The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Prime Minister yesterday doubled down on his pledge of no “new taxes that will directly impact Bahamian families” while asserting that the Government has “drawn a line in the sand” on tax evaders.

Philip Davis KC, leading off debate on the mid-year Budget in the House of Assembly, twice repeated his promise to “avoid new taxes that unnecessarily place additional strain on families” while training his fire on wealthy individuals and companies who he claimed have evaded “their responsibilities for years”.

Reiterating his belief that improved compliance and tax enforcement effort will enable the Government to hit annual revenues equal to 25 percent of economic output (GDP) by 2025- 2026, the Prime Minister consistently targeted those businesses and homeowners who can afford to pay but simply fail to do so - although he provided no examples.

“We will achieve this goal through the efficient collection of taxes, including the collection of maritime-related taxes and the introduction of a Large Taxpayers Unit focused on businesses making more than $5m annually – not the small corner store or side hustle, but the multi-million dollar businesses that have not been living up to their tax obligations,” Mr Davis said.

He returned to the theme of targeting rich tax delinquents several times in his address, especially when it came to cutting the $800m real property tax arrears mountain. “The vast majority of the real property taxes owed are by owners of high value properties,” Mr Davis said. “A huge percentage of those high-valued properties are second home owners.

“Do we not feel that people who buy these nice vacation homes in some of the most beautiful areas that our nation has to offer should be paying their fair share? Why should they get to skip out on their tax obligations when the average middle class family is living up to their responsibilities? The system of non-enforcement as it existed was patently unfair.

“Everyone is now paying their fair share, Mr deputy speaker. No exceptions. And it doesn’t matter how much money you have, how much power you have, or who you know. The Department of Inland Revenue has stepped up to ensure that tax collection is done in a fair, transparent and efficient manner.”

Mr Davis, also reiterating that the Government has no plans to introduce personal income tax or other income-related taxes “at this time” apart from the 15 percent minimum global corporate tax on entities that are part of multinational groups generating 750m euros or more annually, admitted that The Bahamas’ regressive tax regime merits reform.

Acknowledging that this causes lower income Bahamians to pay proportionally more of their income in taxes than their wealthier counterparts, he added: “Instead, our approach is focused on ensuring that those who can afford to pay their taxes live up to their obligations to the Government.

“This is what Bahamians have wanted for years. People have often said that before the Government introduces any major new taxes they would like to see better enforcement and collection of the existing taxes so that we are maximising opportunity for revenue generation under the current system. This is exactly what we are successfully doing now.

“Decision and priorities, Mr deputy speaker. That is what budgets are all about. We’ve made an important decision to draw a line in the sand when it comes to the collection of taxes from those who have avoided their responsibilities for years despite being among the wealthiest people and businesses in our nation,” Mr Davis continued.

“I know there are some who are angered by our approach. They’re thinking: ‘How dare we go after the elite?’” Some people have been evading their Business Licence fees, their Customs duties and their real property taxes for so long it now feels like they’re being targeted when we ask them to finally pay what they owe.

“As the quote goes: ‘When you’re accustomed to privilege, equality feels like oppression’. But this is a New Day. And we are building a new, fairer Bahamas.” Mr Davis also hit out at suggestions that “droves of businesses” and investors will leave The Bahamas as a result of introducing the 15 percent minimum global corporate income tax on entities that qualify for the 750m euro annual threshold.

He argued that, with virtually all countries committed to implementing the same tax, there will be a ‘level playing field’ and nowhere for entities seeking to dodge this initiative to hide. Referring to the version that The Bahamas plans to adopt, known as the Qualified Domestic Minimum Top-Up Tax, Mr Davis asserted that “not a single Bahamian-owned venture” will be impacted.

That remains subject to potential challenge, given Bahamian ownership in the likes of Commonwealth Brewery, which is majority-owned by global brewing giant, Heineken. Still, the Prime Minister said: “As much as I’d like to live in a future in which many Bahamians own multinational companies bringing in nearly $1bn a year, we are not there yet as a country.

“So, we can safely say that not a single Bahamian-owned venture will be directly affected by this tax.

And through this tax, we hope generate an additional $140m per year in government revenue.”

As for fears of a corporate exodus, Mr Davis added: “The vast majority of countries in the world, including those like us who didn’t previously have corporate income taxes, will be introducing similar regimes or face the threat of black- listing and other possible consequences. Rather than wait around to be accused of non-compliance, we have taken proactive action to introduce this corporate income tax.

“Our prospects as an appealing jurisdiction for investments and the operation of multinational corporations are just as strong as they ever were. If these companies don’t pay their tax here, they would simply have to pay the same tax to their home jurisdiction. We have managed to retain many of our competitive advantages as all nations will be on the same playing field in relation to corporate income taxes.

“So, if they are operating here and we have the opportunity to get 15 percent of their taxes, we need to collect it here. It only makes sense. It is only prudent for us to make sure they pay their fair share here and not in their home jurisdiction,” the Prime Minister continued.

“But the bigger point here, the one that speaks to the true importance of this change is: Why should companies operating within The Bahamas making more than 750m euros per year not contribute at all to our country?

“Why are there people complaining about this change? How does the status quo benefit us? It is past time that we changed the rules so that everyone who benefits from being in The Bahamas pays their fair share for being in The Bahamas.”

Mr Davis and Michael Pintard sparred over the Opposition leader’s assertion that the Prime Minister was misleading the House of Assembly and the Bahamian people by suggesting that the Government will collect $140m in revenue in 2024 from the 15 percent minimum corporate income tax.

With The Bahamas yet to enact legislation to give effect to the Qualified Domestic Minimum Top-Up Tax, let alone implement it, Mr Pintard argued that with other countries having already effected their ver- sion this nation has already foregone an estimated $13m in monthly revenues for January, February and March as these will be earned by qualifying entities’ home country jurisdictions.

The Prime Minister, in response, sought to turn the tables on Mr Pintard by arguing that he never said the Government will collect $140m from the Qualified Domestic Minimum Top-Up Tax this year and that, as result, it was the Opposition leader who was being misleading.