By NEIL HARTNELL
Tribune Business Editor
The Bahamas may devastate the economy if it surrenders too easily to demands from high-tax European nations for a corporate income tax, a former finance minister warned yesterday.
James Smith, who held the post during the first Christie administration, told Tribune Business that the continued pressure from the Organisation for Economic Co-Operation and Development (OECD) and its members was threatening to drive us right into the ground as a sovereign nation.
He argued that The Bahamas compliance with past OECD and European Union (EU) initiatives meant it was likely to resist the formers latest thrust, which is calling for all nations to impose some form of minimum level of taxation on the activities of multinational entities.
The OECD initiative, whose headline objective is to prevent tax evasion by multinationals who shift profits earned in higher-tax jurisdictions to those with lower tax rates, is calling for the introduction of a corporate income tax in all but name. OECD literature says its proposal would reduce the incentive for such profit-shifting by reducing the tax rate differentials between countries.
Mr Smith, though, urged The Bahamas not to capitulate to these demands without a thorough analysis of such a significant change to its taxation regime. He blasted the OECDs European members for seemingly seeking to recast our economy in their own image, adding that this nations economic model had worked well for 50 years without income and other direct forms of taxation.
Also an ex-Central Bank governor, Mr Smith warned that adopting a corporate income tax could have repercussions for both this nations fixed exchange rate regime, and one:one peg with the Bahamian dollar, and its investment incentives framework.
He acknowledged that the OECD may be drawing closer to the ultimate objective it had in mind when it launched its so-called harmful tax competition initiative some 24 years ago, which is to create a uniform, one-size-fits all global taxation system that eliminates the competitive advantage enjoyed by The Bahamas and other international financial centres (IFCs) with zero or low tax regimes.
My own point of view is that The Bahamas elected its own economic model more than 50 years ago, and that did not include income tax, Mr Smith told Tribune Business. It seems the Europeans want to remodel our economy in their own image.
It takes away from any form of sovereignty of any country or group of countries are imposing their system or an approach that threatens to deny you access to financial services. On principle we ought to look at it [income tax] very carefully. If a country can survive on taxation without taking directly from its citizens or corporate entities, so be it.
To pattern our tax system after theirs [the OECD states] needs a lot of thought rather than capitulation. If we thought it was the best alternative, yes, but it should not be imposed on us from outside to satisfy the demand for things such as double taxation treaties. Things are going too far, and they ought to be resisted.
Describing the OECD and EU pressures as a form of neo-colonialism, Mr Smith said The Bahamas shared few economic characteristics with their members. He pointed out that this nation was suffering from high unemployment and low wages for the majority of Bahamians.
Conceptually the take from an income tax may devastate the economy, he told Tribune Business, because we will be unable to capture the taxes we need to run the country through a direct form of taxation. They [the OECD] end up being appeased while we disrupt our own economy. We must change to meet their needs and our economy gets disrupted at what gain?
Another vulnerability we have is we may have to look at the fixed exchange rate regime. If the Government goes ahead without subjecting this to a rigorous analysis we may really end up in more trouble. Weve not recovered from the VAT rate increase yet.
Mr Smiths comments highlight the different views and opinions on how The Bahamas should respond by potentially reforming its tax system amid growing external pressures. There is an increasing call for the country to take a serious look at a low-rate corporate income tax as a means to reposition the financial services industry and shed the tax haven label.
Such pressures will only increase after the Netherlands yesterday revealed that The Bahamas will not escape its national tax blacklist unless it implements a corporate income tax of at least 9 percent. And there are suggestions that switching to an income tax regime will be more fair, equitable and progressive - especially for lower income Bahamians.
Persons would pay tax based on their ability to pay, whereas the existing VAT and import duties-dominated system is a a regressive tax on the cost of living that forces lower income classes to pay disproportionately more of their income in taxes.
However, acknowledging that he initiated the studies that led to VATs introduction while minister of finance, Mr Smith questioned whether income taxes would generate sufficient revenues to meet the Governments needs given the relatively small 400,000 population size.
I called for the studies, analysis that looked at a whole range of taxes, and we decided that income tax wasnt the best fit for a number of reasons, including the historical aversion to paying income tax and the fact the base was not large enough, he recalled.
The second Christie administration also rejected income tax on the basis that it would be difficult to administer and involve high collection costs, while also being tough to enforce when it came to preventing tax evasion.
Mr Smith, though, agreed that the OECD and its members may be nearing their end game all along, the idea of a uniform corporate tax. He added: We seem to be in the mood to capitulate and take everything they say, and only find out later how disruptive a move that will be. These things are driving us right into the ground as a sovereign nation.
- US citizens urged to leave now - EyeWitness News - March 31st, 2020
- Carmelo Anthony: LeBron James saved my life during trip to Bahamas - syracuse.com - March 31st, 2020
- Caribbean Moment: A Perfect Sandbar in The Bahamas - Caribbean Journal - March 31st, 2020
- Luxury bunkers and private islands how the rich are self-isolating from the coronavirus - CNBC - March 31st, 2020
- New case of COVID-19 in Grand Bahama - Bahamas Tribune - March 31st, 2020
- Report: 600 being tracked in The Bahamas for signs of COVID-19 - Bahamas Tribune - March 31st, 2020
- Bahamas Striping donates protective gear to help combat COVID-19 - EyeWitness News - March 31st, 2020
- More than 700 COVID-19 cases in the region - EyeWitness News - March 31st, 2020
- UPDATED: Fifth case of COVID-19 is in Grand Bahama - Bahamas Tribune - March 31st, 2020
- Bahamas native named UCF president - EyeWitness News - March 31st, 2020
- Johnson warns Immigration permits at stake for breach of COVID-19 orders - EyeWitness News - March 31st, 2020
- One More Confirmed Case of COVID-19 and Amendments to the Bahamas Ministry of Health's COVID-19 Dashboard - The Eleutheran - March 31st, 2020
- Nearly $15 million of $20 million small business loan programme requested to-date - EyeWitness News - March 31st, 2020
- MFA advice to Bahamian Nationals abroad and Foreign Nationals in country after Bahamas border closure - The Eleutheran - March 31st, 2020
- Bahamas | Facts, History & News - March 5th, 2020
- Inside Kylie Jenners Lavish Bahamas Vacation Rental - Architectural Digest - March 5th, 2020
- Storm-ravaged Bahamas rebuilding its power grid with emphasis on solar energy - 60 Minutes - CBS News - March 5th, 2020
- Bahamas Races Ahead With Its 'Sand Dollar' Digital Currency - Bitcoinist - March 5th, 2020
- Beautiful Bimini: A Photo Guide to the Tiny Island in the Bahamas - TravelPulse - March 5th, 2020
- Bahamas and Bologna Go On the Offensive to Battle Coronavirus Concerns - TravelPulse Canada - March 5th, 2020
- Two charged in connection with murder on Grand Bahama - Bahamas Tribune - March 5th, 2020
- Media in the Digital Age Bahamas Press Club Stages Awards Ceremony - Magnetic Media - March 5th, 2020
- Bahamas braves the elements on mainline trip - Keighley News - March 5th, 2020
- First Solar To Grid In Ragged Island makes '60 Minutes' Appearance - Magnetic Media - March 5th, 2020
- Lemon Shark Gets a Snout Rub by Conservationist in the Bahamas - Yahoo News UK - March 5th, 2020
- Kylie Jenner shows off her new 'bronde' locks in the Bahamas - Goss.ie - March 5th, 2020
- Govt. working on transition to cashless society - EyeWitness News - March 5th, 2020
- Americares to expand Bahamas health care programs - The Advocate - February 21st, 2020
- Banyan Tree to Open Resort With Overwater Bungalows in The Bahamas - Caribbean Journal - February 21st, 2020
- Bahamas Estate Once Home to the Duke of Windsor and Wallis Simpson Hits the Market - Mansion Global - February 21st, 2020
- Former Bahamas Home Of The Duke Of Windsor And Wallis Simpson Goes On The Market - Forbes - February 21st, 2020
- Ecumenical Gathering with the NCC USA at Annunciation GOC in Bahamas - All Archdiocese News - Greek Orthodox Archdiocese of America - February 21st, 2020
- Grant Williams vacationed with Carsen Edwards, others in the Bahamas - The Rookie Wire - February 21st, 2020
- AIBT & BFSB Joint Response The Bahamas Off The EU Blacklist - Mondaq News Alerts - February 21st, 2020
- Joe Giudice Dances to Milania's Song While Partying in the Bahamas (VIDEO) - Bravo - February 21st, 2020
- DPM: Bahamas has already satisfied over 30 of 40 FATF recommendations - EyeWitness News - February 21st, 2020
- Ministry Of Finance Statement: European Union Removes The Bahamas From Tax Watchlist - Mondaq News Alerts - February 21st, 2020
- Senior Bahamas Tourism Executive Receives Recognition Award from Premier Faith-Based Trade Association - South Florida Caribbean News - February 21st, 2020
- FIBA qualifier: Bahamas will have 10 players against Mexico - Bahamas Tribune - February 21st, 2020
- First look at Disneys new private island Lighthouse Point in the Bahamas - The Irish Sun - February 21st, 2020
- PM: Govt. will aggressively defend borders against illegal migration - EyeWitness News - February 21st, 2020
- Removal from the EU's Tax Watch List Confirms The Bahamas Has Implemented Necessary Reforms - Magnetic Media - February 21st, 2020
- Junior sailors take advantage of the 7th annual Youth Olympic Regatta - Bahamas Tribune - February 21st, 2020
- Airbnb is offering five people a free 2-month 'sabbatical' in the Bahamas - CNBC - January 30th, 2020
- Airbnb is sending 5 people on a 2-month 'sabbatical' to the Bahamas - Business Insider - Business Insider - January 30th, 2020
- Airbnb Wants to Send You on a Sabbatical to the Bahamas - msnNOW - January 30th, 2020
- World News Media Looks at How Financial Services in The Bahamas are Changing in the Latest Issue of World Finance - Yahoo Finance - January 30th, 2020
- Live in The Bahamas for two months with this Airbnb sabbatical - Leicestershire Live - January 30th, 2020
- Airbnb is offering a trip to the Bahamas and it's completely free - Mirror Online - January 30th, 2020
- The United States and The Bahamas Sign Air Transport Agreement - South Florida Caribbean News - January 30th, 2020
- Dream jobs: Airbnb is offering a sustainable sabbatical in The Bahamas - Stylist Magazine - January 30th, 2020
- From The Bahamas to Antigua, the Caribbean's Best Historic Hotels - Caribbean Journal - January 27th, 2020
- Jack Nicklaus' New Residence Club Is Coming to The Bahamas - Caribbean Journal - January 27th, 2020
- Society-Wide Effort Needed to Elevate Skill Levels to Global Norms, says Bahamas Education Minister - Magnetic Media - January 27th, 2020
- Bahamas back as 'least corrupt in the Caribbean' - Bahamas Tribune - January 27th, 2020
- Family Hotel in St Lucia Helps Family Islands in Bahamas - St. Lucia News From The Voice St. Lucia - The Voice St. Lucia - January 27th, 2020
- Team Bahamas 6th overall - Bahamas Tribune - January 27th, 2020
- Bahamas Defence Force investigates bodies washed ashore near Ragged Island - Magnetic Media - January 27th, 2020
- Transparency International: The Bahamas least corrupt in region - Loop News Barbados - January 27th, 2020
- Larry Birkhead Wishes He Went to Bahamas Before Anna Nicole Smith Died: 'She'd Still Be Here' - FOX10 News - January 18th, 2020
- Sea level rise threat to 15% of Bahamas' GDP - Bahamas Tribune - January 18th, 2020
- NexTech AR Solutions CEO Gappelberg to pitch company at investor confab in Bahamas - Proactive Investors USA & Canada - January 18th, 2020
- Bahamas 'top of the heap' before Dorian - Bahamas Tribune - January 18th, 2020
- A Travel Guide To The Bahamas: 15 Things Not To Miss Out On - TheTravel - January 18th, 2020
- Just Under Half the Value of Hurricane Dorian Losses and Damage in The Bahamas is Pledged for Recovery Efforts - Caribbean360.com - January 18th, 2020
- Bahamas travel guide: All the things to do and not miss out on at these Carribean islands - Republic World - Republic World - January 18th, 2020
- Gainey wins The Bahamas Great Exuma Classic - SCNow - January 16th, 2020
- Gainey takes third-round lead at The Bahamas Great Exuma Classic - pgatour.com - January 16th, 2020
- Bahamas Government 'considering its options' for Freeport Grand Bahama International Airport - CAPA - Centre for Aviation - January 16th, 2020
- Supplies to be donated to the Bahamas | Featured Content - Suncoast News - January 16th, 2020
- Three Rescued from Sinking Tug Off Andros Island, Bahamas - The Maritime Executive - January 16th, 2020
- The 21st-ranked Gators open up season in the Bahamas - The Independent Florida Alligator - January 16th, 2020
- Columbus' Claims of Cannibal Raids May Have Been True After All - Livescience.com - January 16th, 2020
- United Airlines pilots mark bar mitzvah, dance with rabbi post-landing in Bahamas - JNS.org - January 16th, 2020
- RBC regional exec: Bank is committed to The Bahamas long term - EyeWitness News - January 16th, 2020
- House Hunting in the Bahamas: Comfort on the Waters of Nassau - The New York Times - December 18th, 2019
- The Bahamas Is Recovering From One Of The Strongest Atlantic Hurricanes On Record - Its Hard - Forbes - December 18th, 2019
- Chronic Disease, Injuries, and Mental Health Issues: The Bahamas' Challenging Future - Direct Relief - December 18th, 2019
- Grand Bahama Island still struggling to recover more than three months after Hurricane Dorian - ABC Action News - December 18th, 2019
- Bulls arrive in the Bahamas - UB Now: News and views for UB faculty and staff - University at Buffalo Reporter - December 18th, 2019