The Tribune

By ANNELIA NIXON

Tribune Business Reporter

anixon@tribunemedia.net

Bahamian companies yesterday said they are open to replacing the existing Business Licence fee regime with a corporate income tax provided the latter is properly implemented.

C. Allen Johnson, chief executive of Buy, Build, Borrow, Bridge, said a corporate tax would attract international business and potentially benefit local companies.

“A properly-implemented income tax that deals directly with profits as opposed to income, I think, would serve us a good purpose,” he said. “We have one of the highest numbers of tax exchange agreements. So that puts us in an advantageous position to actually come with a low tax regime or even a flat tax regime... 

“We talk about a 15 percent corporate tax. I am not one to agree that we should have them impose a minimum tax on us. We should do something in our best interest.

“But if we were to, say, have a 10 percent corporate tax or something of that sort, what it would do is allow us to attract more international businesses to domicile here in The Bahamas. But they’d have to take a not just-registered domicile here, but actually conduct business in The Bahamas here to be able to take part of those.”

Should a corporate income tax be implemented, Mr Johnson suggested a tiered approach but warned that too many rates results in “accounting gymnastics”.

“Now I would extend it that we should go beyond corporate tax straight into income tax,” Mr Johnson said. “The progressive taxation when it comes to income tax, personal income tax, would allow us to exempt those individuals that would meet what we call, the people who would be in the... safety net, say under $20,000 or whatever income we decide to put it.

“But going back to the position of corporate income tax, we can do a flat tax, or we can do a tiered tax, but not to make it complex. If you do a progressive tax, not to have all these multiple levels and such that it becomes confusing, or people try to use accounting gymnastics to get into one other position...

“A flat tax would be like 10 percent for all corporate income. A tiered tax would be under $1m you pay 5 percent. One million dollars to $5m you pay 7 percent. Two million dollars... you know, some variations of that,” he added.

“But what happens, though, the more of those tiers you have, the more gymnastics and accounting you will have. So you want to make it straight out where the guy that pays 7 percent is net equal to the guy that pays 5 percent. But what it does, it doesn't penalise the guy that makes too much that he say, 'Oh, you're taking so much of my basis.' And so when we do the tier tax, I would keep it maybe five categories or something of that sort.”

Robert Pantry, founder and chief executive of the Simplified Group of Companies, said he is not opposed to a corporate income tax but warned that it can be complex. He said that, if imposed, it must be kept simple. 

“I am not opposed in principle to the introduction of a corporate income tax, but my support would be highly dependent on how it is designed and implemented,” he said. “While income tax can appear more equitable on paper, it also introduces additional complexity.

“In a small economy like The Bahamas, where economies of scale are limited, this makes it especially important that any tax system be simple, efficient and carefully designed to achieve its intended outcomes while avoiding unintended consequences. 

“For businesses like ours, the impact would depend on factors such as the tax rate, the treatment of deductions and whether the introduction of a corporate income tax is accompanied by the reduction or elimination of existing taxes so as to avoid unnecessary tax layering. If structured thoughtfully, a corporate income tax could be manageable; if not, it could affect cash flow and reduce the ability of businesses to reinvest and grow.”

Mr Pantry shares the view of many in that he prefers a corporate income tax to the current Business Licence fee regime, noting it is more equitable for businesses “that are reinvesting earnings”.

“The Business License fee is effectively a tax on gross turnover, meaning businesses are taxed regardless of profitability. A corporate income tax, which is based on net profits, is generally more equitable and better aligned with sustainable business growth, especially for companies that are reinvesting earnings,” he said.

“That said, it is critical that any move towards a corporate income tax represents a genuine replacement or meaningful reduction of the Business Licence fee, rather than an additional layer. Given the size and structure of the Bahamian market, careful attention must also be paid to thresholds and design features to ensure the system works effectively for both businesses and the Government. If implemented thoughtfully, such reform could improve fairness, support investment and contribute to more stable long-term revenue outcomes.”