The government is moving to stimulate export activity by excluding all revenues generated from the calculation of business licence fees, the deputy prime minister said yesterday.

Addressing an industry briefing at the British Colonial Hilton, KP Turnquest said the move would achieve consistency between the business licence and value-added tax (VAT) treatment of export earnings.

Acknowledging the structural obstacles that make it difficult for The Bahamas to compete on goods exports, he added that this nation should focus more on exporting professional services such as accounting.

Mr Turnquest said the renewed export focus was part of the government’s bid to stimulate domestic economic activity, a move that has been forced in part by the end to preferential tax breaks/incentives for foreign investors as a result of the European Union’s (EU) anti-tax evasion offensive.

“We all know the barriers caused by the high cost of electricity and labour, as examples,” the deputy prime minister said in relation to goods exports.”We have several competitive niche areas as a country and we capitalising on those, but there is another export market that is under explored, where we can more effectively compete on an even footing.

“That is the export of services: Accounting services, legal services, information technology services, management consulting services and, of course, financial services, just to name a few.”

Mr Turnquest said that consistent with the recent legislative changes that level the playing field for Bahamians by removing preferential exemptions for non-residents, the government is targeting policies to incentivise the export of services. Revenue derived from these services exports will not be taxed for business licence purposes or VAT.

“In this digital economy, export services are growing rapidly and we do not want Bahamians to be constrained within our territorial borders,” he explained. “In fact, we want to incentivise them to build clientele on the international market, taking advantage of all the business opportunities that can be delivered through a mobile device or on a computer.”

Mr Turnquest added that as Bahamians increase their skill sets and expand their reach, there will be increasing opportunities to participate in the export economy.

He conceded that, for the past 50 years, the government has approached regulation from the standpoint of whether an individual or entity was resident or non-resident.

“This legal framework of privileges and benefits to non-residents was inherited many decades ago. It served its purpose at the time as a way to encourage the inflow of foreign exchange. However, today, it does not work,” Mr Turnquest said.

“We are adopting a new approach that brings fairness to the system. We are adopting a new way that positively shifts the overall value proposition of The Bahamas’ financial sector. We are implementing a new framework that increases the ease of doing business.

“All together, this means we faced the daunting prospect of change in the industry and, instead of being paralysed by the prospects, we created a framework of transformation for the country.”

Mr Turnquest said that moving forward, it does not matter who the person/business is or where they reside: Taxes are due on all business activity where the benefits are derived inside The Bahamas.

To encourage the export of services, the government is excluding revenue derived from this activity from being included in the basis for business licence fee calculation, consistent with the existing rules for VAT. This will apply whether an individual or entity is resident or non-resident.

Mr Turnquest said: “We first introduced this thinking when we enacted the VAT Act, with its provisions for zero-rated goods and services. They already apply to business activity outside of The Bahamas.

“Streamlining the treatment of VAT and business licence makes it easy for businesses to implement these new rules, because they have already done the analysis for the purpose of VAT. Moving forward, they will apply the same type of calculations to determine export turnover for the purpose of business licence. Essentially, if you do not pay VAT on it, you do not pay a business licence on it.”