The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government is aiming to raise a collective $68.5 million in extra revenue this fiscal year from some of its more controversial Budget increases, amid suggestions yesterday that global banking reforms had contributed to the external reserves slippage.

The International Monetary Fund’s (IMF) Article IV report revealed the extent of the revenue increases the Christie administration is projecting from the new bank and public corporation Business Licence fees; the increased Business Licence rates on all other companies; the environmental levy and the 1 per cent Customs processing fee.

The largest share, more than one-third of the $68.5 million, is projected to come from the 3 per cent of gross revenue Business Licence fee on commercial banks, generating some $28 million.

Another $20 million is forecast to come from the increased Business Licence rates on all other Bahamian companies, with $5.5 million generated by the rise in fees for the offshore financial services sector.

The IMF report said the environmental levy is predicted to generate $7 million in extra revenue for the Government during the 2013-2014 fiscal year, with $3 million coming from the 1 per cent Customs processing fee (capped at $500), which the Freeport private sector is readying to challenge via Judicial Review.

Finally, the new Business Licence fees imposed on public corporations are projected to raise a further $5 million in revenue for the Government.

Meanwhile, James Smith, the former minister of state for finance, yesterday said Basle III accord’s increased regulatory capital and balance sheet demands had prompted global head offices to extract higher-than-normal dividends from their subsidiaries in the Bahamas and elsewhere.

Tribune Business revealed yesterday that the Central Bank of the Bahamas had asked the Government to engage in $400 million worth of foreign currency borrowing this fiscal year to bolster the declining external reserves, with the IMF flagging up the increased bank profit remittances as one factor behind the slippage.

While suggesting that the Central Bank “request” was unusual, Mr Smith agreed that there had “been a bit of a run on the reserves”, due to weaker tourism performance and the Canadian-owned banks and others taking their dividends and profits out.

“I know it’s hit the Bahamas pretty hard,” Mr Smith told Tribune Business, “because the Canadian banks have for the most part been releasing their earnings.”

Banks traditionally left their assets in the Bahamas, due to its low or ‘no tax’ reputation, with net foreign assets often almost equivalent to the Central Bank’s $700-$800 million average reserves.

Now these monies were being taken out of the Bahamas to aid head offices in meeting Basle III’s requirements, impacting the external reserves, although Mr Smith said this was “more a once off”.

“It really shows the Bahamas is becoming increasingly more connected to the wider world, despite what we’re saying,” he said, adding that the capital remittance would not undermine the strength of Bahamas-based institutions.