Bahamians 'unaware' of need to pay their taxes

By MARTELLA MATTHEWS,Guardian Business Reporter martella@nasguard.com

The difficulty the government experiences in collecting revenue could be blamed on the reality that while the citizens of most regional and international jurisdictions are ingrained with the importance of paying taxes from childhood, this was not a reality for Bahamians, the Secretary of Revenue said.

In an exclusive interview with The Guardian on Tuesday, Ehurd Cunningham explained that the unfortunate reality was that most Bahamians are not aware of the linkages between the payment of government fees and the provision of essential services like law enforcement, healthcare and infrastructural development.

"People need to be able to come around to accepting their responsibility for paying taxes!" he exclaimed adding that the frequent avoidance of customs duties at the entry points was a prime example of this.

Making the connection, Mr Cunningham continued that these same people expect immediate services like emergency response vehicles when faced with a ill family member. "We have to accept that we've got to be prepared to pay for it," he said.

Lifting some of the blame from the feet of Bahamians, the Revenue Secretary explained that while in most Caribbean countries, there are established tax payers service units to sensitise the public on the importance paying taxes and the benefits this revenue brings the overall economy, no similar agency exists in The Bahamas.

Acknowledging the reality that the current government expenditures as evidence by the recent budget require an immediate boost in government revenue, The Revenue Secretary said while discussions of alternative tax regimes were making the rounds, the avenue of enforcing payment of current taxes and plugging leakages was being explored. "It may be if we got all the persons to comply with the law, we won't need a new source of revenue," he said.

Mr Cunningham shared that while no formal study has been conducted to prove current leakages in revenue collection within the country today could equal the existing government need, informal measures have proven that if some of the leakages were corrected, the need for revenue would not be as critical as it is presently.

Providing a proven example, the revenue secretary said before the government decided to change the method of paying departure taxes to being included in the ticket price, investigations by the Ministry of Finance proved that the government had been losing millions of dollars per year from avoidance measures. He added that this knowledge became the driving force behind changing the method by which this tax was paid. Since this time, greater emphasis has also been placed on accounting and reporting of this tax in addition to stiffer penalties for noncompliance.

While plugging the leakage on departure tax was fairly achievable, Mr Cunningham revealed that doing the same for customs duties was more challenging. He said to assist the government with this gigantic task a branch of the British based Crown Agents has been employed. This branch is currently undertaking a review of the existing system while also overseeing the implementation of a new system that is expected to eliminate most of the manual processes.

This new system, the Revenue Secretary explained, would allow for greater attention to be given to situations red flagged by the computer.

A key factor leading to leakages in government revenue collection identified by Mr Cunningham was a lack of administrative machinery and the dire need to mechanise the majority of departments. He assured however that the government was working feverishly on implementing a cash receipting system, which would gradually replace receipt books. This new development he explained would provide the government with the ability to generate statistical data on revenue generation as well as ensure more reliable collection procedures. He noted that this new system has already been implemented in the Treasury Department and was currently undergoing fine tuning and the next agency expected to receive this upgrade is Road Traffic.

According to the Secretary of Revenue, the ultimate aim in implementing these upgrades is to move the island of New Providence away from a purely cash based system to include the acceptance of local and international credit cards. "Our plan is to further advance the acceptance of credit cards," he said adding that in some departments this has already begun with the acceptance of Suncard.

Mr Cunningham is hoping that by hosting this years Caribbean Organisation of Tax Administration (COTA) conference, The Bahamas would get the opportunity to learn from the experience of other regional countries that may have faced similar revenue collection situations.

He added that because of the unique crossroads the country was currently facing on its current revenue generation system, the Ministry of Finance has decided to open up the conference to other government ministries and private sector bodies. Included among the invitees are Bahamas Customs Department, Ministry of Trade and Industry, Bahamas Trade Commission and Bahamas Institute of Chartered Accountants.

The conference opens in the capital next Monday and is expected to attact a variety of tax officals from the Caribbean region.