Atlantis (Brookfield), Baha Mar (Chow Tai Fook Enterprises), Sandals and the likes of the RIU and Warwick, both of which are part of international chains. The Canadian-owned banks, Royal Bank of Canada, CIBC and Scotiabank, will also probably qualify along with a number of operators in the international financial services sector.

The likes of the Bahamas Telecommunications Company (BTC), whose parents are Cable & Wireless Communications (CWC) and Liberty Latin America, plus Commonwealth Brewery, which is 75 percent majority-owned by Heineken, as well as the oil majors Rubis and Esso (Sol Petroleum) may also be caught.

Mr Wilson, meanwhile, reassured that companies caught by the 15 percent corporate income tax will not be subject to ‘double taxation’ as they will be exempt from also paying Business Licence fees on their gross turnover. “They obviously won’t pay the Business Licence fee,” he added. “If you fall into the QDMTT you will not pay Business Licence.”

Confirming that the $140m revenues cited by Mr Davis represented net new money for the Government and Public Treasury, Mr Wilson said that designing the accrual mechanism referred to by Mr Davis remains “a work in progress”. However, he signalled that making taxation take effect retroactively was not an insurmountable problem.

“We have been advised that the retroactive implementation of taxes is not that uncommon in the developed word, and that these large companies who will be impacted would also be aware of it, and there are certain benefits to that approach,” Mr Wilson told Tribune Business.

Setting out the Government’s corporate income tax timetable, Mr Davis yesterday said: “We have two inter-related goals – to make sure The Bahamas captures the tax revenues of these very large multinationals doing business here, and to use the fiscal space created by the new revenue to, among other things, provide substantial relief for Bahamian taxpayers.”

No indication was given of what that relief might look like, although Mr Davis said: “The goal is to have draft legislation available by the end of May 2024, at which time we will meet to present the Budget proposals for the upcoming 2024-2025 fiscal year. We hope to speak to that in the Budget presentation.

“We intend to issue the draft for public consultation over the summer months - that is the legislation we hope to have ready by May - and then move to finalise the document for submission to Parliament after the summer recess.”

Mr Davis then moved to reassure Bahamian companies that do not meet the G-20/OECD qualifying threshold that they will not face corporate income tax - at least for now. “We believe that, currently, addressing only Pillar 2 multinational enterprises is the proper approach. We won’t deal with domestic Bahamian companies at this time,” he added.

“Any consideration of a wider business income tax would only happen if it is a more equitable approach for Bahamian businesses, and would only be done after proper consultation, with considerable lead time in order for Bahamian businesses to properly prepare.”

Comments

Sickened 3 months, 1 week ago

How many corporations fall into this category and will be paying a 15% tax?

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Dawes 3 months, 1 week ago

So we are saying that those companies that fall into this category are currently making almost $1 billion a year profit in The Bahamas? Thats a lot of profit.

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AnObserver 3 months, 1 week ago

There are plenty of them, they are here for tax reasons. They may only have a staff of two people, if that, but they are technically here. If we proceed with this tax, they'll simply leave and find a country with more attractive tax rates. This sounds like a great plan on paper, but will result in a net loss for the country.

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Sickened 3 months, 1 week ago

Agreed. When corporations make that much money they have no loyalty to ANY country. They simply pack up and go to Ireland (for example). They politely ask the staff if they wish to relocate but are not bothered either way.

In short... any windfall tax revenue from this may be very short lived.

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ExposedU2C 3 months, 1 week ago

Bingo!

Shell Oil's highly profitable multi-billion dollar international oil trading operation run from within the Bahamas by only a handful of people has already activated its contingency plan to relocate to another more "tax friendly" jurisdiction that will not have them fall victim to the OECD/EU 15% tax dragnet.

Simple Simon and Dumbo Davis are completely ignorant of the various tools and loop holes the OECD/EU globalist bureaucrats have deliberately left available to the very successful multi-nationals controlled by their multi-billionaire friends

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bahamianson 3 months, 1 week ago

It seems like all government does is go looking for more ways to tax individuals. They say it will bring 140 million to the table , but in a few years , we will wonder where the 140 mmill went. The government squanders and loses money to frivolous means annually. This means nothing to Bahamians feeling a tax relief because we won't. Gas will still be high, VAT will still be present, other fees willl still go out. The Big Mac special, the wendys #1 , and the crack conch snack will not go down. The cost of bread and other items in the grocery store will not go down. We will not know or feel the impact of an extra 140 mil. The pm and his ministers will have more money to spend on travel and parties, then we see the pictures of them enjoying their lives on our money.

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ExposedU2C 3 months, 1 week ago

Most Bahamians are now awakening to the fact that they must take their country back from the corrupt political ruling class and their cronies, whether they be of the elitist FNM or PLP persuasion, and that this is no longer something that can be achieved at the polls.

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Sickened 3 months, 1 week ago

But what to do with the 50,000 government workers who really don't need to be hired as they contribute NOTHING to their respective departments and are too illiterate to find a job in the private sector? Do we sneak them into the US or do we forever support them and their masses of uneducated and under-socialized children? That is a huge dilemma that any person or party running the country will face. 50 years of ignorance is boldly staring us in the face while holding a gun. Sadly, but we desperately need a war whereby we can mandate that these violent youths get conscripted.

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bcitizen 3 months ago

It would be cheaper to pay them to stay home. Less office space, less government waste and theft, and less people getting in your way when you need something do. They work harder at trying not to work than if they actually did something.

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ExposedU2C 3 months ago

Amen. Couldn't agree more.

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ExposedU2C 3 months, 1 week ago

“We have been advised that the retroactive implementation of taxes is not that uncommon in the developed word, and that these large companies who will be impacted would also be aware of it, and there are certain benefits to that approach,” Mr Wilson told Tribune Business.

Here we see Simple Simon on behalf of Dumbo Davis unabashedly signaling to every Bahamian who is fortunate enough to still have a few dollars in the bank (or under their pillow or mattress) that the PLP government will be exploring opportunities to take from them what little money they still have by way of imposing retroactive (back-dated) income taxes.

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ExposedU2C 3 months, 1 week ago

KABOOM, KABOOM, KABOOM!!!

Representatives of the major foreign lenders active in the international debt markets have now officially made it known to our government that they can no longer entertain rolling over or restructuring our existing external debt, or advancing new foreign currency denominated loans to our nation, at less than outrightly unaffordable rates of interest, unless a minimum 15% income tax across the board is imposed on all individual Bahamians and residents of the Bahamas and their businesses.

Why has our Minister of Finance (PM Davis) and our Central Bank Governor (John Rolle) not said anything about this, instead choosing to let Simple Simon and Dumbo Halkitis threaten us with one aggressive tax policy after another?!

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TalRussell 3 months, 1 week ago

What time today is the Moon landing and how can I watch it? Odysseus is expected to land on the lunar surface at 5:30 p.m. Eastern time on Thursday. (Late Wednesday afternoon, Intuitive Machines adjusted the landing time, moving it up by 19 minutes, based on the orbit the spacecraft ended up in.)

Although it is a private mission, the main customer is NASA, which paid $118 million for the delivery of six instruments to the moon. NASA TV will stream coverage of the landing beginning at 4 p.m. on Thursday.

NASA Live: Official Stream of NASA TV

https://www.youtube.com/watch?v=21X5l...">https://www.youtube.com/watch?v=21X5l...

----- Intuitive Machines' Nova-C lander, nicknamed Odysseus, launched into space on Feb. 15 atop a SpaceX Falcon 9 rocket. The 14-foot-tall lander then spent six days cruising more than 620,000 miles to reach the moon.

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BONEFISH 3 months, 1 week ago

This corporate income is the minimum 15% global corporate tax that was proposed by the Biden administration.This was championed by Biden's treasury secretary Janet Yellen. This was his attempt to stop the circumvention of US tax laws by american corporations.The OECD jumped on board with idea from the get go.

The Minnis administration signed on to it at a conference before they left office.The Nassau Guardian pointed that out in an editorial last year.Bahamians were unaware of that, That is how this country operates.Politicians go aboard and sign all kind of agreements,They commit this country to do all manner of things. Then they return home and do not inform the Bahamian people.

In terms of tax systems and tax administration,the Bahamas is way behind. A white bahamian who now lives aboard in Canada said this.The main aspect of the current Bahamian tax system is from the nineteen century.

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bahamianson 3 months, 1 week ago

Well , if they can sign agreements at night, they can bring about the freedom of information act , so politicians and others can go to jail when corruption is found.

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