By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Tax collection in The Bahamas is a “combative experience” where businesses are treated as “frauds” if they interpret the rules differently from the Government, a senior banker argued yesterday.

Gowon Bowe, Fidelity Bank (Bahamas) chief executive, told a Bahamas Business Outlook conference panel discussion that too often companies perceive the Department of Inland Revenue as seeking to “extract” taxes from them rather than adopting a “partnership approach.. to get its fair share”.

While The Bahamas consistently advocates its ‘low’ or ‘no tax’ status as part of its value proposition to both domestic and international investors, he argued that many in the private sector view this nation’s tax structure as “complex” due to different interpretations of the rules from government.

And Mr Bowe, who headed the private sector’s Coalition for Responsible Taxation when VAT was introduced a decade ago, said the clarity sought by businesses was “always at the whim of who you get to talk to” as he called for interpretation-based tax disputes to be resolved by “commercial settlement” rather than penalties.

Urging “simplicity” when it comes to tax rules, he said: “We speak about being a low tax facilitator, but most of the domestic business sector and even the international business sector will say our tax system is complex because they never had clarity on how it’s interpreted and it’s always at the whim of whoever you get to talk to.

“Meaning it’s not codified to the extent that when it’s rolled out everyone come to the same conclusion, and when you have that level of ambiguity - and like I say, it’s not intentional; I’ve been through the system when we started implementing new elements such as VAT.

“I think we experience a situation where taxes are seen as combative,” Mr Bowe added. “That the tax authority is seeking to extract it from me as opposed to partnering with me to get its fair share, meaning that I am deemed to be a tax fraud simply because I interpret it differently from the tax authority and that is incorrect.

“We need to get to a basis that’s saying if you have failings in the interpretation, and we clarify those, we deal with on a commercial settlement and responsible basis. When we look at the system we have, we don’t repeat the same failures. Let’s take the time and effort to say we have clarified it as much as we can.”

Kevin Moree, attorney at the McKinney, Bancroft & Hughes law firm, told the same panel discussion that the tax system has to be kept under “constant review” by the authorities so that any uncertainties are rapidly addressed.

He added that “clarity and certainty” is critical to ensuring proper compliance by taxpayers, and suggested the Tax Appeal Commission, through its rulings, will start to “build up jurisprudence” outside of amendments passed by Parliament that will help “to guide investors with how they stand” over the application of taxation to their ventures.

“I think a very clear plan has to be set out by the Government as to what it wants and they will get assistance from the private sector,” Mr Moree said. “That should be done in an open and transparent manner in terms of what the money is used for, where the funds are being used that directly benefit citizens of The Bahamas through healthcare, education etc.

“This goes to your [Mr Bowe’s] point of fairness. You will have taxpayers that won’t be so combative… Where we can have that understanding and transparency, and feeling tax dollars are going to worthwhile causes, and there’s clear direction that this is where the Government wants to end up, I can plan my commercial affairs accordingly as to where I want to invest, which puts us in a very good position.”

Mr Moree, while asserting that “transparency is the starting point” when it comes to the Government’s use of tax dollars, added that the process by which investors access available tax breaks and concessions is also key to The Bahamas’ competitiveness.

He warned that if a “developer has to spend the better part of 12 months in order to achieve those available incentives, that’s not a very effective incentives regime. On paper it may look good, and may look competitive compared to other jurisdictions, but practically it’s not”.

Mr Bowe, arguing that The Bahamas lacks a competitive tax system to incentive investment, said this nation has “to be a bit wiser” and be more proactive in exploiting the external demands imposed on it - such as the 15 percent minimum corporate income tax - for its own national development purposes.

Simon Wilson, the Ministry of Finance’s financial secretary, replied by acknowledging that The Bahamas is in effect “a price taker, not a price maker “ when it comes to setting global taxation rules and largely has to follow what is imposed by the more developed nations and their agencies. He added, though, that The Bahamas is “going at the right pace and in the right direction” with its own reforms.

Mr Bowe, though, said incentivising investment and “certain behaviours” would be easier under an income tax system as opposed to The Bahamas’ current consumption-based framework, while adding there are “real opportunities” to  “more evenly distribute the tax system”.

“Any type of tax reform is always interpreted as taxing more as opposed to how we shift the tax burden or shift the burden to allow me to extract more from those who can pay,” he said, reiterating that The Bahamas’ current regressive taxation system means those with lower earnings pay proportionally more of their income in taxes compared to their higher net worth counterparts.