Minister of State for Finance Senator Kwasi Thompson promised that the new tax structure that would implement a global minimum corporate income tax will not put Bahamian businesses in any worse position than they’re in now.
The government has agreed in principal to adopt the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) two-pillar solution to address global tax challenges, which calls for the implementation of a global minimum corporate income tax of at least 15 percent by the end of 2023.
“We don’t want to put businesses in a worse position than they are in now. The focus right now is on economic growth, that is the whole position and point as to why we said we are not looking at this time at increasing taxes, because we want to put businesses in the best position to grow,” Thompson said last week during an industry briefing.
The tax would apply to multinational entities (MNEs) that meet the 750 million euros threshold as determined under BEPS Action 13 (country by country reporting).
Thompson said very few Bahamian companies would be impacted by this particular tax.
“I know that a lot of companies are concerned when they hear this corporate tax, and their questions are how does this affect me and how does this affect the company that I run and manage? We get that, we understand that,” he said.
“We had to look at it from the point of view of those threshold companies. Right now what we are dealing with are those companies that fit the threshold, those that are in the $750 million range and above. We are doing a complete assessment on this, but I think all of us would agree there are not many, if any companies in The Bahamas that have a turnover of $750 million. So the answer to the question today is, it is not going to have much of an effect.”
Thompson noted, however, that it is a legitimate concern of local companies that the tax structure in general would have to be amended to accommodate this new framework.
Financial Secretary Marlon Johnson said a tax reform study that is currently underway will look at how to incorporate the global minimum corporate income tax into the country’s tax structure.
“This is a continuation of a study that had started some time ago. There’s an initial framework that had looked at the whole issue of alternative forms of taxation and that was in response to the business license regime and how it could be made a little bit more efficient and equitable in that context. So this is building on that, so we’re not starting from scratch. “Moving forward it will be a collaborative effort. They will not go into a room by themselves, crunch numbers and come out. So the dialogue with stakeholders, not only in the financial sector, but in the broader business community, civil society, will form a component of the dialogue,” he said.
“The government’s policy perspective is that whatever comes out of it has to be something that works for all of the stakeholders who have to live and work out of The Bahamas. Even if The Bahamas decided to stay on the outside, the reality of the structure is that the MNEs would still have to pay that tax in their home jurisdiction. So even if The Bahamas opts out when you get to a minimum tax threshold, the taxes that would have been paid in The Bahamas would still have to be paid.”
“And I say that with some force because I want people to appreciate that yes, of course, we have to do that assessment, but the whole notion of this is that those multinational entities, whether they stay here or they leave, they will still be subject to the tax. That’s part of the advantage of this type of arrangement, that you truly have a level playing field. Businesses would not be able to play one jurisdiction off of the other. What is important now is that these companies, now that they are aware of this potential, in their forward planning they can make accommodation for what that will mean.”