Govt crackdown on tax collection to reap $400 million over two years
Guardian Business Reporter
Published: Feb 17, 2017
In two years, the government is seeking to collect $400 million in revenue by tightening its tax collection system, according to Financial Secretary in the Ministry of Finance Simon Wilson.
During the State of the Economy Report 2017 conference at Atlantis resort yesterday, Wilson explained that The Bahamas is the lowest taxed country in comparison to its regional counterparts.
He said tax to GDP ratio (the ratio of tax collected compared to gross domestic product) - which increased from 17 to 22 percent - still needs significant improvement.
Wilson said the country would probably need to have a 26 or 27 percent tax to GDP ratio in order to achieve a surplus.
Wilson pointed out, that one way of doing that was to increase tax rates, but he said the government took a different route.
“We believe the system is sufficient to achieve that target,” he said.
Therefore, the government decided to be “more aggressive” in its tax compliance program by, for example, hand-delivering notices of outstanding real property taxes - one example among others.
In November 2016, the Ministry of Finance announced the establishment of a project team charged with the responsibility of addressing non-compliance with tax and customs laws in The Bahamas.
The project would focus on four key taxation areas: value-added tax (VAT), real property tax, business license fees and customs-related taxes and fees.
“On average, in dollars and cents, these efforts have yielded an average $15 million a month,” Wilson said.
“Our target is $400 million in two years in incremental revenue, without adjusting rates. We believe that is quite achievable.
“If we listened to our advisors and took a more aggressive stance, their target is almost twice that.
“And this $15 million is only in New Providence… We have not gone beyond New Providence.”
Wilson admitted that the tax crackdown has created “some noise” in the business community.
“A lot of persons have not been paying their fair share,” he said.
Wilson revealed that last year, three courier companies were audited and $7 million in VAT was collected as a result. He said the ministry is now targeting 35 courier companies.
“Many people in the business community, they talk the talk, but when we walk the walk, that’s where the challenge is,” said Wilson.
He also revealed that his ministry has identified 24,000 properties in New Providence that have not registered for real property tax.
Most of those properties are in high-end areas such as West Ridge and “off Carmichael”, according to Wilson. “Some have mortgages and some do not have mortgages,” he said.
In terms of customs-related fees, Wilson pointed out that the customs examination process was reduced to two processes: air cargo and sea cargo.
“It has done two things for us. We have seen an improvement in revenue yields, and we have also been able to capture and identify contraband,” he said.
Wilson also said his ministry identified 800 entities that acquired $30,000 worth of goods last year but did not have a business license.