By NATARIO McKENZIE
Tribune Business Reporter
A former attorney general has backed the introduction of income tax in The Bahamas as a more “progressive” and fair way to distribute the tax burden.
Alfred Sears QC, in an address to the National Progressive Institute (NPI), the Progressive Liberal Party’s (PLP) think-tank, argued that this would provide the Government with more sustainable income streams than the current regressive, consumption-based VAT and import tariffs.
“A ‘progressive’ form of taxation of Bahamians, residents and foreign persons doing business in The Bahamas, inclusive of personal income and corporate tax, is the only basis that there can be a more sustainable stream of public revenue to cover the capital and social needs of The Bahamas, “ he argued.
“A system of income tax would more equitably distribute the tax burden rather than the current consumption VAT, Custom Duties and Business Licence regimes. Further, the Government, through exemptions and write-offs, could incentivise taxpayers to make philanthropic contributions to non-profit entities in The Bahamas, thereby, contributing to the development of the third sector and social enterprises.”
He added that Bahamian citizenship was a “disadvantage” under the current investment incentives system, and called for legislation which would ensure equal and fair treatment for both foreign and domestic investors.
“Under the present Bahamian tax and investment system, which I refer to as the Stafford Sands model, Bahamian citizenship is a disadvantage,” Mr Sears said. “Bahamians pay a 12 per cent VAT, Custom duties, business licence, National Insurance and real property tax.
“Foreign investors in the tourism and financial services sectors are exempted from most local taxes and receive incentives, concessions and state subsidies whether they are profitable or not, while profits from these enterprises are repatriated out of The Bahamas.
Describing the Stafford Sands model as being “in crisis”, Mr Sears said: “The current investment architecture, based on outdated assumptions which are inconsistent with a sovereign country and its needs, increases the competitive advantages of foreign investors, who are the exclusive beneficiaries of incentives, concessions and state subsidies.
“Most foreign investors will have the benefit of unfettered access to global venture capital and the support of their respective Export-Import banks. Bahamian investors, on the other hand, do not enjoy those advantages and are prohibited by law from accessing the cheapest venture capital from outside The Bahamas. There is no Export-Import bank in The Bahamas to incentivise Bahamian enterprises to become regional and international players.
‘It is easier for foreign investors to do business in The Bahamas than Bahamian investors. In 46 years of independence, The Bahamas continues to operate according to the assumptions of the Stafford Sands model with a deepening systemic dis-functionality and diminishing competitive position in tourism and financial services.”