The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Opposition’s leader yesterday voiced concern The Bahamas may miss out on significant tax revenues, and lose business, from delays in implementing the 15 percent minimum global corporate tax.

Michael Pintard, speaking after the Free National Movement (FNM) met with International Monetary Fund (IMF) and Ministry of Finance officials on the issue, said the former had warned The Bahamas might forego valuable revenues by not imposing the levy on local entities that are part of multinational groups with annual turnover in excess of 750m euros. If the necessary legislative and administrative mechanisms are not in place to collect the levy locally, the Opposition leader said profit remittances by Bahamas-domiciled entities that are part of such groups can be taxed at the full 15 percent in their home jurisdictions.

This, in effect, means that revenues due to The Bahamas would be lost to multinationals’ home countries, with Mr Pintard disclosing that the IMF team had informed the FNM that other countries have already moved to give effect to the G-20/OECD 15 percent global minimum corporate tax.

While not naming any nations, he added that the Fund’s officials in their meeting had “outlined several countries that have signed on”. These nations were said to host corporate entities that both meet the 750 euros threshold and have subsidiaries in The Bahamas which would be subject to the 15 percent levy.

“We are running the risk that the longer we refuse to address this, and make a determination as to what we’re going to do, these companies that are otherwise obligated by law to pay their share of taxes here, by remitting those profits to their home countries, we’ll be foregoing revenue we could have earned here,” Mr Pintard told Tribune Business.

Both Simon Wilson, the Ministry of Finance’s financial secretary, and Michael Halkitis, minister of economic affairs, have recently answered Mr Pintard by signalling that the Government’s corporate income tax plans will crystallise between this week’s mid-year Budget and end-May when the full-year 2024-2025 Budget will be presented.

Tribune Business sources have also recently suggested that the Government may announce plans for the introduction of a 15 per- cent corporate income tax, but only on those entities that meet the qualifying G-20/OECD criteria as part of multinational groups with annual turnovers of 750m euros or more, in the upcoming 2024-2025 Budget that will be unveiled during the last week of May.

Mr Wilson did not confirm this, but said the Government will likely make a corporate income tax-related announcement in the mid-year Budget due by the end of this month as “we’ll have a much better idea of what shape or form” such a levy may look like then. He added that designing and structuring a corporate income tax system for The Bahamas may now only be 12-18 months away.

“We are progressing quite well, quite well,” he told this newspaper. “During the mid-year Budget we are likely to make an announcement. We still have to do some more work, but we believe that certainly by the mid- year Budget, which is due by the end of February we’ll have a much better idea of what shape or form this will take.”

Asked how far away corporate income tax implementation may be, Mr Wilson replied: “Any corporate income tax will be building on the Business Licence regime, so it’s not two to three years [away]; it’s maybe 12-18 months. Whatever we do, it has to be done to meet out inter- national obligations.” The Bahamas is among 138 countries already signed on to comply with the G-20/ OECD minimum corporate tax initiative.

Mr Halkitis, mean- while, affirmed that the Government is considering implementing what is known as the G-20/OECD initiative’s ‘pillar two’, namely the 15 percent minimum global corporate income tax on multinational groups that generate annual turnover of 750m euros and their subsidiaries.

He added: “I can say that we are leaning firstly at doing the pillar two, which is the, you know, multinational companies with income of 750 million euros or more. So, dealing with those, and so that will not have a whole lot of impact on, if any, local companies.

“We had a study done by one of the major accounting firms [Deloitte & Touche]” Mr Halkitis said. “They did a report and we released a ‘green paper’ asking for feedback. We got that feedback. We are now looking at that feedback and are now in discussions, internally at first, about the best way to proceed without, you know, a lot of confusion, without increasing the burden on anybody, but being able to capture some elements that we don’t presently capture and mostly in the multilateral area.

“Within the next few weeks, shortly after the mid-year Budget, as we roll up to the [May] Budget, you’ll be getting more information on where the Government wants to go. And we’ll be seeking more feedback from, particularly, the business community.”

Mr Pintard, meanwhile, yesterday voiced concern that so-called ‘Pillar Two’ entities would be unable to offset, or claim a deduction, of their Bahamian Business Licence fee if their profit remittances were taxed at the full 15 percent in their home countries with no such levy imposed here.

“If they are forced to repatriate their remittances back home, and are not able to deduct Business Licence fees, and those businesses still have to endure all other service charges present in the cost of doing business in this country, we are putting people in a position where they may say: ‘Is it worth it staying here?’,” Mr Pintard added.

The FNM, in a statement, said: “The Opposition reiterated that given the country’s express commitment to the global corporate minimum tax initiative made under the Free National Movement, the appropriate legislation and enabling framework to cover qualifying firms has not yet been established and circulated for consultation.

“Our understanding is that this would be revenue positive for the country as this would require massive multinational companies which generate revenue in The Bahamas to pay the proportional tax share inside the country.

“We are very concerned that if other countries have adopted this global initiative as of January 2024, and The Bahamas does not have the infrastructure to collect taxes from these multinational companies operating in The Bahamas with revenues over 750M euros annually, these taxes which could have been paid to the Bahamas Government will now be collected by foreign countries.”

Reiterating calls to eliminate the current Business Licence regime, the Opposition added: “The reformed tax regime should seek to eliminate taxes on audited businesses posting losses, and at the same time reduce the unfavourable treatment to high turnover/low margin businesses when compared to low turnover/high margin businesses.

“We believe for Bahamian micro businesses with turnover under $100,000 per year should not be subject to any form of Business Licence fees or taxes. Bahamian small businesses with turnover under $1m should have as an option the ability to pay a straightforward set fee based on a structured tier.”