The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The 2013-2014 Budget will make the communications sector one of the Bahamas’ most heavily taxed industry, a major player estimating that its various licence fees now equalled around 6 per cent of total annual revenues.

Barry Williams, Cable Bahamas’ senior vice-president of finance, told Tribune Business that the Christie administration’s Business Licence reforms, when combined with the various communications fees it already pays, would have a “very significant” impact.

Explaining the turnover-related tax burden that Cable Bahamas will now face, Mr Williams said the BISX-listed company paid Communications and Utilities Regulation & Competition Authority (URCA) licence fees that equated to 3 per cent and 1 per cent of total per annum turnover, respectively.

Under the current Business Licence regime, Cable Bahamas also pays a sum equivalent to 0.75 per cent of its annual turnover to the Government.

But, under the new structure, as a company generating more than $100 million in annual revenues, Cable Bahamas will now pay a Business Licence fee equal to 1.75 per cent of total turnover.

Based on 2012’s revenues of $112.02 million, Cable Bahamas will see its Business Licence payment increase from $840,154 to $1.96 million, a rise of 133 per cent - meaning this tax alone will more than double.

When the URCA and Communications licence fees are thrown in, Cable Bahamas’ total turnover-based taxes will rise from around 5 per cent of total revenue to near 6 per cent.

In gross terms, the latter figure - Cable Bahamas’ total turnover-based tax burden - is $6.271 million. That figure is equivalent to 31.2 per cent - almost one-third - of its full-year $21.561 million in net income for 2012.

The more than $1 million increase in Business Licence fees represents money potentially lost to Cable Bahamas’ Bahamian shareholders, and comes at a time when the company - like most other Bahamas-based businesses - is facing a host of cost-related pressures from regulatory and programming fee rises.

“Everything is really top-line revenue right now. Today, we’re paying probably around 5 per cent, and with the other 1 per cent increase, it’s going to probably going top get us to about 6 per cent, which is no small number,” Mr Williams told Tribune Business. “That’s very significant.”

While he had done no comparisons to other industries, he added that Cable Bahamas and other communications industry players had been paying more in fees and taxes, as a percentage of the top-line, than the likes of banks prior to the Budget reforms.

“Certainly, I think we’re a lot higher than they are,” the Cable Bahamas executive added.

Asked whether communications was one of the most heavily taxed industries in the Bahamas, Mr Williams said: “Absolutely. There’s no doubt about it.

“Obviously, there’s certain increasing costs all around in all areas of the business. We did try to mitigate some of those by going for a justifiable rate increase, which didn’t come through.

“Here we go now in having increases in Licence fees. For us, it’s obviously not going in the right direction, but that’s where we are.”

An even higher burden will likely be shouldered by Cable Bahamas’ main rival, the Bahamas Telecommunications Company (BTC), as a result of the Budget changes.

BTC executives did not respond to Tribune Business inquiries before press time, but based on the company’s $360.68 million in total revenues for 2009, the last year for which audited financials are available, it would be paying $21.64 million in total fees between the various government and URCA levies.

That is more than double the $10.584 million BTC paid in government fees in 2009.

The size and scale of the increased tax burden resulting from the 2013-2014 Budget is being felt throughout the Bahamian economy, and the danger for the Government is it could act as a disincentive for firms to expand and hire.