06/05/22

BAHAMAS: Government urged to pursue greater tax compliance and tax system equity.

As published on ewnews.com, Friday 6 May, 2022.

Government should boost its tax reform efforts with a view of bringing higher levels of compliance and greater equity to the system, a governance reformer said yesterday.

Hubert Edwards, head of the Organization for Responsible Governance’s (ORG) economic development committee, pointed to recent revelations by the Department of Inland Revenue that tax arrears over the past several years have amounted to close to $1 billion in arrears.

Edwards noted that that sum represents approximately 10 percent of the country’s national debt.

“When we consider the extent to which the country has struggled financially over the last few years we should have an appreciation of the violence non-payment of taxes can wreak on an economy over time,” he said.

“It’s never dramatic, often a very subtle erosion of the spending capacity of the government.”

He continued: “The arrears can be evidence of an insidiously destructive culture of compliance and may be indicative of the true strength of certain businesses and an unfair advantage to others. There are seemingly entities which are effectively using their tax obligations to extend their economic capacity, not paying their fair share and arguably gaining a competitive advantage over others that do.

“It is therefore not sufficient to only look at the dollar impact but the underlying effect this can have of the proper functioning of the fiscal machines of the country and fair play in the competitive space. For the country to progress, despite being burdensome, everyone and every entity should meet their tax obligations.”

Edwards said the significant level of intentional non-compliance and evidence of underreporting should raise questions as to whether the country has a true handle on the sufficiency of its tax regime.

“Is the system adequate but being gamed by others and therefore putting the country under stress? Alongside this, are some of us unduly bearing the burden because others are manipulative of the system?” Edwards said.

“My view, therefore, is that the government should leverage these findings to boost its tax reform efforts with a view of bringing higher levels of compliance but more importantly a sense of greater equity to the system. When the tax burden is appropriately spread and there is a sense of fairness, compliance generally operates at a higher level.

“Collections of amount due is critical, enforcement is fundamental but more importantly, the message here is to dig below the surface to ensure that all appropriate solutions are brought to bear in fixing this critical element of the country’s economic apparatus,” said Edwards.

Officials at the Department of Inland Revenue on Wednesday lamented what they called the “unacceptable rate of non-compliance” among registered taxpayers over the past several years which has resulted in close to $1 billion in arrears.

Shunda Strachan, Acting Controller of the Department of Inland Revenue said that more than 70 percent of those arrears stem from taxes levied on commercial properties and vacant land owned by non-Bahamians.