Opposition concerns arise over lack of global minimum corporate tax revenue infrastructure

Opposition concerns arise over lack of global minimum corporate tax revenue infrastructure
NASSAU, BAHAMAS — The Opposition has expressed serious concern that the government has yet to establish the infrastructure necessary to enforce the requirement for multinational companies to submit a 15 percent corporate minimum tax on income generated within this jurisdiction.

Opposition Leader Michael Pintard said in a statement that the previous FNM administration signed on to the Corporate Minimum Tax in 2020 as part of the OECD’s Base Erosion and Profit Shifting initiative to combat tax avoidance by such entities. The Davis administration has indicated its preference for Pillar 2 as outlined in the taxation green paper circulated last year, which requires that all multinational firms operating in the Bahamas with revenues over 750 million Euros annually, submit to a 15 percent Corporate Minimum income tax on income generated in the jurisdiction.

The Opposition recently met with the IMF technical Team and the Ministry of Finance officers for further discussions on the Government’s commitment to the Global Minimum Corporate Tax.

“The Opposition reiterated that given the country’s express commitment to the Global Corporate Minimum Tax initiative made under the Free National Movement, the appropriate legislation and enabling framework to cover qualifying firms has not yet been established and circulated for consultation. Our understanding is that this would be revenue-positive for the country as this would require massive multinational companies that generate revenue in The Bahamas to pay the proportional tax share inside the country,” said Pintard.

“We are very concerned that if other countries have adopted this global initiative as of January 2024 and the Bahamas does not have the infrastructure to collect taxes from these multinational companies operating in the Bahamas with revenues over 750 million Euros annually, these taxes which could have been paid to the Bahamas Government will now be collected by foreign countries.”

Pintard noted that the Opposition believes that the government must also reform the current business license regime to abolish the current arrangement that is based solely on gross receipts.

“The reformed tax regime should seek to eliminate taxes on audited businesses posting losses, and at the same time reduce the unfavorable treatment to high turnover/low margin businesses when compared to low turnover/high margin businesses. We believe Bahamian Micro businesses with turnover under $100,000 per year should not be subject to any form of business license fees or taxes. Bahamian small businesses with turnover under $1 million should have as an option the ability to pay a straightforward set fee based on a structured tier.”

The Opposition contends that a revised business tax must be structured in a way that allows for some measure of tax relief when businesses seek to expand their operations, support key civic initiatives, and provide employment for specified disadvantaged individuals.

The Bahamas is one of 140 countries that have signed on to the G-20/Organisation for Economic Co-Operation and Development (OECD) drive for a minimum 15 percent global corporate tax. In the first instance, this applies only to corporate groups and their subsidiaries that have a minimum annual turnover of over 750 million euros.