By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

A Bahamian financial analyst yesterday backed the introduction of income tax as he called for this nation to move away from VAT and the other regressive levies it has relied on for decades.

Kriston Moore, president of the Chartered Financial Analyst (CFA) Society of The Bahamas, told a Rotary Club of West Nassau meeting that income tax would be a fairer and more equitable option given that it is directly linked to a person’s or company’s earnings and ability to pay.

Those who earn more would pay more tax, either via a personal or corporate income tax, he added, as opposed to The Bahamas’ current VAT and import-dominated tax structure where lower income households devote a higher proportion of their earnings to taxes compared to their wealthier counterparts.

Mr Moore said implementing a Bahamian income tax will also better redistribute wealth that under the current system, branding such reforms more “progressive” than Customs duties or VAT.

“Putting in more progressive tax systems, such as corporate income tax and personal income tax, are very complicated considering that a lot of the reason that we get so many foreigners to come here is because of our tax environment,” he added. “So we have to find some way to strike a balance between economic growth, and not shutting that off, versus better distributing the wealth.

“I think we’re all aware that VAT is not a very progressive tax. It impacts low income households more than it does wealthier income households. So that’s something that we definitely have to consider.” Addressing such inequality through tax reforms will require some retooling of the Bahamian economy, Mr Moore acknowledged.

“The World Bank classifies countries into different income groups based on their gross national income per capita. Classification of high income is determined by a specific income threshold and they update that annually,” he said.

“Of course, The Bahamas well exceeds that. I think our gross national income, the last time I checked, was about $31,000 per capita, so we’re classified as a high income country by the World Bank standards which, of course, eliminates us from certain receiving certain development financing.”

Considering that the minimum wage is “nowhere close” to $31,000, Mr Moore said there is “much more” that is needed to close the income gap, and “redistributive policies” are needed to bring more Bahamians above the threshold.

The $31,000 figure cited “does not truly reflect” the income most Bahamians earns, Mr Moore said, and as a result this misconception multilateral financial institutions think that this nation does not need development financing.

“Now part of the problem with us getting development financing, especially as a ‘high income nation’, is that we advertise ourselves as a very well-off nation,” he added. “So I think we have to be a bit careful in our messaging and decide what we really want. Now, having a gross national income per capita of $31,000, you would think that that’s an average income for The Bahamas.

“But no. We know that’s biased upwards by the wealthy persons in our country, right, because there are many Bahamians who make nowhere near that amount. Even if you think of minimum wage, it is less than half that amount. So we’re not even close to that in terms of an average income for the most part.

“Now, even if that was the average income, that’s only part of the issue. Part of the other issue is that we have a very high cost of living in The Bahamas.”