The Tribune

By Neil Hartnell

Tribune Business Editor

nhartnell@tribunemedia.net

Hopes were voiced last night that The Bahamas will benefit from a revenue “windfall” after Shell’s locally-domiciled subsidiary revealed it has a $248m corporate income tax liability “accrued” on its books - likely due to this nation’s Domestic Minimum Top-Up Tax implementation.

The multinational energy giant, in its recently-released report on 2024 global tax contributions, revealed that its Bahamian subsidiary generated another $1.654bn in profits last year from $32.705bn in revenues. Some $10.867bn of the latter was paid by so-called “third parties”, while the $21.838bn balance originated from third parties.

However, Shell Western Supply & Trading was shown for the first time to have “accrued” $247.503m in corporate tax liabilities on its balance sheet. The report indicated that this is related to The Bahamas’ implementation of a 15 percent corporate income tax to comply with the global G-7/Organisation for Economic Co-Operation and Development (OECD) initiative, with this levy taking effect from January 1, 2024.

The corporate tax liability also corresponds to 15 percent of Shell Western’s $1.654bn annual profit. “As of 2018, Shell's principal business in The Bahamas is Shell Western Supply and Trading (SWST),” Shell’s 2024 global tax report said.

“Shell Western Supply & Trading sources crude oil from West Africa and Latin America, and is active in trading and transporting crude oil globally.” Further highlighting a lucrative source of revenue that The Bahamas has potentially been missing out on, Shell added that its local subsidiary - which employs 45 persons - had also paid several million dollars worth of corporate income tax outside this jurisdiction in 2024.

“The corporate income tax figure reflects $2.2m paid by an entity in The Bahamas outside of The Bahamas. This was on income earned from the transportation of goods,” Shell said.

“In November 2024, the Government enacted legislation, in line with the OECD's pillar two framework, which introduces a 15 percent corporate income tax rate on multinational enterprises active in The Bahamas. The tax rate took effect on January 1, 2024.”

Several sources explained that, while The Bahamas is likely to receive some of that $247.503m in accrued corporate tax, it may only gain a portion because of how the G7/OECD initiative is structured. That sum is likely to be divided among the jurisdictions where Shell Western Supply & Trading conducted its business, because the 15 percent corporate income tax has to be paid to the nations where revenues and profits were generated.

“The way the rules are set up, they would have to allocate and award that to the various jurisdictions,” one source, speaking on condition of anonymity, asserted. “How that plays out will be a wait and see. They’ll have to apportion it and pay it out in the countries that are participants.

“The portion that is allocated to us, it’d be great if we can get the whole thing but the purpose of it is to prevent any country claiming a windfall from multinationals’ global market activity.” Ryan Pinder KC, the attorney general, yesterday directed Tribune Business to speak to the Ministry of Finance about Shell’s accrued Bahamian corporate income taxes. Michael Halkitis, minister of economic affairs, did not respond to messages before press time.

However, the Government itself appears to only be anticipating that it will receive a portion of Shell’s Bahamian corporate tax liabilities based on previously-published forecasts. It has forecast that the DMTT will generate some $140m in additional revenue, equivalent to around 1 percent of economic output or gross domestic product (GDP), during the current 2025-2026 fiscal year.

Meanwhile, questions were asked yesterday as to whether Shell’s new taxation burden will result in it exiting this jurisdiction. “Shell has been able to shift a lot of taxation off its books,” one source said of its Bahamas presence, “and if that liability has accrued it doesn’t make sense to have their operation here because it becomes another cost centre. They set it up here to avoid paying that amount of tax. The reason for setting up in The Bahamas now goes away.”

However, shifting to other nations will not be so easy if all are still signed on to the G-7/OECD minimum 15 percent global corporate income tax initiative. Yet this has been weakened after Donald Trump withdrew the US from it earlier this year.

Paul Moss, president of Dominion Management Services, who has long advocated for The Bahamas to implement a corporate income tax albeit at a rate lower than 15 percent, told Tribune Business yesterday that the Shell data again exposed the benefits of such reforms if this nation has “the courage” to move in such a direction.

“This is a windfall we can all benefit from. No doubt, no doubt. We should be able to get something out of it,” Mr Moss said of Shell’s $247.503m Bahamian tax liability. He added that it was “not too late” for The Bahamas to implement a version of corporate income tax for its own purposes at a lower rate than 15 percent given the US stance.

“We ought to look at it and not be so high,” he said. “We can benefit from that from the amount of companies that we have in the country and not paying substantial taxes. It benefits us if we can do it. We should really be leaning on the US so heavily at this time. That should be the way we look at it in terms of financial services.

“It [Shell] certainly does show the benefit, but with that we need courage because if we have the courage to go and do it we’ll benefit from it, but unfortunately what we do is wait for the world to do it and then we proceed after them.”

Those connected to the financial services industry and other observers previously warned that the perceived benefits from the newly-introduced 15 percent corporate income tax - to only be levied at present on Bahamian-domiciled entities that are part of multinational groups enjoying 750m euros or more in annual turnover - could be “severely diluted” depending on the extent of the fall-out from Mr Trump’s move.

The US president’s order, declaring that the 15 percent global corporate minimum tax deal produced by the G-20 and Organisation for Economic Co-Operation and Development (OECD) “has no force or effect” in the US, effectively reintroduces the concept of international tax competition to global affairs with countries offering different rates in a bid to attract multinational firms and capital.

Tribune Business was told that The Bahamas will need to closely monitor global fall-out, and whether other jurisdictions follow the US lead under Mr Trump, otherwise it could ultimately lose multinational business if its corporate income tax rate remains at 15 percent while others lower theirs. This would produce a potential exodus of corporate business seeking a better return from lower tax rates in other nations.

Should such a scenario occur, the expected $140m annual revenue boost for the Government from implementing the DMTT may also not materialise.