The Tribune

By NATARIO McKENZIE Tribune Business Reporter nmckenzie@tribunemedia.net THE Bahamas should move towards changing its tax structure and explore an alternative system to exchange control, a well-known doctor and financial executive said yesterday. Dr Jonathan Rodgers, speaking at a meeting of the Rotary Club of West Nassau on how to fix the economy, reiterated calls for a change in the Bahamian tax structure, from an import-based tax to a sales and services tax. "With the proposed change in tax structure, the proposal is that you have a sales and service tax, but not a tax on production, so it's not a full value added tax. The people who want to produce have a leg up," Dr Rodgers, a key Democratic National Alliance adviser, said. "The biggest problem with manufacturing countries today is the cost of electricity and power is too high, but if you allow for the free flow of money by having this dual currency system, what happens is we, as Bahamians, can then invest in other countries that have the manufacturing capabilities, the know-how and cheap utilities. "We can make money from that, and the money can be repatriated to the country. That's why we have to get rid of all of these archaic things like exchange control, so that we can have real free flow and free trade, and the economy can come up very quickly." Prior to the relaxation of exchange controls relating to real estate investments, foreign currency transfers, mortgages and debt and equity instruments in 2006, residents purchasing securities or making real estate investments overseas had to do so through the Investment Currency Market (ICM), at a premium bid and offer rate of 25 per cent and 20 per cent, respectively. These rates were however reduced by half, to 12.5 per cent and 10 per cent respectively. Dr Rodgers said the Bahamas must have an alternative exchange control. "We have to have an alternative system to exchange control," he said. "The only people who makes an money out of exchange control is the banks. Why shouldn't you be able to put your hard-earned money anywhere in the world, and get the best return or access money from out side?" Using Bermuda as an example, Dr Rodgers said: "In Bermuda, they allowed Bermudans to have US dollar accounts, so they can bring any foreign currency into the country and use that money to import consumer goods or to re-invest outside. "In the Bahamas, what happens is the excess US dollars accumulate in the banks, and they have to sell that to the Central Bank in exchange for Bahamian dollars, so there is a cost both ways. When Bermuda did this, after a four-year period they had more US dollars than Bermudan dollars. "In the system right now there are 116 US dollars for every Bermudan dollar. They have a fully backed currency. It also means that you can borrow in US dollars in Bermuda to build your home at a lower rate because you become one economic zone." Dr Rodgers added: "This would also allow our stock markets to take off. With this new system you can access money from anywhere in the world to get your business going." He said the Government must also provide an environment where there can be maximum opportunity for employment, without being the major employer. "The major employer is always the small and medium-sized businesses, not the Government," Dr Rodgers said. "What our government has done over the years is they have succumbed to what I call the double dependency syndrome. Since tourism and banking never provided all of the employment needed, the Government picked up the slack, so to speak, by-over employing in the public sector - often people who don't have the skills to be productive. "That has been a major part of why we have so much debt today. Eighty to 90 per cent of all government income goes to paying civil servants' salaries, rents and the ever-escalating debt." Dr Rodgers said the Government must also provide an environment where there can be the maximum amount of entrepeunership and Bahamian ownership, while noting that access to capital has been one of the biggest challenges facing local entrepreneurs.