In the year 2004, The Bahamas is one of the few countries that is still without income tax, but lately, representatives from the entire political spectrum have pointed out that the country needed to expand its revenue base.
Governments in need of more money, and budgets showing deficits are by no means a new phenomenon, nor are they a strictly Bahamian one, and governments, often criticised for a lack of imagination, have displayed amazing creativity in tapping into new sources of income.
In 1902, German Emperor Wilhelm II, grandson of Queen Victoria, had ambitious plans to build a navy that could compete with that of Great Britain.
To finance this undertaking, he introduced a tax on champagne and other sparkling wines. While the British Royal Navy sank most of the Emperor's ships in World War I, after which monarchy was abolished in Germany, Germans today are still paying the tax. This should demonstrate how it is easy for governments to introduce new taxes, but near impossible for the public to have taxes, which were designed to be temporarily and meant for a specific purpose, lifted. Neither the imperial government, nor the three following systems of government ever thought of depriving themselves of this convenient source of income; on the contrary, it has been raised some 10 times.
When I read in a book on Bahamian history ("Chronological Highlights in the History of The Bahamas: 600 to 1900," by Patrice M. Williams) that The Guardian in 1876 suggested the introduction of income taxes, I was surprised. To find out more about it, I went to the Error! Reference source not found. in Mackey Street, and did my own research.
Reading the articles and editorials of 1876 I was immediately reminded of this year's budget debate in Parliament. On January 8, 1876, The Guardian reported about Governor Robinson's disclosure in the House of Assembly that the actual deficit for the previous year had been £5,325 19s. 8d. The treasury was broke to the point that for some time it could not pay the public servants, which caused one parliamentarian, Mr Dupuch, to suggest the following:
May it please your Excellency:
In consequence of the embarrassed state of the Public Finances, the House of Assembly respectfully request His Excellency to abstain from filling permanently any vacancies now existing, or which may hereafter occur, in any Department of the Public Service, until the Legislature has been able to consider and decide upon the best means of reducing the Public Expenditure.
The House adopted this proposal on January 11, 1876. As the saying goes, "History repeats itself." This June, I was listening to the Minister of Public Service, Fred Mitchell, speaking on ZNS, where he explained that, at the moment, government would only hire new employees if their salaries were already included in the budget, for instance if a current employee left the job or died. While hiring freezes have proven to be a useful means to temporarily alleviate national budgets, they are not long-term solutions.
Both the politicians of 1876 and the media of the time, were aware of this, searching for ways to improve the revenue situation of the colony. On January 19, the editorial of The Guardian declared support for the proposed Stamp Act; on January 22, the editorial rejected property and income taxes, and instead suggested the government should collect trade license fees.
On February 2, The Guardian reports that "the Governor sent a Message to the House of Assembly ... It asserts that which most of us feared before, but probably failed thoroughly to realize – i.e. our bankrupt condition as a Colony." In light of this news, The Guardian published the following editorial:
An Income Tax would be more difficult of collection than a Trade Tax besides being more inquisitorial in its character. But, much as we object to an income tax, we should prefer to see even that adopted, than to witness the consequences which must follow impaired credit and further embarrassment. An income tax of threepence in the pound on all incomes over one hundred pounds a year would realize a large sum of money and at once relieve the Government. It would bear too on those persons who could best afford to give extra aid in the emergency, and could by no possibility hurt the poor. Either this, or a trade tax or local direct taxation must be had before the Legislature closes.
Public discourse on fiscal matters took an interesting turn when the tourist season came to a close in April. The season just past had been very successful, attracting more visitors to Nassau than the previous two together. On April 15, The Guardian's editor expressed his view that the tourist industry would be The Bahamas' future, after wrecking was but a memory, salt had failed, fruit growing did not generate enough income, and sponging was stagnant.
In light of this, the editor of the Nassau Times suggested that a form of tourist tax be introduced, arguing this was only fair as the steamship service between the U.S. and Nassau was heavily subsidised by the Bahamian government. This inflamed an editorial war between The Guardian and the Times, as the editor of The Guardian argued that the tourists generated more revenue by staying here than the government spent on the steamship subsidy, and added that Bahamians, too, benefited from the regular service, which carried mail and freight as well. Not only arguments, but unfortunately frequent insults, too, went back and forth for some three months, taking up much newspaper space in an otherwise quiet summer.
Fiscal policy was once again brought to the public's attention early in 1877. Despite increased customs duties, the deficit had grown. Especially the duties on wine, beer and spirits were down £2,200 compared to the previous year, which means that consumption of properly declared wines and spirits decreased by 10,792 gallons, consumption of properly declared beer by 8,000 gallons. This led Governor Robinson to state, "I have entered into these details because the return suggests the possibility of smuggling having been effected ..."
While strictly opposed to smuggling, the editor of The Guardian, writing on February 3, 1877, saw the high import duties as partly responsible, as they had "already reached the point beyond which they cease to be remunerative and become restrictions on legitimate trade and incentives to smuggling, one of the greatest national evils ..." Logically, he recommends lowering the import duties.
Interestingly, the same editorial calls income tax "in theory the fairest of all taxes" and also states that a "trade-tax is opposed to the plainest elements of economical science." Only one year before, the editor of The Guardian was not very enthusiastic about income taxes and had recommended a trade tax instead.
In search of means to alleviate the government's fiscal problems, The Guardian's editor even suggested a poll tax: "A moderate tax on the citizens of Nassau would suffice ... These would relieve the present embarrassment, and permanently equalize the income and expenditure ... One pound per head is not a very heavy tax."
However, not all of these suggestions found support in the House of Assembly. In 1877, the House passed the "Act for raising a Revenue by levying a Tax in respect of Real Property" and the "Bill for raising a Revenue by Stamp Duties," but also an "Act for further prospectively reducing the Public Expenditure." All these measures were supported by The Guardian's editorial. After the House was prorogued, The Guardian's editorial on May 9, commends the Parliamentarians on these decisions, and no further mention of either income tax or poll tax is found:
Our Legislators, when brought face to face with the public difficulties, have exhibited a spirit of patriotism and self-sacrifice ... they have sustained the strenuous efforts of the Governor to establish an equilibrium between Revenue and Expenditure ... not only has the principle of direct taxation been introduced and affirmed, but a successful effort has been made to maintain the public credit, to meet the annual deficit, and to balance the public income and expenditure.
While The Guardian's editor certainly wrote about income taxes, it would be an oversimplification to say that The Guardian suggested its introduction. Albert Einstein, who is world-famous for his genius, once said, "The hardest thing in the world to understand is income tax." History and politics surely rank close second. While it appears that nobody in 1876/77 seriously wanted an income tax, many were willing to accept it as a necessary evil in light of the bleak financial situation of The Bahamas.
