Corporate Tax

Seize “Bull by Horns” to interrupt the corporate tax hike

• The Bahamas urged “to go ahead” through reforms of their own

• The government warned: “Make decisions for the next generation”

• Banker argues the tax threat never went away

BY NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas must “take the bull by the horns” and implement progressive tax reforms to place it ahead of the pursuit of a minimum global corporate tax rate, urged a top banker yesterday.

Gowon Bowe, who led the Coalition for Responsible Private Sector Taxation when VAT was introduced, told Tribune Business that this nation must “come to the fore” and make its own adjustments rather than being put on the defensive by the G20s to become and Organization for Economic Co-operation and Development (OECD).

He acknowledged that the introduction of corporate and / or income tax must be part of a major tax reform and can only be carried out after careful consideration, arguing that the Bahamas can no longer avoid the overhaul he considers “regressive, flawed and inoperative ”system in favor of more advanced options.

Criticizing successive administrations for finding the safe and easy way out to implement key reforms, Mr Bowe said they too often “feared political retribution” and “crouched down to make decisions that will lead us to the next generation” .

The head of Fidelity Bank (Bahamas) claimed that the Bahamas should have realized that the OECD’s tax initiatives never went away, as the Bush and Trump administrations offered only “temporary reparation,” and said the public stance was the current one US government has shown to be “very aggressive and direct” in realizing the global vision of a minimum corporate tax.

Given the continued belief of the G-20 / OECD that its member states are losing enormous tax revenues to so-called “zero tax” countries like the Bahamas and other international financial centers (IFCs), Mr. Bowe told the newspaper: “While some may punish me for it , I’ve long been a proponent of progressive taxation …

“The Bahamas must stop responding to what is happening globally and take the bull by the horns and figure out which tax system is most appropriate and relevant for the Bahamas. If we do it right, I believe we can come to a place to stay that is globally acceptable and competitive. “

Mr Bowe urged the Bahamas to stay one step ahead of the global minimum corporate income tax rate, saying that all reforms are needed to ensure that the government can continue to fund all functions of state and essential public services.

He added that previous legislative changes to meet European Union (EU) demands for an end to tax breaks for the international business sector and that all companies doing business in the Bahamas must do real business and be physically present (Substance) provide a platform for a broader tax base that does not require tax rates of 30 percent or more.

Mr Bowe urged the Bahamas to introduce corporate tax itself before being forced to do so, telling Tribune Business, “Let’s stop trying to appease the OECD overlords and become overlords ourselves by determining what for this is best suited to us and take advantage of this to become competitive.

“We’re always on our backfoot now and play defense. If we get our tax system right for us, we can step on the front foot and take offense. We can have a tax system that is progressive, compatible with First World countries, competitive and shows that it is not harmful because we generate revenues that allow us to be fiscally sustainable. “

Mr Bowe added that the introduction of a corporate income tax would allow the Bahamas to enter into double taxation treaties with other nations, with foreign companies based here being taxed only by that nation and not also by their home states.

“We’re not focusing on the root that needs to be addressed,” he argued. “I think our regressive, flawed and non-functional tax system is always being scrutinized. If we fix this, we will be better able to promote ourselves as overlords, competing with other nations in the same area, but more aggressive and competitive with our tax system. “

Mr Bowe urged the Bahamas to adopt a “David versus Goliath” mentality and said they could “use the same strategy to our advantage when they act on their field”. However, he urged the government and political elite to commit to reforms before they are forced upon this nation.

“Don’t pay lip service,” he warned. “If you want to do it, go back to what was done before and get to the point of execution, not deliberation. I’ll say, and catch some flak for it, but we’ve had successive administrations that when they’re not in office say what should have been done when they’re in the seat.

“This shows the fear of political retribution for doing the right thing and continuing to leave us in a regressive state. Make decisions that will reach the next generation and beyond, and don’t make decisions that will be detrimental to future generations. “

Mr Bowe spoke out after the newly elected Biden administration threw its support behind the other G-20 countries and the OECD last week, leading the call for a global minimum corporate tax rate.

It now seems inevitable – and only a matter of time – that a global minimum corporate income tax rate will emerge, with pressure on all nations to adjust, after the US government showed its support last week in efforts to reach consensus on the issue. The International Monetary Fund (IMF) also supported the initiative.

The move by the Biden administration is a marked change from the stance of its Trump predecessor, who was more focused on allowing sovereign nations to set their own tax rates and resisting European efforts to so-called U.S. multinational giants Impose “digital taxes” like Amazon, Google, Facebook and Apple.

However, the newly elected Democratic government sees a global minimum corporate tax as critical to preventing such companies from minimizing their tax burden through creative structures that shift profits and revenues to low-tax countries like the Bahamas and other international financial centers (IFCs). .

Like the OECD and the European high-tax nations such as France and Germany, it believes that a global minimum will prevent a so-called “race to the bottom” in tax rates. Pascal Saint-Amans, Head of Tax Administration at the OECD, told the Guardian: “What the US has put on the table … [is saying] We want the rest of the world to follow suit, we’re killing tax havens. The game is over. Let’s move on to an agreed minimum level. “

US Treasury Secretary Janet Yellen last week pushed for a global minimum tax rate of 21 percent – a huge, potentially unsustainable, leap for countries like the Bahamas that have no income or corporate taxes.

Even World Bank executives suggested that 21 percent was too much. It may take some time to develop a global consensus on this issue, although the G-20 and OECD are pushing for one by summer 2021, given the differences in existing interest rates. For example, while the US currently has a corporate tax rate of 21 percent, the UK is 19 percent and Ireland is only 12.5 percent.

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