Bahamas

BAHAMAS: The Bahamas government has met all commitments to EU, amidst revenue shortfall.


By added on 27/06/2019

As published on menafn.com, Wednesday 26th June, 2019.

 

The government has met all of the commitments to the European Union (EU) that could reduce the risk of The Bahamas being blacklisted once again, deputy prime minister and minister of finance Peter Turnquest said, however, a deeper explanation is needed from the government on why it won't hit its revenue target for the 2018/2019 fiscal year, chairman of the Clearing Banks Association (CBA) Gowon Bowe asserted.

The final pieces of legislation needed to keep The Bahamas' financial services sector in good standing with the EU were presented in the 2019/2020 budget, Turnquest said.

'We have met all of our commitments and have enacted regulations and legislation to put those commitments into force, including the last pieces of legislation included in the budget package to give effect to the removal of preferences,' he said, 'We are now preparing for peer reviews to ensure that our actions match up to our words.'

Last year the government tabled legislation designed to ensure compliance with tax matters highlighted by the EU and the Organization for Economic Co-operation and Development (OECD). The legislation was benchmarked with other jurisdictions and was found to be adequate.

The EU and OECD want to ensure that Bahamian international business companies (IBCs) have economic substance and that all of their substantial owners are known and listed.

In May, The Bahamas was revealed to be on another tax haven list, one that placed it at number nine on a list of the 'top ten most corrosive corporate tax havens in the world', as outlined by the Corporate Tax Haven Index.

The Tax Justice Network complies the index, an independent international network which focuses on research, analysis and advocacy in the area of international tax and financial regulation, including the role of tax havens.

The top ten countries 'that have done the most to proliferate corporate tax avoidance and break down the global corporate tax system', according to an article published by the Tax Justice Network, are the British Virgin Islands, Bermuda, Cayman Islands, Netherlands, Switzerland, Luxembourg, Jersey, Singapore, The Bahamas and Hong Kong.

The article further notes that some of the 'world's most aggressive countries in terms of driving down other countries' withholding tax rates through treaties', also find themselves on the 'top ten most corrosive corporate tax havens in the world' list.

Meanwhile, proper analysis of the revenue shortfall of government is needed, says chairman of the CBA.

Since the government has only collected 63.7 percent of its $2.6 billion revenue projection for this fiscal year up to the end of the third quarter, Bowe questioned how the numbers are going to play out in 'the bright economic future' the government has been speaking about.

He said it's the singular thing that's been missing from the past few weeks of the budget debate in the House of Assembly.

'We still have not really done a significant debrief over last year's outturn, what we are projecting will be the actual performance with the revenue shortfall. We've heard that will be offset by some expenditure gains in terms of reduction in expenditure. But we really should be analysing that because if you don't know your history, you're bound to repeat it,' Bowe said in an interview with Guardian Business.

'Every year we come to budget and we talk about the next year's budget and we never talk really about what happened relative to the previous budget. Businesses and households don't operate that way. If you find that you haven't achieved your budget, you usually sit down and say what you need to change moving forward. Now that may be done internally but it should all be done externally for the people who you've set the budget for.'

The economy grew by 1.6 percent in 2018, lower than the 2.5 percent projected by the International Monetary Fund (IMF), which has projected further growth of 2.25 percent for 2019.

Bowe said it is more likely The Bahamas will again miss that target.

'We have economic growth that is being projected and there are some mixed messages in the sense that we are saying we will have positive growth but the revenue collections are flat with what they have budgeted for this past fiscal year that they have not achieved,' he said.

'What that suggests is the GDP (gross domestic product) growth is either somewhat tenuous because there are so many global factors taking place, trade wars between China and the U.S., civil unrest in the Middle East in terms of potential threats of war and issues taking place in that regard, so from a numbers perspective it's probably fairly prudent and conservative to say that we expect the economy to roughly remain flat and our underperformance last year would be made up where we didn't collect what we thought we would have. But persons are interested in understanding what the numbers mean.'

Although the government may miss its revenue target, collections are up 15 percent due largely to the increase in value-added tax (VAT) at the beginning of the fiscal year.