The Tribune

GLOBAL pressure has told – The Bahamas is going to comply with an international push to charge a corporate income tax of 15 percent.

The move has been building for a while. The G20 nations and the OECD have been pressing for a minimum global corporate income tax. There is a bit of a catch in it all – if we do not charge the tax, then the host countries where the parent companies of businesses based here can charge the money instead. So one way or another, those companies will feel the sting.

In Bahamian terms, the companies affected will be MNEs – an abbreviation that stands for multi-national enterprises and which basically means companies that are based in more than one nation or their subsidiaries. The companies that will be charged are those which earn 750m euros or more.

Some may think that this will not affect most Bahamians – but of course the companies affected by these new rules are among the country’s biggest employers. Businesses that face a new cost will have to assess what impact that has on the profit margin – and if costs need to be cut elsewhere, salaries can often be the first to go. That means jobs.

We do not know yet how much of an impact there will be, and whether it may lead to job cuts in some businesses, but that is the balance that needs to be struck.

Prime Minister Philip “Brave” Davis talked yesterday of revenues “expected to exceed more than $140m annually”, which sounds good but it must be remembered that means more than $140m a year coming out of the pockets of those businesses. Maybe they can afford it, maybe it might be a challenge, we shall see.

Which businesses are we talking about? Well, it may well be Atlantis, Baha Mar, Sandals, the Riu, the Warwick, and banks such as RBC, CIBC and Scotiabank. Then there are companies such as BTC or Commonwealth Brewery who may be caught in the tax snare.

There may be some reductions in costs for those businesses too, as the companies forking out for a corporate income tax may well not have to pay for business licences at the same time.

What is not encouraging is that at the same time as this is all announced, it appears the deficit is soaring far beyond its predicted levels.

Despite the half-year deficit being almost double the full-year goal, the government is not changing course, however. The Ministry of Finance is apparently very confident of meeting its targets, despite the worrying $258.7m total so far. The government is banking on increased revenues, we shall see if that bet is a good one in a few short months.

Also unencouraging is the government’s rethink on boat registration fees. While the reduction in originally projected numbers might be welcome, the U-turn did not inspire confidence that the government had well-planned its original increase.

What stood out though is that the half-year figures are still more about what else can be charged of Bahamians rather than what can be given back.

As we start to move towards another election, people may well be looking at the revenue raised by government and asking well, what do I get out of it?

People will need to feel the benefits of the government’s financial moves before the time to vote comes around again.

And that is the heart of the finance measures the government must deal with – people have to feel the impact, in a positive way, or they will question the value they are getting from the increased amount of money being pulled from pockets into the treasury.

Will the corporation income tax bite? That we must wait and see. But the government should be clear about what benefit we can expect from it. If all you feel is pain and you do not see any gain, it is unlikely to win you over at the ballot box.