By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Cabinet minister last night asserted it was “no surprise” that Donald Trump has withdrawn the US from the 15 percent minimum global corporate tax amid fears this move may hit The Bahamas’ competitiveness.

Michael Halkitis, minister of economic affairs, told Tribune Business that even though the former Democratic treasury secretary, Janet Yellen, had committed the US to the G-20/Organisation for Economic Co-Operation and Development (OECD) initiative it was still likely to have encountered headwinds in becoming law due to the Republicans controlling the House of Representatives in Congress.

“They had a Republican Congress, so even though the Democratic Secretary to the Treasury, Janet Yellen, signed an agreement, they would still have had to get it through a Republican Congress, which would have been difficult,” said Mr Halkitis. “So, we knew their participation wouldn’t be forthcoming, and so the fact that Trump just withdraws, I mean, that’s not surprising to us at all.”

The newly-elected US president, amid a flurry of executive actions on his first day in office, issued an order declaring that the 15 percent global corporate minimum tax deal “has no force or effect” in the US, effectively pulling the US out of the 2021 arrangement negotiated by the Biden administration with nearly 140 countries.

“The OECD global tax deal supported under the prior administration not only allows extra-territorial jurisdiction over American income but also limits our nation’s ability to enact tax policies that serve the interests of American businesses and workers,” Mr Trump’s executive order states.

“Because of the global tax deal and other discriminatory foreign tax practices, American companies may face retaliatory international tax regimes if the US does not comply with foreign tax policy objectives. This memorandum recaptures our nation’s sovereignty and economic competitiveness by clarifying that the global tax deal has no force or effect in the United States.

“The secretary of the treasury and the permanent representative of the US to the OECD shall notify the OECD that any commitments made by the prior administration on behalf of the US with respect to the global tax deal have no force or effect within the US absent an act by the Congress adopting the relevant provisions of the global tax deal.”

Mr Trump’s move comes just months after The Bahamas implemented its version of the 15 percent minimum global corporate tax by passing legislation to enshrine in law the so-called Domestic Minimum Top-Up Tax, which currently only applies to Bahamian entities that are part of multinational groups enjoying in excess of 750m euros annual turnover. It is estimated as generating $140m in revenues for the Government during a full year.

It is unclear what impact Mr Trump’s move will have on The Bahamas although concerns were expressed that this could place the jurisdiction at a competitive disadvantage and undermine the financial services sector. In effect, The Bahamas has complied with a global initiative and commitments only to have this torn apart by Mr Trump within hours of taking office.

Paul Moss, head of Dominion Management Services, told Tribune Business: “I’m smiling. We’ve already leaped. That puts us at a disadvantage. I’m not sure what Trump has in mind but already it’s not going to be 15 percent. I’m not sure if our guys realise we’re a nation and need to make calls for ourselves and not other people. We do it every single time on every issue. It doesn’t make sense to do it that way.

“If the US is not going to be part of it, I’m not sure how this is going to work. Trump is the man, Trump is the man. It’s not about conformity; it’s about competition. We must have tax competition, but we seem not to want that.” Mr Moss said The Bahamas was unlikely to extend corporate income tax to other parts of its economy before the next general election which must be held by September 2026.