The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government could increase tax revenues by $485 million per annum if it just brought Customs duty and real property tax compliance up to international norms, a Tax Coalition co-chair yesterday warning its potential fiscal reforms were a recipe for “a failed society”.

Robert Myers told Tribune Business that if the Bahamas increased compliance with those two taxes to the “internationally acceptable” 70 per cent level, the Government would earn an extra $485 million annually.

The International Monetary Fund’s (IMF) recent Article IV report had placed taxpayer compliance with these two key taxes at below 50 per cent, and the increased sum projected by Mr Myers and the Coalition for Responsible Taxation would come close to matching the $500 million revenue rise the Government is targeting for 2016-2017.

If the Coalition’s $485 million estimate is correct, it would almost eliminate the need for Value-Added Tax (VAT), which Mr Myers and the private sector group last week told the National Chambers Conclave was an attempt to “treat the symptoms”, not the core problems, responsible for the Bahamas’ fiscal malaise.

The Tax Coalition co-chair yesterday told Tribune Business that VAT was effectively an attempt to squeeze more money from the law-abiding businesses and citizens that already paid their due taxes, and who were already ‘maxed out’.

Failing to go after delinquent taxpayers, he warned, would upset the social balance and drive more persons and businesses into the informal, cash-based economy, resulting in even less money for the Government.

“VAT is saying we just need more money to address the shortfall,” Mr Myers said. “You’re doing that by taxing the same people, and ignoring the people that don’t pay taxes.

“You can’t have half the society not paying taxes, or one-third paying taxes, as you upset the balance.”

Mr Myers said that, through the proposed VAT plan as currently exists, the Government was asking law-abiding businesses to pay more taxes despite many being unable to afford to do so, while giving delinquent taxpayers a ‘free pass’.

Likening the situation to two neighbours, where one paid due taxes and the other did not, Mr Myers said the law-abiding person would be subsidising his neighbour’s non-payment, with the latter suffering no consequences.

“At some point you’re going to say: ‘No , I can’t afford to do this any more, I can’t afford to pay more taxes’,” Mr Myers said of the law-abiding neighbour.

“Why can’t you collect from him, make him accountable? We’re already at that breaking point, no more to give, putting me out of business.

“The guy next door is running around in a new car because he’s not paying taxes, and you can’t afford to buy new cars for your car because you’re also paying his taxes.”

“If affects you whether you’re an individual or a business,” Mr Myers added. “People and businesses are being over-taxed, while the rest are just running amok.

“Why should I be asked to pay more when I’m already paying? It’s not acceptable and not sustainable.

“From a government standpoint, it’s irresponsible to think that model’s sustainable. Eventually, what you’re going to have is a failed society. You’ll force people into the informal economy, a cash-based system.... That’s a dangerous threshold to get to.”

The Bahamas spent more than $1 billion on interest payments just servicing its debt in the seven years between 2005 and 2011, and Mr Myers said many in the private sector were “screaming” that they could not afford any further tax increases.

He added that many Bahamas-based companies were being forced to take out loans to pay the new and increased taxes unveiled in the 2013-2014 Budget, and countless sectors - especially tourism - had expressed fears that VAT would reduce their competitiveness and cost them market share.

“My God, what would make you wake up and do something about it,” Mr Myers asked. “All the signals are negative. At what point will you wake up and say: Houston, we have a problem.

“You can’t keep taxing the law abiding citizens. Ask the others to pay. A lot of them can afford to pay, but don’t because there are not teeth. Unless you make something happen to them, they will not pay up.”

He called on the authorities to write new laws, or amend existing ones if necessary, to ensure the Government did a better job collecting the existing taxes on the books.