The Tribune

By Fay Simmons

Tribune Business Reporter

jsimmons@tribunemedia.net

The Attorney General yesterday acknowledged that corporate income tax is a "novel approach" for The Bahamas and will require "significant regulatory reform" to implement if adopted.

Ryan Pinder KC, speaking at the Bahamas Institute of Financial Services annual conference, said consultation over the Government's corporate income tax 'green paper' has been extended by almost two months - from July 3 to end-August 2023 - to give all parties more time to conduct detailed analysis and submit their views.

He added: “As you would know this week, the Ministry of Finance announced the release of its 'green paper' on corporate Income tax strategies for The Bahamas, which aims to solicit feedback from stakeholders on the Government's proposals to achieve greater efficiency and equity in the business tax regime and achieve alignment with global tax developments.”

“Given certain statements in the press, I think it important again to detail this consultation process. The 'green paper' is what it is; extended consultation through August, digesting and analysing feedback received before even the Government takes the position of deciding what to do.

"The 'green paper' does not obligate us. Then there is a 'white paper' to set out the Government's policy position. So we are at the 'green paper' stage, which is a consultative process. We ask everybody to go and read it, digest it and provide some comments to it.”

Mr Pinder conceded that, as the first income-based tax in The Bahamas' history, almost every area of the economy could be impacted. He said: “A corporate income tax is clearly a novel approach in The Bahamas and will have to have significant regulatory reform for the country in tax administration, enforcement and dialogue and education. It will affect most almost every area of the cross-border economy.

“This mandate of a minimum global income tax spurred the Government of The Bahamas to undertake a comprehensive review and analysis of our current tax system, and the implications of evolving from a Business Licence turnover-based tax to the corporate income tax, which is based on net income."

Mr Pinder continued: “So we anticipate doing a very detailed consultation exercise for the general public over the summer, in which we will hold different town meetings, technical analyses, just so everybody is comfortable with understanding what is in the paper and can have enough knowledge and basis to be able to do their own analysis and provide the feedback that is necessary.

"The Government is committed to maintain innovation and transparency in the development of our financial services industry. We will do all we can to ensure that we are fully compliant with international standards and give you the platform you need to excel. We understand that the rules are constantly changing, that policy and legislative reform is constantly required. We are committed to do just this

"I want you to be confident that our government will work with you and for you. We will involve industry in our decisions and initiatives. And we will work together in the co-operative fashion for reforming and innovation that you have grown to expect.”

Mr Pinder outlined the four options presented in the paper. "Option one represents the OECD 15 percent compliant pillar two regime. Again, that's for business units generating more than 750m euros. So option one is just the OECD barebones requirement," he added. "Option two adds to option one a 10 percent rate for all other firms. So 15 percent for the OECD criteria and then 10 percent for everybody else.

“Option three adds to option one a 12 percent rate for firms above $500,000 and maintains the Business Licence regime for the firms below the threshold. So you had OECD standard, for everybody generating $500,000 and more you have an income tax, for everybody under $500,000 you have Business Licence and that's to preserve simplicity for the small businesses but imposing wider corporate income tax across the economy.

“And option four applies a 15 percent corporate income tax across all firms, except for those below $500,000 which attract 10 percent. So that would put everybody in a corporate tax regime with scaled rates. Those are four options presented, no options decided upon," he added.

"Different options have different economic consequences, and unemployment consequences, and those are spelled out in the 'green paper'. Again, I encourage you all to carefully review the 'green paper' and take the opportunity to provide your input and opinions. This is the mature approach to national development and we ask for everybody's involvement in the process.”