Johnson: Comprehensive tax reform study essential

There is a need to look at transforming the country’s tax structure through a comprehensive study on the tax burden of the current system, Economic Recovery Committee (ERC) Co-chair Marlon Johnson said yesterday, adding that the country has to develop an equitable sense of participation and inclusivity if the The Bahamas’ economy is to have meaningful growth.

Johnson, who was a speaker at the Bahamas Institute of Chartered Accountants’ (BICA) Accountants’ Week seminar, said this country still has a lot of work to do around the issue of tax reform given that the tax system is based on regressive structures.

He added that there are a lot of undertaxed areas of the country’s economy and ways to make the country’s tax burden fair and equitable, starting with changing the business license tax from being based on gross receipts to being based on gross profits.

“We wanted to find things we believe work,” said Johnson.

“Businesses that have small margins and large cash flows are penalized, whereas businesses may have more modest cash flows but higher margins.

“And we have this situation where businesses can be losing money and in a position of having to pay a business license tax out of that.

“As a first step towards corporate tax, we could at least adjust the way in which business license fees are done to a fairer, more equitable way, we believe.”

Johnson said this comprehensive study on the country’s tax structure would dispel or confirm the notions held about who is more burdened by taxation in the country and affirm whether this regressive tax system is in fact a strain on the well-being of the economically vulnerable.

“We are calling for a true comprehensive study on the equitable tax burden in this society,” he said. “We need to know and understand where the burden is being felt in the country… That, we believe, is the fundamental start to reform.

“Once you understand the equity of the tax system…maybe our assumptions are wrong, maybe VAT (value-added tax) isn’t as regressive as we think it is, maybe people who have more money consume more and pay a higher share.

“We have a theory, but we believe that theory needs to be tested and the results of that, we believe in the ERC, need to be published and form the basis for discussion around tax reform. So, we believe that study to be critical and important.”

The government maintains that Bahamians do not suffer a heavy tax burden, especially when compared to other countries in the region.

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Chester Robards

Chester Robards rejoined The Nassau Guardian in November 2017 as a senior business reporter. He has covered myriad topics and events for The Nassau Guardian. Education: Florida International University, BS in Journalism

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