BAHAMAS' 48% TAX BURDEN IS 'SCARY'
By NEIL HARTNELL
Tribune Business Editor
Nassau, The Bahamas
THE Bahamas' long-cherished notion of being a 'low tax' jurisdiction has been called into question by a report that says companies pay taxes equivalent to almost 48 per cent of their annual profits, a private sector leader yesterday describing that number as "scary".
The Paying Taxes 2012 report, produced by the PricewaterhouseCoopers (PwC) accounting firm, together with the World Bank and the latter's International Finance Corporation (IFC) arm, placed the Bahamas among the bottom third of nations - 134th out of 183 - when it came to the 'total tax rate'. This was defined as the ratio of a business's total annual tax burden to its commercial profits.
The report said an average Bahamian company paid, in taxes, a sum equivalent to 47.7 per cent of its annual commercial profits. This left Winston Rolle, the Bahamas Chamber of Commerce and Employers Confederation's (BCCEC) president, to call for a breakdown of the calculations, so that the private sector and government could see how the figure was derived.
"That's very surprising," Mr Rolle said of the Paying Taxes 2012 report's findings. "When you consider other countries, with their payroll and employee taxes, and you take a look at our National Insurance Board (NIB) with a 9.8 per cent contribution rate, that's relatively low compared to a number of other jurisdictions, who are now in the teens, so that's very surprising.
"That 48 per cent sounds like a really high number, and that's a scary number right now. My concern is that some businesses will jump all over that number to advocate for lower taxes.
"Everybody is going to complain that the cost of doing business is too high, but we need to understand what's in those numbers to numbers to make up 48 per cent. That one is clearly something to look at a little deeper. The initial response is: Where did that number come from?"
Still, Mr Rolle added: "I don't deny the cost of doing business in the Bahamas is high, but all things considered, when you look at other Caribbean countries, I don't know if we're significantly higher than other jurisdictions."
Others, though, felt the Paying Taxes 2012 report was close to the mark. Rick Lowe, operations manager at Nassau Motor Company (NMC) and a well-known fiscal hawk, said the findings added to his contention that the Bahamas was not a 'low tax jurisdiction' as it repeatedly advertised.
Pointing out that, via the Business Licence fee, companies were taxed regardless of whether they made a profit, Mr Lowe said of the 48 per cent figure: "I don't think it's out of the question. I've always maintained we are not a low tax jurisdiction."
While the Government typically referred to revenues being 'a low' 18-19 per cent of gross domestic product (GDP), Mr Lowe said the reality facing the private sector was something quite different, and he preferred the PwC study.
The Bahamas, though, fared better elsewhere in the Paying Taxes 2012 report. It ranked 54th out of 183 nations on the ease of paying taxes, coming in at 63rd with just 18 tax payments by companies per year. And the Bahamas finished just 5th on time to comply.
"One of the key reasons we're in a good position compared to other jurisdictions is that the bulk of the taxes are in duties, and if you do not pay them you do not get the goods," Mr Rolle said. "That makes the process a relatively straightforward one."
He questioned, though, with the compliance timeframes were actually adhered to in practice.
December 16, 2011