Corporate Tax

“Billions present corporate tax wants”

BY NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian financial services firm argued yesterday that this country should not use global demands for a minimum corporate tax rate of 15 percent “as a marker” after Ireland refused to break away from its lower regime.

Paul Moss, president of Dominion Management Services, told Tribune Business that the Bahamas should both seek alliances with countries like Ireland and introduce a much lower 5 percent corporation tax “for their own needs” instead of waiting dictated by the G-7 and the Organization for Economic Co-operation and Development (OECD).

While the Bahamas are among the 130 nations that have already signed up to the G-7 / OECD Inclusive Framework, Mr Moss said his longstanding call for a low corporate tax rate for the country following recent revelations about how much profit Shell, the multinational energy giant, booked through this nation.

A recent Reuters report on Shell’s tax returns found that more than $ 1.8 billion of its offshore profits in 2018 and 2019 were booked by Shell Western Supply and Trading, based in the Bahamas. The oil trading company will buy oil from Shell fields and other producers in West Africa, Brazil and Guyana and sell two-thirds of the crude oil to other Shell subsidiaries.

Shell Western posted a profit margin of 4.1 percent in 2018 and 2019, more than four times the level of independent oil trading companies, and its profits also outpaced its competitors. Still, the Bahamas does not appear to earn anything in taxes or anything from the profits posted in that country.

This would potentially be subject to corporate income tax, and Mr Moss said, “We should be able to catch these guys but be dictated to ourselves and not by the G-7 or anyone else. We don’t have any of it. Imagine getting 5 percent of that and what that would mean for the country. We have to pursue it and get it on our terms, not those who want to put us out of the competition by 15 percent. “

A 5 percent corporate tax levied on $ 1.8 billion would equal $ 90 million at a time when the treasury needs every penny of the revenue it can get its hands on after COVID. And Shell’s operations seem to be exactly what the G / 7 / OECD is aiming for with its global corporate tax plan of at least 15 percent.

A 15 percent levy on $ 1.8 billion is the equivalent of $ 270 million, but the G-7 / OECD plan makes it unlikely that everyone will come to the Bahamas. Because it demands that such income be redistributed to the countries in which the profits were made, and so that West African states such as Guyana also participate in it.

It’s also uncertain whether Shell would qualify, as the G-7 finance ministers communique apparently focused on multinational companies making profit margins of 10 percent or more, not 4.1 percent from Shell Western Supply and Trading.

Mr Moss, meanwhile, said the Bahamas would need to be cautious in committing to a minimum global tax rate of 15 percent after Ireland denied abandoning its 12.5 percent rate that helped lure several multinational corporations to its shores .

Irish Treasury Secretary Paschal Donohoe told the country’s media yesterday that the 12.5 percent interest rate “has been a central feature of our economic policy for decades” and he is “obliged” to adhere to it.

“I advocate our rate of 12.5 percent and the right of small and medium-sized economies to a low rate as part of their competitiveness,” he said.

In response, Mr. Moss said: “Of course we shouldn’t consider 15 percent as a marker. We have to look at ourselves to see what makes sense to us. We can’t be ahead of the world and try to have a marker at 15 percent. As a country we have to be able to develop this resource up to 5 percent. “

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