The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The private sector has hailed the International Monetary Fund’s (IMF) call to simplify a “non-progressive” Business Licence fee system that taxes companies into losses.

Gowon Bowe, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman, suggested that the private sector was interpreting the Fund’s call to reform ‘non-business friendly’ taxes as a direct reference to the Business Licence fee.

The IMF, in a statement following its recently-completed two-week Article IV consultation with the Bahamas, said: “The authorities should review the efficiency of tax exemptions and concessions, including to the tourism sector, and consider simplifying domestic taxes that are not business-friendly.”

Welcoming the IMF’s advice, Mr Bowe said the Chamber and wider private sector had “long advocated for revisiting the Business Licence regime”.

Backing the Fund’s call for more “business friendly taxes”, he added: “The Business Licence regime currently charges on revenues and does not factor in the profitability of businesses.

“In practical terms, a business can be profitable before Business Licence fees and be driven in to losses once Business Licence is factored in.

“There is no progressive tax regime globally that taxes a business into losses. Taxes are capped at profits and, under corporate tax regimes, losses can in fact be carried forward for a period of time. This reality has been recognised by the IMF team, and our policymakers must work with the private sector to reform this tax.”

The Business Licence fee, and how it is calculated, have been concerns for the private sector long before the latest controversy erupted over the Government’s decision to move the annual filing deadline forward by two months to end-January 31.

The Christie administration eventually relented, and move it back to end-March, but businesses have long regarded the use of turnover/revenues as the basis for calculating Business Licence fees as unfair.

The use of turnover, rather than profits, penalises high volume (revenue)/low margin businesses, such as food stores and gas stations. They inevitably incur higher Business Licence fees than low turnover/high margin (profit) businesses such as law and accounting firms.

Many companies have also complained that their annual Business Licence fees are higher than their net profits, meaning that the Government is earning more from them than their shareholders are.

Mr Bowe, meanwhile, acknowledged that the IMF had “raised the question of the effectiveness of our current tax concessions to foreign direct investment and, in other words, the return for our concessions”.

Some observers have previously suggested that the foreign-owned resort industry enjoys a never-ending welfare system courtesy of taxpayers and the Government.

“This is a much larger debate, but is one that we must have, and the National Development Plan provides the platform to do so,” Mr Bowe added, suggesting that this initiative will further enable the Bahamas to “punch above its weight”.

The Plan’s first step, the so-called ‘State of the Nation’ report, is due to be publicly released within the next several weeks.

Mr Bowe told Tribune Business that it was remarkable that the Bahamas had progressed so far without proper planning in the 43 years since it became an independent nation.

He warned, though, that the country was now reaping the results of its failure to plan, which were the emergence of low economic growth, high crime and unemployment, deteriorating infrastructure and social breakdown.

“The Bahamas has tremendous potential as set out in the [IMF’s] concluding statement,” he said. “We are a nation that has long punched above its weight and, ironically, we have done so without even planning to do so.

“Imagine the power our punches could pack if we actually planned. The efforts of the National Development Plan, although not as glamorous in public discussion to date, are the most progressive efforts this country has taken since its move to independence.

“ As the Proverb sets out, where there is no vision, the people perish,” the Chamber chairman continued. “The Bahamas has meandered along since independence and benefited from good fortunes, but the failure to plan has planted the negative seeds were are currently reaping - crime, large numbers of under-educated youth, breakdown in our social fabric, anemic economic growth, deteriorating infrastructure and failure to protect and leverage our natural resources, just to name a few.”

Mr Bowe quoted Antoine de Saint-Exupery, who said ‘A goal without a plan is just a wish’, and Benjamin Franklin’s comment that ‘If you fail to plan, you are planning to fail’.

“There need not be further commentary necessary - the National Development Plan is a must,” he added.

“The gifts we have been granted as a country, including beautiful natural resources, intelligent and ultra capable citizens, and a welcoming environment, must be leveraged to ensure that we continue to punch above our weight and knock out fiscal deficits, spiralling debt, anemic economic growth and our social ills.

“Comments such as the [IMF] concluding statement should not be eye openers, but rather inspire us to prove the world wrong on its underestimating us.”