The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A well-known businessman yesterday suggested the Bahamas implement a small capital gains tax on property transaction profits, as he warned the Government not to “pile” its National Health Insurance scheme on top of Value-Added Tax (VAT).

Adding his voice to the recent surge of private sector opinion in favour of a payroll tax, Dionisio D’Aguilar said the Government should also examine a 5-10 per cent capital gains tax that would capture some of the enormous profits made on high-end real estate deals.

Emphasising that property vendors would only pay such a tax if a profit was made, the Superwash president told Tribune Business: “We’ve got a lot of wealthy people coming into the country, buying property at Lyford Cay for $2 million and selling it for $4 million.

“They could pay just 5-10 per cent on the profit. These taxes are easy to collect, easy to understand and easy to verify.”

This, Mr D’Aguilar said, was not the case with VAT, whose proposed 15 per cent rate was “so significant that it’s caring a lot of people that it’s going to destroy the economy.

“It’s going to cause a significant amount of inflation for those companies that are not exempt. What the Chamber of Commerce is trying to do is prevent an enormous shock to the system.”

The former Chamber of Commerce president added his voice to those calling for the Government to implement a payroll tax instead of VAT, given that the infrastructure to collect and administer it already existed through the National Insurance Board (NIB).

Suggesting that this mean a payroll tax would be cheaper to administer than VAT, Mr D’Aguilar acknowledged that potential loopholes with the former - such as persons claiming that they were partners or shareholders in a business, and did not receive a salary - would have to be eliminated prior to implementation.

Noting that many wealthy Bahamas residents could also avoid the tax because their earnings were linked to dividend and investment income, Mr D’Aguilar agreed: “You’d have to define what payroll is, and make it equitable. Middle income and low income people get a pay cheque, whereas wealthy people get dividend and investment income.”

He argued that a payroll tax, set at a rate of between 5-8 per cent, and with employer’s paying 5 per cent and the employee 3 per cent, “might be cheaper and easier to collect”.

“The Government would probably yield more from that tax than VAT,” Mr D’Aguilar said. “If you implement VAT it might yield 70 per cent, but a payroll tax, because of the infrastructure that’s in place and it’s easier to police, might yield 85 per cent might not be so significant. People can live with an 8 per cent payroll tax.”

Meanwhile, Mr D’Aguilar expressed concern that the Government appeared likely to move on implementing its National Health Insurance (NHI) scheme within months of VAT’s implementation on July 1, 2014, disclosing that he had heard September mentioned as a target date.

“I really think National Health Insurance is dead on arrival, at least for the next couple of years,” Mr D’Aguilar told Tribune Business. “There’s no way they can pile this increased cost on top of the other one they’re doing [VAT].

“They would be absolutely stupid to put it in shortly on the wheels of VAT. I don’t think that’s going to happen.”

“I don’t think the business community can absorb that additional cost right now. If they bring in any other type of tax, it would incense the business community; everybody would say enough is enough.

“That would drive the business community to Bay Street. They’d have massive push back on NHI, and we don’t want them to think about that right now. The only debate we should be having is how to plug the Government’s deficit.”