As a means of leveling the playing field on taxes, the Economic Recovery Committee (ERC) has recommended that government increase the tax ceiling on high-end properties in the capital and introduce taxes on similar properties on the Family Islands, which are currently exempt.
Pointing to the country’s “historically regressive tax regime”, which the ERC noted disproportionately places the tax contribution burden on lower-income citizens and businesses, the ERC’s executive summary report, which was tabled in Parliament yesterday, proposes to change the current business license fee model to calculate total tax contributions on the basis of gross profits instead of business turnover.
“Pursuing this recommendation is likely to remove distortions created by the current fee model, which have led to disparities across a number of sectors in terms of fees paid relative to turnover; preserve and/or increase revenues collected currently from business taxation; broaden the tax base; and increase equity across several sectors,” the report notes.
It added that the government should also “expand the reach of real property tax by increasing the tax ceiling on high-end properties, introducing real property tax to high-end Bahamian properties on the Family Islands with funding of the same to support family island councils in those islands”.
The ERC maintains that the sustainability of the current regime in light of population growth, the rising cost of living and other factors, remains an impediment to The Bahamas’ growth and development prospects.
In an effort to combat economic vulnerability against external shocks like natural disasters and pandemics, the ERC report recommends that the government facilitate the development of privately-issued micro-property insurance policies with face amounts of $5,000 to $15,000 for people who meet specific criteria.
This would require some government subsidization, the report notes, but would ultimately result in cost efficiencies in the near to medium term.
Another recommendation is the introduction of sovereign wealth fund (SWF) legislation with a provision for a separate national infrastructure fund.
“The proposed SWF would be underpinned by holdings of Crown land and commercial real estate owned by the government and will be mandated to mobilize private capital flows to enhance the country’s infrastructure as a support mechanism for resiliency,” the ERC report states.
The report also calls for a disaster resilience policy (DRP), which takes into account the broad, current and projected macroeconomic conditions. “The DRP, which would provide a road map for policy design and prioritization, should cover structural resilience, financial resilience and post-disaster resilience. Once drafted, the multilateral financial institutions should be invited to review and provide feedback.”
The ERC report notes that these measures would have a high to medium economic impact over the short term, while a recommendation to undertake a comprehensive audit of each island’s infrastructure with a view to determining the cost required to make these islands more resilient, could have a high economic impact over the medium term.