As the Organization for Economic Co-Operation and Development (OECD) proposes to rewrite international tax laws this year by possibly implementing a global minimum tax rate, at least one industry stakeholder believes The Bahamas shouldn’t wait on a decision from the OECD and adapt its tax regime to meet the needs of the ever-changing global financial services industry.
Group Chief Financial Officer of Fidelity Bank & Trust International Limited Gowon Bowe questioned if it is even sensible for The Bahamas to continue to hold on to a no tax mantra, as opposed to switching to a low tax mantra that would allow the jurisdiction to effectively compete in the same spaces of other jurisdictions that have low income tax.
“Do we want to be the last of the Mohicans? The reality is, the number of jurisdictions that are holding on to the zero tax rate can be counted on one hand. Are you waiting until you’ve become extinct to try and reinvent yourselves, or are you going to be focused on reinventing yourselves while you still have contact with the various customers that are departing? Because the reality is once you’ve lost them, the ability to get them back is going to be very difficult. Think about the base that you’ve built up basically over the last 40 to 50 years,” said Bowe, who is also an elected industry association representative of the Bahamas Financial Services Board.
“So, if it took us effectively 40 to 50 years to build a base that is now being eradicated by the closure of these operations, how long will it take to build it back as opposed to us adjusting our models? And whilst you may do it with a grain of salt and begrudgingly because you don’t want or don’t like income tax, is our tax structure actually 21st century ready and is it competitive? I would argue that no, it is not.”
Last week, Deputy Prime Minister and Minister of Finance Peter Turnquest said the government must be mindful of the agenda item raised by the OECD surrounding minimum global corporate income taxes and how that will be translated to countries like The Bahamas.
He added that The Bahamas must be prepared to respond on its own terms.
Bowe further questioned if it makes sense that The Bahamas holds on to a no income tax and no corporate tax mantra when many of the businesses that were established in the country in relation to those very same laws are closing anyway.
“So is it an indication that our tax model is the one that has become extinct and we should be looking at being a competitive tax income jurisdiction with low income tax both in corporate and personal, where we are presenting ourselves as an attractive alternative by virtue of having income tax but at more competitive rates, because our needs are less than those of the industrialized OECD countries?” he said.
“Our tax rates only need to be at levels to sustain our social infrastructure.”