There has been much talk in recent times about the G7 nations introducing a worldwide 15 percent taxation of corporate earnings. I see nothing wrong with this and would encourage our local politicians and economists to consider the pros and cons of this proposal. Yes, some will argue that The Bahamas is a tax haven and as such should not get involved in global economic debates. I beg to differ.
Large economies like the USA, Canada, the UK and many European economies inclusive of Germany are losing billions of dollars in potential corporate income taxes from multinational corporations, which for tax purposes are based outside of their parent country. For instance, US companies that are domiciled in Ireland or even The Bahamas pay little or no taxes on corporate income in these countries to the detriment of their home countries.
While understandable, this is dead-wrong in light of the economic dislocations brought about by the pandemic. Large companies like Amazon, Facebook and Microsoft pull in billions of dollars through their foreign-based associated companies but pay virtually nothing in their home nations. Other high-end individuals park their wealth in what are referred to as tax havens like the Cayman Islands, Panama and even The Bahamas.
A few European countries are also seen as tax havens. The massive loss in potential taxes on corporate earnings has caused much concern in the home nations as they are now all scrambling to address massive national deficits and budget overreaches. The Ministry of Finance seems to have rejected this novel suggestion out of hand based on what it says is sovereign rights as a nation.
Prime Minister Dr. Hubert Minnis and his government must wake up and smell the coffee. This is a brand new world from the pre-COVID-19 one. Imaginative and progressive taxation structures must be implemented here in The Bahamas. Income inequality is rampant and very dangerous in many countries around the globe. The Bahamas is no exception. Our basic taxation engine is now VAT and consumer or user fees.
We do not yet have an income taxation system where the more one earns the more he/she pays in taxation. This is a more progressive, as opposed to a regressive, system, currently in place. No doubt we have scores, if not hundreds, of high-earning Bahamians and foreigners who make good money but pay no more than the average lower-ended earner. The level of the VAT would not ordinarily impact the former but could be devastating for the latter.
I join with my esteemed colleague, attorney Andrew Allen, in calling for an income taxation system here in The Bahamas. Why should the marginal poor pay the same basic rates as a person pulling in hundreds of thousands of dollars on an annual basis? Successive governments have been reluctant to address this elephant in the room. Talking up a brave talk and collecting every cent possible from the small man and woman makes no economic sense.
As we seek to rationalize our taxation system, income taxation is a given. We must also aggressively go after the easily identifiable tax dodgers. I understand that we have multiple millions of outstanding real property and other taxes, which are low hanging fruits. For some strange reasons, however, administrations have been reluctant to go after these individuals. It is time for a taxation change and the sooner the better.
— Ortland H. Bodie, Jr.