Regressive fiscal policy hurting The Bahamas

  • Government’s efforts not tied to long term vision

  • FNM and PLP place tax burden on poor and middle class

  • Blacklists will not stop; goalposts will continue to shift

  • Complacency is bane of current administration

  • IMF and TJN initiatives show delay of the inevitable


A recent report issued by the Tax Justice Network (TJN) placed The Bahamas on another tax haven list. The Corporate Tax Haven Index (CTHI) ranked our nation as number nine on an adverse list among ten jurisdictions with corrosive corporate tax policies.


This blacklist follows the passage of myriad legislation and implementation of regulatory changes by the government to ensure compliance with international standards. We have expended much time and resources on being removed from lists produced by international agencies while increasing the cost of doing business and concurrently reducing our competitiveness.


The Democratic National Alliance (DNA) has repeatedly advised the current administration to adopt a more holistic approach and redefine the value proposition of The Bahamas as an International Financial Centre (IFC). It is regrettable that our recommendations have fallen on deaf ears by an administration that lacks or has failed to articulate a long-term vision for our country.


We call on the government once again to wake up from its self-induced slumber and substitute its rose-tinted glasses of naivety with clear lenses of the new global reality. The goalposts will continue to be moved and the prospect of a real level playing field is wishful thinking. The Bahamas must chart a new course which sheds the tax haven label and reposition itself as an IFC without the baggage associated with perceived inadequate tax practices.


The Free National Movement (FNM) and Progressive Liberal Party (PLP) have perpetuated a regressive and oppressive tax system on the backs of the working and middle class while taxing businesses on turnover rather than profits. The DNA submits that comprehensive tax reform which prioritizes the creation of a progressive and more equitable system of taxation is long overdue.


There is a direct correlation between the challenges we face as an IFC and the regressive tax system that both political parties have maintained for the benefit of special interest groups. The Bahamas is being held back by the complacency and lack of fortitude by a government that governs for a select few.


We remind the government that momentum is gathering around global corporate tax reform and they are only delaying the inevitable. They were elected to lead with vision, and it is their duty to put the interest of the nation ahead of that of a select few.


The proverbial clock is ticking and the future of our financial services industry hangs in the balance.


Arinthia S. Komolafe

Leader

Democratic National Alliance

EU Blacklist: What has really changed?

  • Bahamas remains on grey list

  • Strategic not myopic approach to financial services

  • New standard imminent and inevitable

  • Government kicking can down the road

  • Time to govern for Bahamians

The recent announcement by the European Union (EU) that The Bahamas remains on its grey list and has not been blacklisted is a welcomed development. This follows the removal of The Bahamas from the EU blacklist to the grey list in May 2018 after the government made several commitments to carry out reforms.


While the temptation to embark on celebratory exercises and seek political brownie points may seem attractive to the government, it would be prudent not to do so. In reality, The Bahamas’ status as a country on the EU grey list has not changed since May 2018.


According to the European Commission, 25 countries from the original screening process have been cleared; The Bahamas is not one of those countries. The Bahamas remains on a grey list of countries that will continue to be monitored in 2019 and is listed among 34 jurisdictions that have already taken steps to comply with the requirements under the EU listing process. The EU has directed that jurisdictions on this list must complete this work by the end of 2019, to avoid being blacklisted next year.


The Democratic National Alliance (DNA) reiterates that the current administration continues to adopt a myopic approach to the second pillar of our economy. The government has taken the view that the avoidance and removal from adverse listings by international agencies is their priority over developing a growth action plan for the industry. They are squandering an opportunity to truly govern for the Bahamian people by rebranding, refocusing and reviving the financial services industry.


As we have seen in times past, the goal posts will continue to shift as new standards will be established to undermine the value proposition of The Bahamas as an International Financial Centre (IFC). It would be naïve for the government not to realize that the next standard or hurdle is imminent and inevitable. We submit that it is even more egregious for the government to adopt a reactive approach and kick the proverbial can of comprehensive tax reform down the road.  It is an open secret that the ultimate goal of certain global organizations is the demise of the Bahamas' financial services industry. The government cannot be complicit in this endeavor by continuing to capitulate to the extra territorial demands of multilateral ‎bodies until we have no financial services business to regulate. 

 

The discussion about a global taxation standard has commenced and it is only a matter of time before this becomes the new agenda. In the interim, The Bahamas must be proactive and strategic in shedding the tax haven label while articulating a vision for the future of our financial services industry.


It is common knowledge that we have a tax system that is regressive and oppressive to the detriment of the masses. The middle class and vulnerable in society bear the brunt of the tax burden imposed by a government that has worsened the misery index. The question on the lips of Bahamians is when will this FNM administration start governing for them rather than special interest groups and international agencies?


Arinthia S. Komolafe, Leader

Democratic National Alliance


EU and OECD: Wrong Impetus for Reform

  • Financial services under constant pressure

  • Agility of Government questioned

  • Long term strategy required for Financial Services

  • Domestic-driven comprehensive tax reform long overdue

  • Proper consultation and details required

The Bahamas' financial services industry has been under intense pressure over the last year. During this period, we have seen The Bahamas placed on adverse listings or blacklists by the European Union, Organization for Economic Cooperation and Development (OECD), Financial Action Task Force (FATF), United Kingdom, United States of America and The Netherlands.

Observers of the global landscape for financial services are aware that the second pillar of the Bahamian economy has been under assault for over two decades with the goal posts for compliance being moved constantly and continuously. The end goal of the implementation of new standards and placement of additional hurdles for International Financial Centres like The Bahamas seems apparent to industry professionals.

This could not have been more obvious than the Netherlands' recent inclusion of The Bahamas on a blacklist of tax havens with no corporate tax or corporate tax rates lower than 9%. This took place while the Government was working around the clock to implement sweeping changes to our tax system in order to meet an EU imposed deadline. The Netherlands Government in this instance, indicated that the list was subject to consultation from 25 September to 22 October 2018. It is concerning that adverse listings of this nature and other blacklisting initiatives often catch the Government by surprise. This raises questions about our level of engagement and the agility of relevant government ministries or agencies in keeping up with global trends and initiatives.

It is time for the Government to wake up to the reality that the pressures will not cease, and the goal posts will continue to shift. A reactive approach to new standards set by international bodies and other jurisdictions is myopic and demonstrates a lack of a long term plan or vision for the financial services industry and the Bahamian economy as a whole.

Long overdue reforms that are required to usher The Bahamas into the 21st century cannot be ignored or delayed until external pressures force the Government into these initiatives. The recent press release on financial sector reform is a prime example of this phenomenon. We have once again kicked the proverbial can of comprehensive tax reform down the road thereby ignoring the need to move from the current regressive tax system to a more progressive and equitable one. The current system places undue and unfair burden on the working and middle class as well as those who can least afford it.

While some clarity has been provided on the basis for the calculation of business license tax with a link to positively rated taxable supplies, it does not address the main concern of the business community that the tax is imposed on turnover rather than profits. This is especially relevant for high turnover and low margin businesses.

It is imperative that the actual details underlying the proposed changes to our tax regime are provided to stakeholders and the public for scrutiny and feedback. We urge the Government not to shove this down the throats of domestic entities in the same manner as the significant increase in the VAT rate. There must be transparency and disclosure in relation to the criteria for determining the proposed new taxes and/or fees.

We welcome any initiative aimed at reducing the cost of doing business and improving the ease of doing business in The Bahamas. It is our hope that the Government's agenda and priorities will someday not be dictated or determined by external factors but rather a coherent vision which has at its core the best interest of the Bahamian people.

Arinthia S. Komolafe

Deputy Leader, Democratic National Alliance