IMF recommends more “equitable” tax system for The Bahamas

IMF recommends more “equitable” tax system for The Bahamas

Report points to capital gains tax and income tax

NASSAU, BAHAMAS – While the Minnis administration has assured that it is not considering a corporate tax, income tax or further increases to value-added tax (VAT) as part of its fiscal agenda for the remainder of its term, the International Monetary Fund (IMF) has pointed to a need for a comprehensive review of the country’s taxation regime to achieve a more “equitable and less distortionary tax system”.

The IMF’s report, titled ‘The Bahamas: Staff Concluding Statement of the 2019 Article IV Mission’ which was released Monday, largely reflected positively on The Bahamas economic performance last year, highlighting progress of fiscal reforms.

It said, however, that The Bahamas fiscal policy should play a greater medium-term role in achieving public policy objectives, including greater income equality.

“The Bahamas does not levy income or capital gains taxes, relying mostly on VAT, business license fees, and international trade taxes,” the report read.

“Global tax trends and the prospective accession to the WTO thus present an opportunity for a comprehensive review of the Bahamian tax regime with a view to achieving a more equitable and less distortionary tax system.

“To strengthen transparency and inform future policies, a quantitative review of existing tax and other investment incentives is recommended.”

In a statement released yesterday, Minister of Finance Peter Turnquest said the government can appreciate commentary related to boosting the competitiveness of the country, though he did not specifically address the IMF’s remarks related to income tax or a capital gains tax.

In an interview with Eyewitness News Online last week, Turnquest said the Minnis administration’s fiscal consolidation plan for The Bahamas over the three years does not include increasing any existing taxes or introducing any new taxation measures, Deputy Prime Minister and Minister of Finance, Peter Turnquest said his ministry has continued to research various tax models to potentially respond to global shifts.

Turnquest said in that regard, “We are taking nothing off the table”.

Clearing Banks Association (CBA) Chairman Gowon Bowe recently said it would be “foolish” to leave any kind of corporate or income tax off the table as the government advances the restructuring of the country’s tax environment.

Bowe also suggested the government consider diversifying its tax base.

Turnquest said the Ministry of Finance’s technical teams will continue to develop varying taxation models to test their impact, but those medium to long-term considerations do not include a corporate tax.

“There is no anticipation of any increase in value added-tax or any other tax at this particular point,” he said.

“So again, I take Mr. Bowe’s position and I think he shares the same that I do in terms of ensuring that we do the kind of research from a macroeconomic point of view to ensure that in the event there is any global shifting that affects our tax base, that we’re able to respond in a relatively efficient manner.

“This is not to mean that we have ruled in or ruled out.

“This is research and we want to develop our capabilities here such that when people ask us the questions ‘have you done the analysis, do you have the data’, we can say yes we have and this is what we produced — a quality, professional product — and that we are in fact looking and planning for the future.”

According to Turnquest, the ultimate goal is to achieve a range of models to test again domestic and international shifts.