NASSAU, The Bahamas – During his Contribution to the debate on the Domestic Minimum Top-Up Tax Bill, 2024, in the House of Assembly, on November 6, 2024, Prime Minister and Minister of Finance the Hon. Philip Davis pointed out that the Bill was projected to generate revenues of up to $140 million to support “our transformative, people-focused agenda.”
“This Top-up Tax, which is the first-ever corporate income tax introduced in The Bahamas, will raise revenues without negatively impacting Bahamian businesses in this country,” he said.
Prime Minister Davis noted that, for those listening intently who are not sure what this new tax is all about, the first thing you should know is the Domestic Minimum Top-up Tax applies only to multinational corporations operating in The Bahamas that earn over 750 Million Euros per year.
“If you do not own a multinational entity making 750 million Euros per year or more, which is the equivalent of $800 million per year or more, this tax does not apply to you,” he added.
Prime Minister Davis noted that he wanted to make that clear to those who may have heard that the government was implementing a new tax but did not know who would be impacted.
“As you know, this administration has pledged not to introduce any major new taxes to place a further burden on the Bahamian people,” he said.
Prime Minister Davis pointed out that he wanted to start the debate off by providing clarity on the purpose of the Bill because there were those who would “use the mere mention of the word ‘tax’ to sow seeds of confusion and spread fake news”
“The fact is that the vast majority of Bahamian people have experienced lower taxes in the past three years,” he said.
Prime Minister Davis added: “We lowered customs duties on a wide range of healthy and nutritious dietary staples, construction supplies, and a number of essential goods. We lowered VAT from 12% to 10% – a 20% reduction. That is in contrast to the 60% increase from 7.5% to 12% under the FNM. And we increased the threshold for paying real property taxes from $250,000 to $300,000.”
He pointed out that many property owners whose properties were valued between $250,000 to $300,000, benefitted from that move and at that time paid “$0” in real property taxes each year.
“The common thread connecting all of these reductions is that they benefit a wide cross-section of Bahamians, particularly lower-income and middle-income Bahamian families,” he said.
“Just as meaningful as our tax reductions are the ways that we’ve chosen to increase revenues,” Prime Minister Davis added. “We have targeted strategic areas for increases and we enhanced enforcement.”
He continued: “For example, owners of yachts are paying a bit more in fees to cruise around in our beautiful waters. And local businesses that were avoiding paying customs duties or real property taxes now have to pay up.”
Prime Minister Davis stated that his government’s main method to generate increased revenues has been improved enforcement and collection.
He added: “Now, I know when we use the word ‘enforcement’ there are some who try to portray it as a scary word. But enforcement simply means that we’re ensuring everyone follows the law.”
Prime Minister Davis said that most Bahamians don’t mind because they actually followed the law when it comes to taxes. He added that it was a fact that everyday people do not have the means to avoid paying taxes.
He said: “The single mother living over-the-hill doesn’t get to go to the grocery store and say, ‘I don’t think I’ll pay VAT today’. The father who took his family on vacation to Miami doesn’t get to just skip paying customs duties. He knows his bag will be searched as he passes through customs and he better not get caught falsifying the numbers.”
“So, who exactly is it that is afraid when they hear the word enforcement?” he asked. Who is it that has their paid mouthpieces going around attempting to spread misinformation about our enforcement activities?”
“The answer to that question can be seen in their actions.”
Using Real Property Taxes, as an example, Prime Minister Davis said that about 70% of the hundreds of millions of dollars owed in real property taxes was owed by second homeowners. Those, he noted, were non-Bahamians who often owned a vacation home or winter home in The Bahamas.
“For some, we function as their ‘home away from home’, when they want to escape to paradise,” Prime Minister Davis said. “Others use their second homes as income generators, renting out their properties to locals and visitors alike.”
He added: “Why is it that, for decades, we allowed many of these second homeowners to not pay their taxes? I don’t know if it makes sense to y’all, but it doesn’t make sense to me.”
“There is a patent unfairness in enforcing tax policies on the poor and middle class but allowing the wealthy to pay when they feel like it.”
Prime Minister Davis stated that, from day one, his government resolved to make it clear that no one was above the law and everyone must pay their fair share.
“The people who are afraid of the word ‘enforcement’ are people who want the status quo to remain in place,” he said.
Prime Minister Davis added: “I’m sure we all remember when the previous administration announced its intent to generate more revenue from real property taxes. They were big and bold with their announcement. Then, one single letter arrived from that gated community out west. The homeowners in that community said they would pack up their bags and leave if the government touched real property taxes.”
The “very next day”, the announcement was walked back, Prime Minister Davis said.
“Now, fast forward a few years to when this Administration announced enhanced real property tax enforcement measures, as well as a nationwide revaluation,” he added. “We faced the same kinds of threats.”
Prime Minister Davis said that his Government “did not back down”.
“That’s not our style. Not when we are creating a fairer system for everyone,” he said. “We implemented the changes like we said we would, and you know what? Those homeowners are still here today. They didn’t leave.”
He added, “And the real estate market didn’t crash either. It is booming.”
Prime Minister Davis stated that, most importantly, everyone now understood that they must pay their fair share.
“The truth is, the average person doesn’t mind paying taxes as long as they feel empowered, the tax regime is fair, and there are clear results indicating where their tax dollars are going,” he noted. “People want to see improvements in areas like education and national security. They want to see new programmes that help people like the National School Breakfast Programme.”
“They want to see improved fiscal responsibility like we’ve seen in the past three years when the debt-to-GDP ratio dropped from over 100% to 82%.” Prime Minister Davis added. “People don’t mind paying taxes to an effective and responsible government.
“Because everyone knows the government needs revenues to run. We just want our money managed properly.”
Prime Minister Davis said that, unfortunately, when his administration took office three years before, the nation was struggling to “climb out of an economic and fiscal crisis brought on by the FNM’s mismanagement”.
“Since then, we’ve made clear and substantial progress to improve our financial standing through enhanced efficiency and effective financial management, as well as through identifying new ways of increasing revenues,” he said. “We are fixing our predecessors’ mess while establishing a new standard for government efficiency and effectiveness.
“The Bill before us today represents another avenue for generating significant revenues that will be realised without placing a burden on Bahamians.”
