• Ex-DPM urges ‘rush to finish’ over reform options
• As minimum global corporate tax push gains pace
• Govt must be ‘aggressive’ as Bahamas is behind
By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
A former deputy prime minister yesterday urged the government to “rush to the finish” on developing tax reform options, warning: “It would be naive to think we can continue as a ‘zero tax’ nation.”
K Peter Turnquest, who resigned as minister of finance in late November 2020 to fight “unfounded and untrue claims” by Sky Bahamas’ main financier, told Tribune Business the Minnis administration needed to move “very proactively and aggressively” to safeguard the Bahamian economy as momentum for a worldwide minimum corporate income tax gathers pace.
Arguing that The Bahamas “should have been further along, quite frankly” in developing tax alternatives that will ensure it complies with any global standard that emerges, he conceded that the issue creates “some level of concern” for maintaining the country’s economic competitiveness and that of its financial services industry.
With the newly-elected Biden administration last week throwing its support behind other G-20 nations and the Organisation for Economic Co-Operation and Development (OECD), which is leading the push for a minimum global corporate tax rate, Mr Turnquest said The Bahamas may soon have to “find our value proposition beyond being called a low tax jurisdiction”.
But, rather than falling into despair over the latest external pressures, he argued that The Bahamas must view the situation as “a glass half-full and take advantage of opportunities to find a [taxation] system that works” in this economy’s interests.
He agreed that one reform option involves converting the business licence fee regime into a corporate income tax, branding the former “inherently unfair and unjust” as it forces many Bahamian companies to pay more to the government in taxes than they make in annual profits.
Marlon Johnson, the Ministry of Finance’s financial secretary, declined to comment yesterday when contacted by this newspaper and referred it to Senator Kwasi Thompson, minister of state for finance. The latter said the government is “monitoring” developments but declined to
comment further.
However, it now appears inevitable - and only a matter of time - before a minimum global corporate income tax rate emerges, with corresponding pressure on all nations to conform, after the US government last week threw its support behind efforts to achieve a consensus on the issue. The International Monetary Fund (IMF) also backed the initiative.
The Biden administration’s move is a marked change from the stance taken by its Trump predecessor, which was more focused on allowing sovereign nations to set their own tax rates and opposed to European efforts to impose a so-called “digital tax” on US multinational giants such as Amazon, Google, Facebook and Apple.
However, the newly-elected Democratic government sees a global minimum corporate tax as critical to preventing such companies from minimising their tax burden via creative structures that shift profits and revenues to low-tax nations such as The Bahamas and other international financial centres (IFCs).
Its view, like that of the OECD and high-tax European nations such as France and Germany, is that a global minimum will prevent a so-called “race to the bottom” on tax rates. Pascal Saint-Amans, head of tax administration at the OECD, told the UK’s Guardian newspaper: “What the US has put on the table … [is saying] we want the rest of the world to follow, we kill tax havens. The game is over. Let’s move to a minimum agreed level.”
Janet Yellen, the US treasury secretary, last week pushed for a minimum global corporate tax rate of 21 percent - something that would represent a giant, potentially unsustainable leap for nations such as The Bahamas, which has no personal or corporate income tax.
Even World Bank executives suggested that 21 percent would be too much. And developing a global consensus on the issue may take time, even though the G-20 and OECD are pushing for one by summer 2021, given the disparities in existing rates. While the US presently enjoys a 21 percent corporate tax rate, the UK is at 19 percent and Ireland at just 12.5 percent, for example.
However, acknowledging that these efforts have potentially seismic consequences for The Bahamas should they come to fruition, given that it has long based its economic competitiveness on being a ‘no tax’ jurisdiction, Mr Turnquest said a “first phase” tax reform study had been completed before he left the Ministry of Finance in late 2020.
Asserting that the ministry already realised “the pressure being put on zero tax and low tax jurisdictions was unrelenting, and not likely to abate any time”, he added that the emergence of the global minimum corporate tax rate issue sparked further internal government discussions on “whether the tax system of The Bahamas is going to be compliant with global practice going into the future”.
“We fully anticipated this would come along,” Mr Turnquest told Tribune Business. “We started to have internal discussions about the tax system and how to adjust the tax system to whatever comes along so we remain compliant.
“At the end of the day, it would be naive to think we can continue as a zero tax jurisdiction. The support globally is not there for that, and the reality is that the tax base will be affected one way or another - whether by some level of taxation or be impacted by withholding rates that affect our international transactions.
“The Bahamas ought to rush to the finish on its tax models so that we have options we can evaluate as a country and determine what’s in the best interests of the domestic and international economy, and define the process.”
He conceded that efforts to end tax competition, and create a so-called global ‘level playing field’, “gives us some level of concern” in The Bahamas as it threatens to eliminate an advantage this nation has exploited for decades to lure foreign direct investment (FDI) and financial services clients to the jurisdiction.
And the former deputy prime minister also warned that companies headquartered in The Bahamas, but doing business elsewhere, could be suddenly placed at a competitive disadvantage if this country is forced to implement a minimum corporate tax on their profits.
“It’s a very significant issue that we have to look at, and I encourage the Government to look at that in a very proactive and aggressive way as, quite frankly, we should have been further along with our planning in respect of this,” Mr Turnquest said.
“The fact of the matter is that in order for us to be globally competitive we’re going to have to find a way to get along in the world and find our value proposition beyond being called a low tax jurisdiction.... It’s just now a matter of finding tax neutrality so that everybody is subject to what may be perceived as a minimum tax.”
Mr Turnquest voiced optimism that The Bahamas, and its financial services sector, were up to the task of adjusting their business model yet again in the face of renewed global demands. “We have the opportunity to remove ourselves from all this suspicion of being a tax haven or sheltering income from taxes and the like,” he added.
“I believe we ought to look at it as a positive and move to define, or redefine, our position on our terms before we’re forced to take a position. It’s a matter of looking at it as a glass half full and taking advantage of opportunities to find a system that works.”
Calling for The Bahamas to get ahead of international initiatives, he added: “Whenever you are forced into a position you inevitably end up being on the weak side of the table, but if you have a defensible position in terms of meeting the global standard you are in a much stronger position and are able to promote it to the international community.”
Mr Turnquest said determining whether the current Business Licence regime, which is levied on gross turnover, could be converted into a corporate income tax on profits, would be “a useful discussion”.
He added: “Let’s face it: The current Business Licence fee is unfair. You can end up making a loss and paying the Government tax revenue. It’s inherently unfair and unjust. Converting that system to some sort of net corporate tax with minimum deductions makes sense in my view.
“But what rate of tax has to be charged to create neutrality is a topic for discussion, and how to administer and apply that tax is a topic for discussion. We have to get on with that work, whether we’re forced to or we’re proactive.”
Comments
tribanon 3 years, 7 months ago
Global tax neutrality is a concept that would only ever be fair to the globalist bureaucrats who are in favour of and seek to have control over the big-government-high-tax jurisdictions of the world. The New World Order being sought by the globalist bureaucrats who love living the good life off of the taxes they impose on others would end up crashing the economies of smaller nations around the world like the Bahamas, leaving their many impoverished people to be only looked on by the new global ruling class as a source of cheap (slave) labour.
proudloudandfnm 3 years, 7 months ago
Congrats bro! Not one mention of the Chinese! Proud of you! Baby steps bro, baby steps! Keep it going now!
Clamshell 3 years, 7 months ago
ROFLMAO!!
Proguing 3 years, 7 months ago
"Janet Yellen, the US treasury secretary, last week pushed for a minimum global corporate tax rate of 21 percent - something that would represent a giant, potentially unsustainable leap for nations such as The Bahamas" and to think that some Bahamians were stupid enough to support Biden. The blacklists are not far off and once again the Bahamas will have to capitulate to these threats and to get rid of the last advantage that we have over our competitors.
proudloudandfnm 3 years, 7 months ago
That 21% is calculated on profits right? How is that bad? As long as its calculated on profits I think its a good idea. And if it is global how does it negatively affect competition?
Proguing 3 years, 7 months ago
Firstly, don't you think that Bahamians should decide on our tax matters and not Biden? Secondly many foreign companies come here because there are no corporate taxes, just like many banking clients came here for the banking secrecy. We already lost many banks, now whatever is left will leave. Why would someone set-up a company in the Bahamas once it is taxed at 21%? You can say goodbye to all the IBCs. Some people who hold property through companies will soon be shocked to learn they have to pay 21% tax on any gain when they sell. The consequences of this will be catastrophic.
proudloudandfnm 3 years, 7 months ago
Well if its globally accepted you can't blame Biden can you?
And if it is globally accepted then theoretically it puts us all on even ground.
You need to get your trump infused hatred of Biden out ya system bro. Seriously, trump is a moron, dumber than a bag of snot. Get a new role model...
Proguing 3 years, 7 months ago
If Biden forces the whole world to have a 21% tax, yes he is to blame. Your love for the old man is blinding you. Obama did the same with automatic of exchange of information, except that the US was the only country not to participate.
proudloudandfnm 3 years, 7 months ago
And how do you think Biden can force the whole world to do something they don't want to do?
Get a grip...
Proguing 3 years, 7 months ago
The same way Obama did with exchange of information and as mentioned above the US did not even participate in the program. This would have never happened with Trump.
proudloudandfnm 3 years, 7 months ago
Except the Common Reporting Standard was originally requested by the G20. Who told you it was Obama? Lemme guess Lou Dobbs? Hannity?
Please man. Just stop...
Proguing 3 years, 7 months ago
All the black lists the Bahamas was put on were initiated under Democrat presidencies. Under Clinton we had to sign automatic of exchange upon demand. As I said your love for the old man is blinding you completely.
newcitizen 3 years, 7 months ago
I'd much rather pay on profit than the current antiquated system of paying on revenue.
Emilio26 3 years, 7 months ago
Proguing I think the Bahamas should strengthen it's ties with China and Canada so we could let go of the USA.
newcitizen 3 years, 7 months ago
We're going to replace 87% of our visitors and 90%+ of our imports while our dollar is pegged to the USD? You think Canada (a country of 1/10th the US population) and China (a country literally on the other side of the world) will replace our ties with the USA?
proudloudandfnm 3 years, 7 months ago
I do agree about the business license fee, ship agents take in huge amounts of money from ships to pay for pilots, berthing and departure taxes among other services. For that money to included in calculating the business license fee is exactly as Turnquest says it is. That alone can wipe out any profits.
But before any new taxes are implemented the Bahamas has to deal with government reform. We cannot be made to pay more taxes and still receive the low quality services we currently receive. Time for government to downsize significantly and to move from an entitled system to a merit based system. No more jobs for life. No more jobs for votes!
ohdrap4 3 years, 7 months ago
In the bahamas only the poor or unfortunate pay taxes.
Zero tax is only for politicians.
tetelestai 3 years, 7 months ago
That is not only in The Bahamas, my friend. That is a global tenet.
proudloudandfnm 3 years, 7 months ago
How does the Cayman Islands deal with all this pressure? They still have no corporate taxes they still use duties as their primary source of revenue, they are still a tax haven and they are still one of the richest countries in the Caribbean. Do they just ignore these pressures? Why can't we?
tribanon 3 years, 7 months ago
The doors of the Cayman Islands aren't foolishly closed to non-resident foreign professionals competing with their local professionals in the practice of law, accountancy, investment management and advisory services, etc. and they don't have a D - - public education system.
And on top of that they know, unlike Jamaica and ourselves, how vitally important it is to keep the sinister and ruthlessly evil Communist Chinese Party well away from (out of) their economy. As a matter of policy, they don't take compromising gifts and loans, or accept investment projects, that are in any way connected to enterprises controlled by the CCP. LOL
proudloudandfnm 3 years, 7 months ago
Bro. Do you ever deal in facts? Ever?
Chinese companies incorporate in the Caymans a lot. And they Caymans is in fact inviting Chinese investments....
https://www.blacktowerfm.com/news/639-c…
Emilio26 3 years, 7 months ago
proudloudandfnm you must realize the Cayman Islands is still a british colony so it's still safe from being bullied by the United States and other world powers.
tribanon 3 years, 7 months ago
They also know the importance of not antagonizing their most important close neighbour - the US.
proudloudandfnm 3 years, 7 months ago
Actually they seem not to care what the US or any other country thinks or wants... That was the point of my post...
proudloudandfnm 3 years, 7 months ago
How do you think Brexit will affect the UK's ability to protect its territories?
ForeverDreamer 3 years, 7 months ago
I think, the simple fact that they are UK territory erases all their conjecture lol.
TalRussell 3 years, 7 months ago
The Eighth commandment is clear enough about the taking of personal monies/things against one's will. The Eleventh tax commandment..., Thou shall tax, all those found out to be/has, made profits off COVID, yes, levy even a higher rate taxes against the labs. the grocers, takeout meals vendors, and the undertakers.
DDK 3 years, 7 months ago
A zero tax nation? The only nation in the world that charges value added tax on customs import duty. These fricking politicians have been lying and stealing from the people for so for so long they wouldn't know honesty if it slapped them in the face!
tribanon 3 years, 7 months ago
We already have one of the highest effective tax rates in the world and our cost of living for a family of four is now even higher than that of the New York City greater metropolitan area. If voters foolishly allow Minnis to remain as PM, very few of them will survive the increased taxes and fees he has planned for them and their businesses.
Emilio26 3 years, 7 months ago
Tribanon actually the cost of living in bermuda and barbados is much higher than the Bahamas. You can even google it if you don't believe me. However, Barbados has a VAT rate of 17% and it's citizens and residents also pay property taxes and a road tax.
tribanon 3 years, 7 months ago
And what's the average GDP per capita and income per capita in Bermuda compared to the Bahamas? No matter what economic comparisons are made with these other island nations, one thing is for sure: We are rapidly headed the way of Barbados and Jamaica, and certainly not the way of the Caymans and Bermuda. And with our illegal immigrant crisis to boot, not to mention Communist China's agenda for our nation, we'll be lucky if we don't look like Venezuela within the next decade. Another term of Minnis as PM will certainly get us there in short order.
Emilio26 3 years, 7 months ago
Tribanon electing Brave Davis won't make much of a difference seeing how the last PLP administration under Perry Christie introduced VAT at 7.5% in the first place.
tribanon 3 years, 7 months ago
From my perspective, most die-hard FNM supporters are truly lost when it comes to knowing what evil to fear most. And I say this while readily acknowledging the political elitists within the PLP party are also corrupt bastards. Suggest you cast your vote for the reputable independent candidate who decides to run in your constituency. If there isn't one, then you'll just have to make your choice of the lesser of evils. It does seem I will have an easier time than you casting my vote.
DDK 3 years, 7 months ago
It doesn't matter how much they tax us, if they don't stop wasting the proceeds of taxation on the one hand, and putting the other half (?) in their pockets on the other hand, they will never bring down the national debt and the Country will never be solvent.
Proguing 3 years, 7 months ago
Breaking news:
"IMF officials endorse Biden's corporate tax hike, global minimum plan"
"WASHINGTON (Reuters) -International Monetary Fund officials on Wednesday endorsed U.S. President Joe Biden’s plan to raise corporate income taxes and negotiate a global minimum tax, adding that companies and wealthy individuals that have prospered during the pandemic can afford to pay more."
https://www.reuters.com/article/us-imf-…
BONEFISH 3 years, 7 months ago
What the incompetent ex-minister of finance said should be common knowledge. Maybe not here in our Bahamas.
Tax reform should be an going process. Making the system of taxation fairer, more equitable and more efficient.. Also the first world countries will force these changes upon the smaller countries. The americans are trying to capture as much of the tax dollars, american corporations avoid paying by transferring some of their operations aboard.
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