The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

Another Cabinet minister yesterday added his voice to those calling for legalising a Bahamian web shop industry, suggesting the $20-$100 million in annual taxes it might generate could lessen what was needed from Value-Added Tax (VAT).

Ryan Pinder, minister of financial services, said a conversation with a “major businessperson” had shown him that persons were not opposed to VAT as a concept, but rather “the rate and the timeframe for implementation”.

He added that the business executive had indicated to him that he “can work” with VAT, if the rate was cut from 15 per cent to 10 per cent, and implementation pushed back from July 1, 2014, to January 1, 2015.

Acknowledging that extra monies had to be found to accommodate any ‘lessening’ of VAT, Mr Pinder focused on the regulation and taxation of a Bahamian-owned electronic gaming (web shop) industry as “worthy of consideration”.

He added that taxation of such an industry and its winnings could result in reduced taxes and a lower cost of living for Bahamians.

During his presentation on the 2013-2014 Mid-Year Budget, Mr Pinder suggested the creation of domestic electronic casinos where Bahamians can legally gamble on pre-approved and regulated electronic games.

He added that the industry as it exists today creates significant regulatory concerns. “Because of these concerns, the current operations are unable to bank their assets in the Bahamas, thus essentially removing millions and millions of dollars from the economic activity of the Bahamas. This has a dramatic effect on the economic growth of the country,” said Mr Pinder.

“Separate and apart from these concerns are the obvious implications to government revenues. With a legitimate and regulated domestic gaming industry, it is projected that depending on the tax structure, the Government can realise anywhere between $20 million and $100 million per year.

“This is a very significant amount of Government revenues, and significantly impact the fiscal well-being of the Bahamas and alleviates any pressure from multilateral institutions, such as the IMF and international rating agencies.”

Mr Pinder said he agreed with Central Bank governor, Wendy Craigg, that the current unregulated status of the web shop gaming sector created both money laundering and ‘parallel banking system’ concerns.

“I think the creation of a domestic electronic gaming industry, owned by Bahamians, where Bahamians would be permitted to gamble on games approved by the regulator, the Gaming Board, is worthy of consideration,” Mr Pinder said.

“The imposition of anti-money laundering regulations and requirements on these establishments, consistent with international best practices, would be required.

“The taxation of these institutions and the winnings could well result in reduced taxes and reduced cost of living for all Bahamians.”

Mr Pinder also called for the Government to review the taxes it levied on the Bahamas’ international economy, specifically work permit and permanent residency fees, and a corporate income tax on foreign-owned businesses based in this nation.

He suggested there was “some headroom” to raise work permit and permanent residence fees, based on a comparative study of similar fees charged by other countries.

“I would also propose a review of external fees for the purpose of revenue generation. An example of this is Immigration fees on work permits and permanent residency,” the Minister said.

“A review and balance must be achieved that generates additional government revenues while not making the Bahamas non-competitive to foreign investment and business.”

Mr Pinder also proposed an International Operational Company Income Tax. “This will require careful review and intense consultation, and will require detailed analysis on revenue versus affect on business,” he added.

“The concept is those businesses that are designated as ‘non-resident’ by the Central Bank will be subject to a Corporate Income Tax. By definition these institutions are operational entities from within the Bahamas that are foreign-owned and provide services exclusively to foreign clients.

“This model can only work if the Bahamas can successfully negotiate double tax agreements with countries where the owners or parent company of these companies are from/taxed.”

Mr Pinder said none of these measures was a substitute for VAT, but could lessen the burden it was likely to impose.

“Tax reform is not easy, but the Bahamas requires tax reform to be fiscally sustainable. Tax reform is not easy, the Bahamas Government has and continues to review options and approaches. Tax reform is not easy, but tax reform is necessary,” he added.