The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Minister of Finance says the Government will soon extend its crackdown on tax cheats to Grand Bahama, arguing that Freeport was being "used as a smuggling gateway to the rest of the Bahamas".

K P Turnquest told a Grand Bahama Chamber of Commerce luncheon that the enhanced compliance and enforcement methods unveiled on New Providence last November, in Hurricane Matthew's aftermath, will now be turned on the second city.

"The bedrock of a sound fiscal regime is a modern system of tax and Customs administration, executed by committed and honest actors in the positions of public trust," Mr Turnquest said. "Unfortunately, the system has not always worked, and thus the Government has recently launched measures to address non-compliance with tax and Customs laws.

"These programmes have been piloted in Nassau with great success, and will be extended to Grand Bahama and the Family Islands in the very near future, having full regard for the provisions contained in the Hawksbill Creek Agreement."

Mr Turnquest continued: "These measures are risk-based and focused on levelling the playing field between those that operate within the rules and those outside. In this context, we believe these programmes will be welcomed by the business community as they will help eliminate distortions caused by shadow operators that are not paying their fair share....

"We must not allow Freeport to continue to be used as a smuggling gateway to the rest of the Bahamas to avoid tax responsibility, and to avoid detection of illegal activity."

The Minister of Finance's last comment is understood to have caused some consternation in the Freeport private sector, as it was unclear what he was referring to. Some have interpreted it to mean the practice of Nassau-based firms importing product through Freeport, leaving it in 'bond' and only bringing it out and moving inventory to Nassau once it is needed or has been purchased.

One Freeport-based business contact, speaking on condition of anonymity, described this as 'good business practice' that boosts cash flow, with no due VAT or Customs taxes evaded since this has to be paid once inventory is removed from a 'bonded' facility.

The tax crackdown headed to Freeport is targeting four key taxes - VAT, Business License fees, real property taxes and Customs duties, as the Government bids to enhance cash flows by collecting every cent in taxes due to it.

Simon Wilson, the Ministry of Finance's financial secretary, earlier this year said the Government was targeting an extra $400 million from its tax crackdown within two years.

He told the Chamber of Commerce's State of the Economy 2017 forum that the enforcement crackdown, launched late last November, had generated an extra $15 million per month just from New Providence.

Mr Turnquest, meanwhile, acknowledged that the Government needed to further diversify the tax base away from Customs duties, something it has begun doing with Value-Added Tax (VAT).

"Sometimes, effective enforcement of our Customs laws is in conflict with our monetary and economic growth objectives," the Minister said. "For this reason, the Government must continue to diversify its tax base away from Customs duties and encourage domestic production of goods and services for local consumption and export."

Pledging that the Government would adhere to its promises of transparency, accountability and anti-corruption, Mr Turnquest added: "Businesses must follow the rules as you would expect us to. Government contracts must be awarded on the basis of merit and ability, and at competitive rates.

"Conflicts of interest will be frowned upon and not tolerated in a modern governance structure. More serious situations, such as acts of bribery or attempted bribery, will be dealt with according to the law. We must be a government and people of integrity in order to safeguard the public trust and their future prospects."

Mr Turnquest provided no specifics on efforts to re-open/sell the Grand Lucayan property, only saying that the Minnis administration had "a back stop plan if the negotiations drag out further than we intend.

"At the end of the day, we want a deal that we can stand behind in full daylight and any transparency tests, which will not place unacceptable burdens on the Bahamian people, but gives us an opportunity for Bahamians to obtain a stake in the industry for any tax dollars given, and a world class operator that will bring value to our destination long-term," he said. "We believe we are close."