By YOURI KEMP
Tribune Business Reporter
ykemp@tribunemedia.net
A Bahamian financial analyst yesterday backed the introduction of income tax as he called for this nation to move away from VAT and the other regressive levies it has relied on for decades.
Kriston Moore, president of the Chartered Financial Analyst (CFA) Society of The Bahamas, told a Rotary Club of West Nassau meeting that income tax would be a fairer and more equitable option given that it is directly linked to a person’s or company’s earnings and ability to pay.
Those who earn more would pay more tax, either via a personal or corporate income tax, he added, as opposed to The Bahamas’ current VAT and import-dominated tax structure where lower income households devote a higher proportion of their earnings to taxes compared to their wealthier counterparts.
Mr Moore said implementing a Bahamian income tax will also better redistribute wealth that under the current system, branding such reforms more “progressive” than Customs duties or VAT.
“Putting in more progressive tax systems, such as corporate income tax and personal income tax, are very complicated considering that a lot of the reason that we get so many foreigners to come here is because of our tax environment,” he added. “So we have to find some way to strike a balance between economic growth, and not shutting that off, versus better distributing the wealth.
“I think we’re all aware that VAT is not a very progressive tax. It impacts low income households more than it does wealthier income households. So that’s something that we definitely have to consider.” Addressing such inequality through tax reforms will require some retooling of the Bahamian economy, Mr Moore acknowledged.
“The World Bank classifies countries into different income groups based on their gross national income per capita. Classification of high income is determined by a specific income threshold and they update that annually,” he said.
“Of course, The Bahamas well exceeds that. I think our gross national income, the last time I checked, was about $31,000 per capita, so we’re classified as a high income country by the World Bank standards which, of course, eliminates us from certain receiving certain development financing.”
Considering that the minimum wage is “nowhere close” to $31,000, Mr Moore said there is “much more” that is needed to close the income gap, and “redistributive policies” are needed to bring more Bahamians above the threshold.
The $31,000 figure cited “does not truly reflect” the income most Bahamians earns, Mr Moore said, and as a result this misconception multilateral financial institutions think that this nation does not need development financing.
“Now part of the problem with us getting development financing, especially as a ‘high income nation’, is that we advertise ourselves as a very well-off nation,” he added. “So I think we have to be a bit careful in our messaging and decide what we really want. Now, having a gross national income per capita of $31,000, you would think that that’s an average income for The Bahamas.
“But no. We know that’s biased upwards by the wealthy persons in our country, right, because there are many Bahamians who make nowhere near that amount. Even if you think of minimum wage, it is less than half that amount. So we’re not even close to that in terms of an average income for the most part.
“Now, even if that was the average income, that’s only part of the issue. Part of the other issue is that we have a very high cost of living in The Bahamas.”
Comments
Believer1 1 year ago
I really cannot see income tax instead of VAT as it is a regressive form of taxation and will be difficult to collect. VAT has been very successful in The Bahamas, is broad based on both goods and services, and serves as taxation on consumption, which means the affluent will spend more and pay more tax, which takes care of the fallacy of “ making the rich pay their fair share” I think what ought to be done is Customs Duty needs to be eliminated and if the objection is that Revenue will fall, then adjust VAT to compensate.
sheeprunner12 1 year ago
Mr. Moore needed to go one step further and STATE what the median income figure is for Bahamians.
If 1% of Bahamians are making 70% of the wealth of the country, it is pretty obvious that most Bahamians are probably making on average between 15-20K per year. This is the reality in the civil service, and probably even worst in the private sector.
Additionally, 85% of every tourist dollar is exported by the investors/vendors and remittances exported by the immigrant population is draining even more FX from the country. This leaves a very SMALL slice of the GDP to be divided among the 150,000 Bahamian workers of the country.
With 75% of Bahamians living on New Providence, it is further obvious why the MISERY INDEX is over the moon. The social problems of high crime, poor education, ill health, personal debt, overseas migration, and lack of job productivity says it all.
The Bahamas is a paradise for the one percenters and the tourists, but it is hell for the average Bahamian. The political elite and the OECD are in a conspiracy to frustrate and demoralize the general population.
Socrates 1 year ago
if we sell all the sorry loss-making government SOEs, stop giving contracts to bidders who dont insure buildings that burn down with the taxpayer holding the bag and stop giving these Unions outrageous contracts so you get voted in next election, no more taxes woukd be needed. taxation is the lazy man's solution.
The_Oracle 1 year ago
No one said income INSTEAD of VAT. It will be alongside, make no mistake. Duty has to fall to 8-10% per WTO accession, however this admin has said it isn't a priority to join WTO. The required duty drop was the reason for VAT in the first place. In short, Government wants and needs more of your shingles.
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