The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian businessmen yesterday slammed the IMF’s income tax proposal, demanding: “Don’t even talk to us about more taxation until the Government’s cleaned its house.”

Robert Myers, a principal with the Organisation for Responsible Governance (ORG), blasted the idea of new and/or increased taxes as “short-sighted and irresponsible” given the Bahamas’ present economic and fiscal condition.

Warning that an income tax would only further weigh down already-overburdened Bahamian businesses, Mr Myers described the IMF’s proposal as akin to “putting the cart before the horse” because the Government has yet to curb its spending and deliver on promised fiscal reforms.

The IMF, in its statement on the Article IV consultation with the Bahamas, called on the Government to implement a “low rate income tax” to both improve taxation system fairness and replace revenue lost as Customs tariffs are slashed.

The Bahamas has to cut, or eliminate, many tariff rates as part of its international trade commitments, but Mr Myers warned it was dangerous to implement an income tax “in a vacuum” where just one factor is considered.

“I think it’s irresponsible and short-sighted,” he told Tribune Business. “The IMF’s suggestion to introduce income tax into the Bahamian tax structure is putting the cart before the horse, and does not show an understanding of the local socioeconomic structure.

“Adding any further taxes ahead of the Government’s [planned fiscal] reform is unacceptable, and the suggestion of it is downright irresponsible.

“In effect, what the IMF suggests by this is that if the Government taxes its citizens more the IMF will lend it more money. The Government does not need more money; it needs to learn how to live within its means, like the rest of us.”

Mr Myers agreed that the Bahamas’ potential accession to full World Trade Organisation (WTO) membership would require further reviews of its taxation system, but changes should not be made on this basis alone.

“We can’t do this thing in a vacuum,” he told Tribune Business. “We’ve got to do things with an eye to improving the socioeconomic conditions and economy of the nation. We’ve got to look at the tax structure, but not just to increase government revenues.”

Suggesting that the IMF proposal reflected an outsider’s opinion, and the Fund’s “limited view of the Bahamas”, Mr Myers said there were numerous tax reform options besides income tax.

To replace revenues lost to tariff cuts and eliminations, alternatives included increasing the VAT rate or imposing real property tax on Bahamian-owned properties in Freeport and the Family Islands.

Mr Myers added: “To focus on tax as a means to fix the nation’s socioeconomic and fiscal crisis is, as Winston Churchill put it: ‘I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle’.

“First and foremost, clean up your house,” the ORG principal said of the Government. “Don’t tell me to tax the citizens more, and slow the economy more, when there is all kind of waste, inefficiency and corruption in government.

“Don’t talk to me about any more taxes until you’ve cleaned up your own fiscal house. I don’t want to know. I don’t even want to hear it. We took VAT on the chin, and the former government said they would do all that, but they did nothing.”

Michael Maura, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman, last night echoed Mr Myers by warning that it would be “disastrous” to introduce an income tax now - even if it was intended as a revenue replacement mechanism.

“The IMF speaks to the need to improve the ‘ease of doing business’, for the Government to complete its fiscal overhaul, to reduce the cost of energy. We also need to improve productivity. All these and others must precede any new tax,” Mr Maura argued.

“To introduce a new tax at a time when the cost of living is unbearable, at a time when a small business can hardly keep its doors open, would be destructive. Furthermore there remains much work to do in the area of tax compliance with the taxes on the books today.

“I will say this: After meeting with the new Financial Secretary [Marlon Johnson] today I am confident that he will do all he can to address this matter. There is also great opportunity for the Government to automate its processes and engagement with the taxpayer so as to become more efficient at tax collection, and simultaneously lower the administrative cost.”

Rick Lowe, an executive with the Nassau Institute think-tank, also slammed the IMF’s income tax proposal for “going in the opposite direction we should be taking”.

“How ridiculous,” he told Tribune Business. “Just tax us into oblivion, tax us all out of existence. That will solve the problem. They’d better figure out ways let people get into business a little bit easier to rejuvenate the economy and take the pressure of existing businesses with the current tax framework they have in place.

“You’re killing the economy through regulation and taxation, and it is already slowing with no growth. We cannot keep finding new taxation without finding economic growth. You will take more and more out of the economy. There’s less and less to spend, and people are less inclined to invest.

“As long as you keep taxing, that’s not going to change the situation very much. I don’t support the idea of taxation simply for the sake of taxation. To me, it’s the opposite of the approach we should be taking.”