The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas needs to position itself as a ‘low tax’ jurisdiction to access potential benefits from tax and investment treaties with other countries, a Tax Coalition co-chair warning yesterday that a ‘flat’ or ‘no tax ‘ posture would “cause problems”.

Robert Myers told Tribune Business that the Bahamas needed to look towards the likes of Singapore and Luxembourg as examples of progressive taxation, as their economies were “booming” despite income and corporate taxes levied on foreign companies.

Speaking to where the Bahamas should position itself on tax and fiscal reform, Mr Myers said being perceived as a ‘no tax’ jurisdiction would likely leave this nation unable to access ‘double taxation’ and other investment boosting agreements with developed nations.

“I don’t think in 10 years’ time that anybody will be ‘no tax’,” Mr Myers told Tribune Business. “‘No tax’ is going to cause some problems.

“Some of these jurisdictions with ‘flat taxes’, it also creates problems for tax treaties, so we need not have a flat tax. We need to be ‘low tax’ to have treaties with the US and Europe.”

Pointing out that Singapore and Luxembourg’s tax policies were “not scaring off” commerce and investors, Mr Myers said the Bahamas potentially had much to learn from their approach.

“Those economies are booming because of their approach to taxation,” he added. “They’re actually encouraging economic activity.”

Mr Myers revealed that the Coalition for Responsible Taxation was working on short, medium and long-term proposals for fiscal and tax reform that it is hoping to unveil in early May.

This, he added, would coincide with the publication of the economic impact study, currently being performed by Oxford Economics, on different versions of Value-Added Tax (VAT) and alternative reform options.

Mr Myers explained that the Coalition had focused on a 5 per cent payroll tax, projected to raise $190 million annually, as its favoured short-term reform option because it could be implemented almost immediately.

“Let’s get it done as fast as we can. That’s the responsible thing to do,” he told Tribune Business on fiscal reform. “As fast as we make the decision, let’s do it. That’s why we went for a payroll tax, as it could literally be done in a month. Bam, it’s done, and already you’ve got industry behind it.”

And, via the National Insurance Board’s (NIB) existing infrastructure, a payroll tax would be relatively cheap and easy to collect.

While Government ministers and officials have expressed concerns over potential flaws with a payroll tax, Mr Myers said there were “loopholes” and problems with all taxes, including VAT.

Acknowledging that commission and dividend income would somehow have to be captured under a payroll tax, he added: “Long-term we’re looking beyond a payroll tax, as we recognise the World Trade Organisation will create issues with duties, and we will have to fill that void.

“We’re having these discussions internally with various groups, looking at issues in their fields. That is why we’re hoping to have some of these medium and long-term plans complete by the time we have the Oxford Economics report completed and presented by early May.”

Mr Myers, meanwhile, complained that the Ministry of Finance’s VAT team were failing to properly consult the Coalition on tax/fiscal reform, despite it representing the “broadest spectrum” of private sector interests.

With the VAT team seemingly more interested in meeting individual industry groups and businesses, the Coalition co-chair expressed concerns that this potentially created a ‘divide and conquer’ approach.

And, in turn, is also created the possibility for the Government to cut agreements with specific industries for them to be VAT ‘exempt’ or ‘zero rated’, moves that would narrow the tax base, increase the burden on other sectors and not be in the overall economy’s best interests.

‘I don’t know why there’s resistance,” Mr Myers said of the Ministry’s seeming reluctance to consult with the Coalition. ‘I’m surprised that at this point they don’t see us as the recognised body to consult with. Why not consult with the broadest private sector group possible? I don’t want people to think they have been consulting with us.... they have not.”

He suggested that this made the Ministry of Finance’s consultations efforts “inherently flawed”, and questioned why it had not recognised the Coalition as the private sector lead despite meeting with it eight to 10 times.

“We are looking at it from the broadest spectrum, not what concessions they’ve given the retailers versus the hotels,” Mr Myers told Tribune Business.

“We want to be as balanced as possible,” Mr Myers told Tribune Business. “There are plenty of organisations in the Coalition that want to give a bit, but it has be balanced. These things they are doing individually could be something the Coalition and business community at large object to.

“What we hear back from industries on a daily basis is that they [the VAT team] talk to us, but they don’t hear us. For some reason [John] keeps going back to the gas station or food store, not the Coalition.

“We may not roll over like they want us to, but we promise we won’t bite them.”

Mr Myers emphasised that he did not want to blow the consultation issue out of proportion, as the Coalition was getting all the support and data necessary from the Government.

He described the consultation issue as “one little speed bump in the road” that both parties had to get right.