The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

The Government is not planning to introduce “a broad-based corporate income tax”, as recently urged by the International Monetary Fund (IMF).

Michael Halkitis, minister of state for finance, said such a tax was not on the Government’s agenda at this time.

“I think they raised it in the context of Business Licences. Our Business Licence fee operates like a sort of corporate tax. When they come they do their studies, and they give us ideas. A corporate tax is not on our agenda at this time,” Mr Halkitis told Tribune Business of the IMF’s advice.

The Government is proposing to implement a Value Added Tax (VAT) on July 1, 2014, at a rate of 15 per cent, with the hotel industry subject to a lower 10 per cent rate.

The Government is estimating that implementation of a Value-Added Tax (VAT) will generate a $100 million net increase in its annual revenues, with the new tax producing equivalent to 2 per cent of Gross Domestic Product (GDP).

The IMF, in its Article IV consultation report on the Bahamas, urged the Government to go further than a VAT and combine it with a “simple, broad-based corporate income tax”.

While pointing out that revenue-to-GDP ratios were low in comparison to the rest of the Caribbean, and well below the spending ratio equivalent, the IMF said the narrow tax base and “weak” compliance and administration were compounded by the lack of taxes generated by the two largest industries - tourism and financial services.

Apart from VAT, which it estimated would yield revenues equivalent to 2-3 per cent of GDP ($160-$240 million), the IMF urged the Christie administration to “introduce a simple broad-based corporate income tax, and rationalise the system of tax incentives”. The latter, which are largely tax breaks/concessions to major foreign direct inesvtors, account for $285 million in per annum revenues.