Tax reform needed
thenassauguardian editorial
Given the fiscal performance of the economy over the past few years and especially in the midst of the global recession, it has become increasingly clear that the days of relying on customs duties for the majority of the government’s revenue are rapidly coming to an end.
The arguments against, and the analyses of the current tax regime are as numerous as they are compelling.
The more often repeated reasons are that customs duty as a major source of government revenue has outlived its usefulness because the system is extremely insensitive to changing circumstances in the economy; it is unintentionally unfair and regressive in its impact, particularly on low-income households and at best, it distorts the orderly and efficient working of a market economy.
To which we can add, in the context of the predominantly retail and wholesale services sector of the Bahamian economy: it ties up too much of the cash flow in advance of the first sale or turnover of the imported goods.
Some have argued, rather convincingly, that consideration ought to be given to introducing a more progressive tax regime, such as the value added tax (VAT), a tax regime that is used in more than 170 countries and that is generally considered less onerous on low-income households and small businesses.
Since the tax is levied on both goods and services, it is believed that the government’s overall take could increase without having to increase the tax rate.
Indeed, there may be scope for reduction in tax rates and fees in some specific categories.
In a country such as The Bahamas, that has historically boasted of its distaste for imposing direct taxes on income, the VAT has a certain amount of appeal in the sense that it has the potential to increase the tax yield to government without having to concede its historical adherence to no tax on income.
Given the developments over the past few years with the removal of the veil of secrecy and confidentiality as regards to bank accounts in The Bahamas, and more recently the almost 30 tax information agreements (TIEA’s) signed by the government and other foreign jurisdictions, perhaps the time has come to re-examine tax reform in The Bahamas beyond the consideration of a VAT.
Consideration could be given to a broad-based or selective income tax regime which would permit the country to enter into double-taxation agreements, and by so doing obtain tax income from foreign companies operating in The Bahamas without increasing the overall tax burden to those companies since — by the double taxation treaty — the existing tax would be shared between our Public Treasury and that of the company’s home country.
Such a move could also provide added protection against the OECD’s constant threats to destabilize the so-called “tax haven” countries.
A modern Bahamas must adopt modern ways of conducting its affairs, and if we are to contemplate a reform of our tax structure, we ought to look at all forms of taxation and select the most efficient and the most appropriate for the benefit of all Bahamians.
Jul 08, 2011
thenassauguardian editorial
A political blog about Bahamian politics in The Bahamas, Bahamian Politicans - and the entire Bahamas political lot. Bahamian Blogger Dennis Dames keeps you updated on the political news and views throughout the islands of The Bahamas without fear or favor. Bahamian Politicians and the Bahamian Political Arena: Updates one Post at a time on Bahamas Politics and Bahamas Politicans; and their local, regional and international policies and perspectives.
Showing posts with label taxation Bahamas. Show all posts
Showing posts with label taxation Bahamas. Show all posts
Saturday, July 9, 2011
Thursday, June 3, 2010
Bahamas tax level remains "one of the lowest in the world" and simply "cannot cut it" in the long term, says Prime Minister Hubert Ingraham
PM: Bahamas tax level one of world's lowest
By ALISON LOWE
Tribune Staff Reporter
alowe@tribunemedia.net:
THE level of tax taken in by the government each year remains "one of the lowest in the world" and simply "cannot cut it" in the long term, the Prime Minister said yesterday, as he defended tax increases being imposed in this year's budget and warned that more substantial changes will be required in the future.
Prime Minister Hubert Ingraham said that the country's low-tax status remains the case "notwithstanding the increase in taxes" the Government is implementing to shore up its revenue this year, such as those on cars, local beer, tourism and domestic retail banks.
He said that the Government currently collects the equivalent of 18 per cent of the country's gross domestic product in tax, comparing this to the tax collected in other nations such as Singapore (23), St Lucia (29), Trinidad and Tobago (30), Jamaica (30) and Barbados (33).
"Notwithstanding the increase in taxes that we are putting in, The Bahamas has one of the lowest rates of taxation in the world. That's notwithstanding all of the islands and services we have to duplicate. You know how easy it is to run a Barbados with a similar population (size), with one island, one set of high schools, one set of primary schools, one set of roads, one set of electricity to generate?
"But while we are expensive to operate as a country, we're only getting around 18 per cent of Gross Domestic Product in tax. That is not going to cut it. That cannot cut it. We are hoping to raise that to 19.7 per cent in the coming year. That is optimistic, as I said."
Mr Ingraham complained that Bahamians "demand all of these services but are not prepared to pay the taxes" that are required to sustain them.
And in this regard, pointing to more sweeping changes to the way the government collects its revenue and from where, Mr Ingraham said that the government of The Bahamas will "one day have to be prepared to say to the public of the Bahamas that the current tax system is inequitable and unfair and do something about it."
He added that Bahamians tend to "demand all of these (government) services but are not prepared to pay the taxes."
"Barbados has excellent social statistics. But the people pay," he said.
June 03, 2010
tribune242
By ALISON LOWE
Tribune Staff Reporter
alowe@tribunemedia.net:
THE level of tax taken in by the government each year remains "one of the lowest in the world" and simply "cannot cut it" in the long term, the Prime Minister said yesterday, as he defended tax increases being imposed in this year's budget and warned that more substantial changes will be required in the future.
Prime Minister Hubert Ingraham said that the country's low-tax status remains the case "notwithstanding the increase in taxes" the Government is implementing to shore up its revenue this year, such as those on cars, local beer, tourism and domestic retail banks.
He said that the Government currently collects the equivalent of 18 per cent of the country's gross domestic product in tax, comparing this to the tax collected in other nations such as Singapore (23), St Lucia (29), Trinidad and Tobago (30), Jamaica (30) and Barbados (33).
"Notwithstanding the increase in taxes that we are putting in, The Bahamas has one of the lowest rates of taxation in the world. That's notwithstanding all of the islands and services we have to duplicate. You know how easy it is to run a Barbados with a similar population (size), with one island, one set of high schools, one set of primary schools, one set of roads, one set of electricity to generate?
"But while we are expensive to operate as a country, we're only getting around 18 per cent of Gross Domestic Product in tax. That is not going to cut it. That cannot cut it. We are hoping to raise that to 19.7 per cent in the coming year. That is optimistic, as I said."
Mr Ingraham complained that Bahamians "demand all of these services but are not prepared to pay the taxes" that are required to sustain them.
And in this regard, pointing to more sweeping changes to the way the government collects its revenue and from where, Mr Ingraham said that the government of The Bahamas will "one day have to be prepared to say to the public of the Bahamas that the current tax system is inequitable and unfair and do something about it."
He added that Bahamians tend to "demand all of these (government) services but are not prepared to pay the taxes."
"Barbados has excellent social statistics. But the people pay," he said.
June 03, 2010
tribune242
Sunday, May 9, 2010
Telecoms 'ripe' for increased taxation says former Chamber of Commerce president Dionisio D'Aguilar
Telecoms 'ripe' for more taxes
By NEIL HARTNELL
Tribune Business Editor:
Telecommunications is an industry "ripe" for increased taxation, a former Chamber of Commerce president yesterday urging the Government to "come up with innovative ways" to raise revenue by increasing fees on industries that paid "negligible taxes", such as banks/trust companies and the numbers business.
Suggesting that the Government impose a 1-2 per cent tax on making/receiving telephone calls, which is effectively a Bahamian national pasttime, Dionisio D'Aguilar said that if the Ingraham administration sought to raise revenues in its 2010-2011 Budget, it needed to look at fee increases that had the "least effect on the average person in the street".
Urging the Government to "come up with innovative ways to raise additional revenues", Mr D'Aguilar, who is also Superwash's president, told Tribune Business: "There are sectors of our economy that pay negligible taxes. Telecoms, that's a ripe one. Everyone pays a tax on their incoming calls. That's a totally undertaxed sector."
Mr D'Aguilar said such telecoms taxes were already levied in many other countries, and said a 1-2 per cent tax on telephone calls was "negligible to the consumer", especially since many Bahamians treated their cellular phones as a luxury.
Adding that he disagreed with fellow businessman Franklyn Wilson, who yesterday told Tribune Business that legalising gaming would result in net outflows from the Public Treasury, as a result of "gambling breeding poverty" and other adverse social consequences, Mr D'Aguilar said taxing the numbers business would raise millions of dollars per year in government revenue.
"Banks tend to be under-taxed compared to other businesses," he added. "It's a heavily under-taxed industry" compared to the income that Bahamian banks and trust companies generated per annum.
Mr D'Aguilar also pointed out that the Government was "not taxing services one bit", even though this was the sector accounting for the largest amount of economic activity in the Bahamas. He suggested, though, that the Ingraham administration was unlikely to do anything about this in the 2010-2011 Budget, and was likely to save it for a more comprehensive introduction of Value Added Tax (VAT).
"All you're looking at are fees, raising revenues from avenues that have the least effect on the average person in the street," Mr D'Aguilar said of the Government's efforts to plug the fiscal deficit and reduce the national debt.
"Look at the whole fee structure. There's a whole host of fees that are charged, but have not been amended, for four million years.
"They have to look at taxes that are easy to collect. Gasoline taxes are easy to collect because they are paid at the border when the fuel comes in. But property taxes are a nightmare to collect. Increasing property taxes could increase revenue, but not the Government's cash flow. And that's what we need to increase.
"The Government will not be able to get increased taxes from its traditional sources. Import duties are already high enough."
While all Bahamian governments were reluctant to cut spending and reduce the size of government, the former Chamber president suggested that the Ingraham administration now had to seize the moment offered by a public mood that was more prepared for austerity measures, and set the public finances back on track.
Arguing that the Government would find it impossible to accommodate the wishes of the likes of the Nassau Institute, which would like to see departments closed down and employees released, Mr D'Aguilar suggested that the administration "tackle" the generous pensions and benefits civil servants/public sector employees enjoyed.
Emphasising that this did not involve changes to basic salaries, the former Chamber president said: "They've got to get their house back in order. We don't want to go the way of the Greeks.
"The Government needs to look at the generous benefits it gives its employees. Salaries are one thing, but those generous and lucrative defined benefit pension plans for public sector workers and civil servants have to be tackled. That whole issue has to be tackled, as it will come home to roost one day."
May 07, 2010
tribune242
By NEIL HARTNELL
Tribune Business Editor:
Telecommunications is an industry "ripe" for increased taxation, a former Chamber of Commerce president yesterday urging the Government to "come up with innovative ways" to raise revenue by increasing fees on industries that paid "negligible taxes", such as banks/trust companies and the numbers business.
Suggesting that the Government impose a 1-2 per cent tax on making/receiving telephone calls, which is effectively a Bahamian national pasttime, Dionisio D'Aguilar said that if the Ingraham administration sought to raise revenues in its 2010-2011 Budget, it needed to look at fee increases that had the "least effect on the average person in the street".
Urging the Government to "come up with innovative ways to raise additional revenues", Mr D'Aguilar, who is also Superwash's president, told Tribune Business: "There are sectors of our economy that pay negligible taxes. Telecoms, that's a ripe one. Everyone pays a tax on their incoming calls. That's a totally undertaxed sector."
Mr D'Aguilar said such telecoms taxes were already levied in many other countries, and said a 1-2 per cent tax on telephone calls was "negligible to the consumer", especially since many Bahamians treated their cellular phones as a luxury.
Adding that he disagreed with fellow businessman Franklyn Wilson, who yesterday told Tribune Business that legalising gaming would result in net outflows from the Public Treasury, as a result of "gambling breeding poverty" and other adverse social consequences, Mr D'Aguilar said taxing the numbers business would raise millions of dollars per year in government revenue.
"Banks tend to be under-taxed compared to other businesses," he added. "It's a heavily under-taxed industry" compared to the income that Bahamian banks and trust companies generated per annum.
Mr D'Aguilar also pointed out that the Government was "not taxing services one bit", even though this was the sector accounting for the largest amount of economic activity in the Bahamas. He suggested, though, that the Ingraham administration was unlikely to do anything about this in the 2010-2011 Budget, and was likely to save it for a more comprehensive introduction of Value Added Tax (VAT).
"All you're looking at are fees, raising revenues from avenues that have the least effect on the average person in the street," Mr D'Aguilar said of the Government's efforts to plug the fiscal deficit and reduce the national debt.
"Look at the whole fee structure. There's a whole host of fees that are charged, but have not been amended, for four million years.
"They have to look at taxes that are easy to collect. Gasoline taxes are easy to collect because they are paid at the border when the fuel comes in. But property taxes are a nightmare to collect. Increasing property taxes could increase revenue, but not the Government's cash flow. And that's what we need to increase.
"The Government will not be able to get increased taxes from its traditional sources. Import duties are already high enough."
While all Bahamian governments were reluctant to cut spending and reduce the size of government, the former Chamber president suggested that the Ingraham administration now had to seize the moment offered by a public mood that was more prepared for austerity measures, and set the public finances back on track.
Arguing that the Government would find it impossible to accommodate the wishes of the likes of the Nassau Institute, which would like to see departments closed down and employees released, Mr D'Aguilar suggested that the administration "tackle" the generous pensions and benefits civil servants/public sector employees enjoyed.
Emphasising that this did not involve changes to basic salaries, the former Chamber president said: "They've got to get their house back in order. We don't want to go the way of the Greeks.
"The Government needs to look at the generous benefits it gives its employees. Salaries are one thing, but those generous and lucrative defined benefit pension plans for public sector workers and civil servants have to be tackled. That whole issue has to be tackled, as it will come home to roost one day."
May 07, 2010
tribune242
Thursday, May 26, 2005
The Bahamas 2005-2006 Fiscal Deficit is Projected to Increase Over the Previous Period
The Bahamas 2005-2006 National Budget Projects The Government Finance Statistic (GFS) Deficit of $172 million
Budget Deficit Soars
The 2005-2006 budget projects a GFS deficit of $172 million, which would be $30 million more than the deficit expected when this fiscal year draws to a close on June 30.
The $172 million deficit would be 2.8 percent of GDP and would be the highest deficit since fiscal year 2002-2003 when the spending shortfall came in at $184 million.
There are several factors that are expected to contribute to increased spending in the 2005-2006 fiscal year, Acting Prime Minister Cynthia Pratt announced in the House of Assembly yesterday.
The recurrent expenditure is pegged at $1.214 billion, which is an increase of $39 million or 3 percent over the 2004/2005 budget.
"The single major component of the increase is the provision in the Ministry of Finance Estimates to pay increases for public servants and related groups, arising from the present negotiations, as well as some increase in benefits for retired public servants," Mrs. Pratt announced.
"Another important increase is for the improvement in insurance arrangements for the Royal Bahamas Police Force, the Royal Bahamas Defence Force and the other law enforcement officers."
This comes to a total of $8 million, the Acting Prime Minister announced.
In addition to the GFS deficit, one of the traditional highlights in the annual budget communication is the ratio of government debt to GDP given that financial experts continue to advise that this ratio should be kept as near as possible to 30 percent of GDP to avoid the problems which would arise from a ratio significantly in excess of that level.
Exceeding the 40 percent mark could mean that the government’s ability to borrow money would be severely constrained and it would be forced to sharply increase taxes, Mrs. Pratt reiterated during her communication, which she delivered on behalf of Prime Minister and Minister of Finance Perry Christie, who is still convalescing at home three weeks after suffering a slight stroke.
"Fiscal deficits arise if we spend more than we earn in revenues and if this situation continues for long enough we build up massive borrowing problems," Mrs. Pratt pointed out.
She added that circumstances are quite different if the ratio of government debt to GDP is closer to 30 percent.
"There would be much greater scope to avoid these drastic remedies because there would be the capacity to borrow until the economic situation improves and until revenues recover so as to again close the gap between revenue and expenditure. This is what transpired in 2001 and 2002," the Acting Prime Minister said.
She said in order to bring the ratio of government debt to GDP as close as possible to 30 percent revenues must consistently attain the level of 20 percent of GDP.
"At that level, we can also provide the level of revenue resources which we need for ongoing public expenditure while containing the fiscal deficit," Mrs. Pratt said.
She also noted that successive governments have tried to attain the ratio of government revenue to GDP of about 20 percent.
At that level, Mrs. Pratt said, Bahamians could enjoy a reasonable level of public services without the introduction of taxation to pay for them.
"However, the ratio of revenue to GDP of 20 percent is becoming increasingly hard to achieve because of the narrowness of our revenue system, heavily dependent as it is on customs revenues and the non-taxation of services. Thus, the expansion of essential public services has resulted in fiscal deficits emerging, which have been met by borrowing.
"As a result, the level of government debt to GDP has risen inexorably since the year 2000. In recognition of this issue, in the 2005/2006 budget- the government is aiming to contain the ratio of government debt to GDP to under 38 percent."
The Acting Prime Minister also said that the government is continuing an aggressive process of addressing tax reform to improve its revenue situation.
The 2005-2006 budget projects recurrent revenue of $1.145 billion, an increase of $93 million or 9 percent over the 2004/2005 budget.
"The reason for projecting an increase of 9 percent over 2004/2005 is because of the strengthening of the economy, with growth in current terms of over five percent and the heightened emphasis being given to concrete and specific improvement in revenue administration," Mrs. Pratt said.
The Acting Prime Minister also announced that the government plans to improve all of the country’s national airports to raise them to the highest standards required.
"Accordingly, a variety of air navigational fees and related charges in the Family Islands are being increased to more realistic levels to meet part of the cost," she announced. "In addition, it is intended to implement passenger facility fees at major airports as part of the cost recovery exercise."
Thursday, May 27, 2004
Bahamian Taxpayers Urged to Meet Their Tax Obligations
The monies raised from taxes in The Bahamas are required to meet essential expenditures which are also approved by the Bahamian legislature
PM Pleads To Taxpayers
By Macushla N. Pinder
Nassau, The Bahamas
Journal Staff Writer
05/27/04
In an impassioned plea, Prime Minister Perry Christie on Wednesday begged Bahamian taxpayers to meet their tax obligations in a timely manner.
“The taxes levied in The Bahamas are in accordance with the laws passed by this legislature, “ Mr. Christie pointed out, while making his Budget Communication to Parliament.
He said, “The monies raised are required to meet essential expenditures which are also approved by this legislature. We have an open and transparent budgetary system and the purposes of taxation are known.”
The 2004/2005 budget projects total expenditure of $1.324 billion and total revenue of $1.063 billion.
Mr. Christie – in an unprecedented move – departed from the custom of lengthy and involved reports on budgetary allocations, giving a brief overview of his government’s spending plan.
It was the shortest Budget Communication in the post-Independence Bahamas.
About an hour and 20 minutes after he started his much-anticipated communication, Mr. Christie, who is also Minster of Finance, ended by declaring that, “The 2004/2005 budget and the economic prospects on which it is based, represent yet another landmark in my government’s commitment to the interests of the Bahamian people.”
As expected, the country’s social sector – education and training, health, housing, social services and youth development – will receive a huge chunk of the government’s $954 million 2004/2005 recurrent expenditure, a figure totaling $428 million or 45 percent.
Mr. Christie further revealed that almost 20 percent of the recurrent expenditure would be spent on national security, including the police and defence forces, judicial and legal affairs.
Some $65 million, he said, will go towards infrastructure like works and transport.
Another $100 million will be spent on economic services, including tourism, trade and agriculture and fisheries; while $173 million has been allocated to administrative services like foreign affairs, public service, finance and local government.
According to Mr. Christie, another $500,000 has been earmarked for consultancy services for, amongst other things, planning the development of Clifton Cay National Park.
“The consultancy will provide an outline of how the Park should be developed and laid out so as to maximize public benefit from it,” he said. “In this regard, it is envisaged that the Park would provide a facility which would be of enjoyment to Bahamians as well as an attractive enhancement to the cultural experience of our visitors.”
There is also provision of $1 million for interest payment on the bonds that will be issued for the purchase of the Park.
“I am sure that the Bahamian public appreciates that while each priority is of equal weight, an appropriate balance must be maintained in allocating the increasing flows of resources between them in the coming years,” he said.
“This will involve some degree of patience because not everything can be achieved or accomplished in one single year. The overarching consideration, however, is that all of these priorities be steadily and concurrently addressed as the flow of budgetary resources intensifies, not from increases in taxation, but rather from the strengthening of the economy arising form this government’s policies and from firmer and more efficient revenue administration.”
During his address, the Prime Minister also unveiled a package of measures that are sure to cause certain sectors of the Bahamian population to breathe a collective sigh of relief.
Among these are the removal of customs duties and stamp duties on imports from building materials used by private schools.
According to the Prime Minister, the new fiscal plan positions The Bahamas to take advantage of the country’s “imminent surge in economic performance” like that provided by Kerzner International’s Phase III $1 billion project.
He said it is this economic stability allied with political maturity that will make the country’s economy a magnet for investments.
Mr. Christie added that while geopolitical uncertainties like the continued surge in oil prices could result in early increases in interest rates, these uncertainties would have “diminishing implications as (economic) growth becomes firmly entrenched.”
“There is one factor working strongly to our advantage, and that is, the sizeable depreciation in the value of the United States dollar that has occurred since 2002 as a result of the expanding record-level Federal budget deficit and shortfalls on the US trade account,” Mr. Christie said.
“As these imbalances persist, the dollar is expected to remain weak in the year ahead, making dollar priced vacation destinations such as The Bahamas more affordable for people from North America, Europe and Asia.”
While on his feet, the nation’s chief also reiterated that the over-riding priorities for the economy, fiscal and non-fiscal, are to generate enough quality employment opportunities for all Bahamians.
“Our goals are clear-cut and unambiguous…” he said.
“Simply stated, they are to maximize the job creation potential of the Bahamian economy by strengthening the key sectors and encouraging the highest possible levels of employment-generating investment; accelerate the social advancement and inclusion of all members of society; ensure that every major settlement in The Bahamas participates in national prosperity and advancement and raise standards of delivery of public services so as to get the best possible value for the taxpayers’ dollar.”
As is customary, many Bahamians were drawn to the House of Assembly’s gallery to hear the budget communication first hand.
Among them were a key fiscal architect, Minister of State for Finance, Senator James Smith; former PLP Cabinet Minister Paul Adderley; government advisor Sean McWeeney; PLP Chairman Raynard Rigby; various FNM senators, including Tanya McCartney and Desmond Bannister, and other citizens.
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