Member of Parliament
Elizabeth Constituency Business License Bill 2010 Presentation
July 26, 2010 Introduction
Mr. Speaker …
Today I am honoured to rise on behalf of the good people of the Elizabeth Constituency. I would like to thank my constituents for having the confidence in me to speak on their behalf. Today I address a Bill that attempts to establish the predicate for small business advancement through simplification of the business license process. My constituents in Elizabeth frequently make mention on how much bureaucracy there is in just starting a business, and this frustration before even facing the challenges of entrepreneurism. Any legislation that addresses these concerns is philosophically good, however, in my opinion, is only a piece of what is needed, and there has not been the necessary consultation with industry that such a dramatic reform of the taxing system requires.
Overview of the Bill
Current Bill – Recommendations
I think if you ask any business person, the current Business License process requires reform in order to facilitate business and collection while having a framework that is equitable to the business operations. Examples in which the current legislation could be reformed to encourage business growth and development include:
1) Taxation could be based on gross profit of the business. There is a reality that different businesses have different profit margins. For example, a convenience store might operate at a 15% profit, while a clothing store might operate at a 40% profit. To tax on gross revenues, or turnover, would be unfair to the lower margin business. A business license structure that taxes on gross profit rather than gross revenues might be more equitable. This would also allow for the allowance for incentives through credits and deductions for charitable contributions, benefits awarded to employees, and the expansion of jobs within a business.
2) The coordination and blending of taxes already paid by businesses – for instance, customs duties on goods that are ultimately re-sold and business license fees on transactions of goods that have already been paid by a Bahamian company. Any tax system should have the goal of being fair and equitable, while maintaining the integrity of the Government’s revenue collection. It is a difficult balance, but under our taxing system we should be cognizant of total taxes paid by businesses, and more specifically, small businesses in this economy.
This Bill is a fundamental shift in the taxation of Bahamian businesses. Complete and effective consultation is required, especially from a Government of so-called transparency. I question whether the business community has had the appropriate time to review this legislation and provide meaningful input and recommendations. Has the professional services organizations been consulted? Professional services in the Bahamas are generally small institutions, small business owners. The 1% fee for these professional services providers likely results in large instances a significant increase in business license fees. Furthermore, there are items in this Business License Bill, 2010 that are of concern, and require clarification.
Business License Bill, 2010
This Bill is obviously a revenue raising measure, that in my opinion, could jeopardize current businesses’ viability at a time when many Bahamian businesses are struggling to survive. As an example, sections 3 and 4 of the Bill seem to require that within 90 days after the Bill comes into effect, the business has to either pay all outstanding business license fees, National Insurance fees, and Real Property Taxes, or enter into an arrangement for their payment.
I want to be clear, I am not against the Government collecting fees and taxes it is legitimately owed, including fees and taxes that are in arrears. What I would recommend is that the Government take the position that any businesses that owe back taxes and fees come forward and enter into a voluntary compliance program that would provide incentives to compliance, such as reduced penalties and a minimum term for payment. This program should be well defined and publicized so that the business public understand the agreement up front. By facilitating voluntary compliance, while allowing for a smooth re-payment schedule would help with government revenues, while not being an overly penalizing provision that could force companies out of business. It is a time where Government and businesses need to work together in cooperation to achieve all desired goals.
I also have a concern about the audit procedures whereby the respective authorities have the right to enter the premises of businesses and conduct an audit. For the protection of the rights of Bahamian businesses, I think more definitive due process protections should be implemented for the administration of audits. Another element of concern is the fact that the Government can outsource the audit of businesses to private accounting companies. An immediate concern that arises is that during an audit sensitive and confidential information is reviewed and collected. This accounting company could represent a client who is in competition with the business being audited. I recommend that certain protections be implemented in the situation where private companies are hired to conduct the audit. An example might be that a conflict of interest report be filed by the accounting company, and such company not be able to conduct an audit of a business in direct competition with a client. Another recommendation would be that the private accounting company be required to enter into a confidentiality agreement. These due process restrictions would make businesses feel more comfortable with the process prescribed in this Bill.
There is always a concern that the appeals process for a business appealing an assessment be efficient and effectively conducted. The method in which the Business License Review Board is comprised is of concern. In Nassau it is completely appointed by the Minister of Finance. And in the Family Islands the Board comprises representatives from the Nassau Review Board, as well as local government district representatives. There is a concern that not only can the appeals process be politically effected through who is appointed on the Review Board, but there is also a real possibility, and in fact, a probability that those who make up the Review Board do not have the necessary expertise to conduct an effective appeal of a business license assessment. As mentioned, it is important that there be a balance between the requirements of Government and the effective and efficient conduct of business. In the appeals process I think that the Review Board should be comprised of independent experts who can ensure efficient and accurate appeals process without the risk of political interference.
It is understood that this Bill is to make it easier to do business in the Bahamas. Standard and Poor’s recently commented that the ease of doing business in the Bahamas. Specifically, the S&P Report states:
“According to the World Bank’s Ease of Doing Business Index, The Bahamas ranking continued to deteriorate, falling to 68 from 59 last year. The particular weaknesses are in the areas of construction permits, property registrations, investor protection, and contract enforcement.” The S&P Report further points out that this Bill is to facilitate operating a business and strengthen conditions for business in The Bahamas.
This Bill does not address the deficiencies in conducting business that the S&P Report highlights. Furthermore, the Bill does not seem to go far enough in creating the One Stop Shop concept that was promised. Yes, this Bill does streamline certain license approvals, yet, it does not address the mechanics involved. For example, a person who wants to open a restaurant will still have to seek approvals from a number of different Ministries and Government organizations in order to be licensed. This Bill does not address these practical issues.
I would suggest that a comprehensive Business License Bill incorporate a liaison officer or department that assists and coordinates the inspections and approvals from the different Government departments. This would truly facilitate doing business, and be more of a One Stop Shop for businesses.
This Bill can be improved. It is a fundamental alteration of taxing of businesses and requires more consultation. In addition, this bill should not be debated in isolation, we in this Honourable House, should commit to an immediate suite of legislation to assist business owners. I would have liked to see the much-promised Small Business Incentive Legislation tabled and debated at the same time. Business owners, and prospective business owners in the Bahamas deserve the attention of this House, the attention and all legislative benefits possible. Business owners deserve more than piece piece legislative process, they deserve a comprehensive suite of legislative reforms.
One must note, however, that businesses are struggling and going out of business as a result of the economic hardships and mismanagement of the economy by this Government. In addition to a suite of legislative initiatives, we need firm Government policy on economic expansion and economic development to allow business owners to have additional opportunities to succeed. Economic expansion policy can and should be in a number of different areas – by encouraging linkages in our primary industries, but also expanding the scope of our economy into areas such as international trade. A plan for economic expansion will not only provide further opportunities to Bahamian small and medium size businesses, but would also establish a base for enhanced government revenues at lower tax rates.
I submit that small business development is vital to the over-all economic recovery and success of our economy and that greater and immediate attention must be given to a policy of economic expansion and the legislation and training necessary to foster growth.
The Bahamas has been experiencing significant pressures on its traditional tourism product. We have been struggling to attract the numbers of visitors we ought to be, all while our cultural attractiveness has been slowly dying.
I have colleagues who have ideas that go to the deepening of our culture and our tourism product – a form of economic expansion. I was amazed after my example of how to easily implement measures to enhance cultural tourism which I shared during the bye-election campaign how many other members spoke of other ideas to expand our tourism product – medical tourism, corporate tourism, edu-tourism, eco-tourism just to name a few. The problem that continues to stifle us I believe is that we have done tourism for so long that we allowed ourselves to fall off the cutting edge. We need to be flexible, creative and quick to respond to changing demands of our clientele. This would in turn create economic opportunities for Bahamian business owners to strive in new markets linked with established elements of the economy.
It seems that attempts to promote our cultural tourism product and its linkage to small business owners is falling prey to poor economic management. The Summer Junkanoo Festival, while a good product, seems to suffer from a lack of effective marketing and promotion, and fails to provide the direct connection to the tourism product. Even with an attempt to connect the Festival with the tourist product, being hosted so close to downtown, there were noticeably few tourists at the event when I attended it. These types of Festivals and cultural events provide a great opportunity for small business owners to link their business with a tourist product, but an economic vision to these events seems to be lacking. In planning these functions, which I support, it is a necessity that tourists are exposed to the event, and that their presence is facilitated, through the provision of transportation and even incentives for attending, making the Festival more attractive. This year I listened to booth operators complain about the lack of traffic, with the number of persons on the cruise ships in port, everything should be done to encourage those tourists to attend celebration of our culture as this is a form of economic expansion.
We also need to have the vision to create new industries around our current industries. One example of this is Medical Tourism. Some medical professions are attempting to develop this industry, by providing safe and effective treatment in the Bahamas, treatment that although without FDA approval, is safe and profitable;.
The Bahamas has the benefit of geography – so close to the largest market on this side of the world, and highly trained nurses and doctors. With the Government support of a policy to promote Medical Tourism, and the involvement of the commercial sector with the medical experts, this can be a thriving industry. Not only for the benefit of the medical profession, but it would provide a lift for the hotel industry, and all the related hospitality industries.
Economic expansion does not have to be an impossibility for this Country. If we start in improving the quality of the industries which have sustained us for years, we can understand the future of the country economically, we can accomplish goals and can launch into light manufacturing, and agriculture and fisheries with millions of visitors sure to visit our shores and I dare say, own homes as well, in our Country.
A key component to economic expansion that will work hand in hand with the expansion of opportunities for business development and ownership is the promotion and establishment of policy in international trade. The Bahamas is perfectly positioned, geographically and with its infrastructure to be a dominant force in international trade.
In the recent budget, we saw $1 million allocated to promote foreign investment. It is my opinion that because of the need to be a participant in international trade, we should allocate a substantive marketing and policy budget to promote a trade industry. This would be an additional pillar of our economy creating economic empowerment for Bahamians, job opportunities for Bahamians, and training in new fields. Important to the Government, it will also provide more necessary sources of revenue
We have signed on to the Economic Partnership Agreement which allows companies here to have preferential trading with Europe. We anticipate joining the World Trade Organization. Yet, we present no clear national policy on trade, on expanding into new areas of our economy.
The benefits from expansion through international trade are clear. Despite this need to develop additional pillars of our economy for which employment, additional ownership, economic empowerment and additional government revenues can be generated, this Government does not seem to provide a definitive policy or direction to define the Bahamas’ position in international trade.
We have witnessed a deterioration of the agriculture industry in the Bahamas, with numbers declining in production. There could and likely are a number of different reasons for this. What I want to speak about on this topic, is not the blame for the regression of the industry, but specific plans for the industry to grow, to provide economic opportunity for prospective business owners. The evolution of the agriculture industry will depend on education on the new ways of farming, effective and modern logistics and distribution of product, and a long term vision with achievable milestones.
In business, one of the key determinations is identifying a viable market. With agriculture, the market is clear, both for food production, and for ornamental agriculture, the production of plants for the real estate development. With food production, we have both personal consumption as well as for the consumption of all the tourists that grace our shores. As the Government, I would advocate for an understanding of the products that are in demand, those products that we can produce through conventional farming, organic farming and hydroponic farming using greenhouses. Through this understanding, we can then establish grow zones throughout the family islands so necessary and achievable production is being done in the Bahamas. This will require an education component in these new forms of farming, but will also require the government to put in measures that facilitate the movement of product to the customer. Bahamian entrepreneurs have a tremendous opportunity in agriculture with a commitment on policy from the Government to do so in a modern and effective fashion.
Need for a National Plan in Partnership with All Bahamians
I have presented a number of ideas on a policy agenda that I would support for the future of the economic welfare of the Bahamas. One thing, however, that is required to ensure the success and the opportunity for small business owners is the need for a national economic plan. As I have described, these proposed reforms are all connected in a certain degree, where one helps promote the other and the success of one could be dictated by the implementation of another.
We as a country, in these tough times, in times where the Government cannot collect enough revenue to meet its obligations, in an era where comprehensive guidance to private enterprise is lacking, a national economic plan is required. The PLP believes this is a matter of urgency, and should be a fundamental component economic policy of the Government.
Through a national economic plan, business owners would participate in a plan to advance the Bahamian economy. There would be a plan for re-education of Bahamians, a plan for private investment in economic development an expansion. A plan on expansion of current industries such as tourism, agriculture and financial services, allowing for new business to provide linkages to existing industry. There will also be a clear economic plan.
Although private enterprise can achieve some, it is imperative that Government understands until it leads in the attitude of the achievability of small business development, economic expansion, and self reliance, the dreams and aspirations of our people will not match the potential opportunity for growth. We need government to believe then before our citizenry can believe.
I believe we have the brain capital right now to not only create the environment for the explosion of small business development in our various communities, even if we have to do so in partnership with foreign direct investment. But I also see the possibility of job creation in many industries through a policy of economic expansion, defined within the scope of a national economic plan.
Our efforts can be further strengthened through massive training and employment schemes built around agriculture and manufacturing.