By INDERIA SAUNDERS ~ Guardian Business Reporter ~ Inderia@nasguard.com:

The president of the Bahamas Institute of Chartered Accountants (BICA) is acknowledging potential benefits to this nation's offshore stemming from a move to change this country's tax regime, specifically, an introduction of Value Added Tax (VAT).

It has everything to do with moving towards becoming a double-taxation jurisdiction and entering treaties to that order, said Reece Chipman.

"Right now what you're looking at is negotiating Tax Information Exchange Agreements (TIEA) with countries that have a taxation structure," he told Guardian Business. "We do not have one, so the benefit of actually having a VAT system in place is actually more beneficial in negotiations because now there is a tax structure in order to have a double tax operation, which is said to be the better one to go for."

VAT is referred to as an indirect tax placed on each stage of production on the value added at that specific stage. It can also be referred to as Goods and Services Tax (GST). It's a method of taxation that Chipman argued Bahamians would find more "palatable" than the more direct income tax.

The VAT system, he said, would be in response to tariff liberalization accompanying the country's moves to full ascension to the World Trade Organization (WTO) and a subsequent move to relax customs duties. Those steps come as the Organization for Economic Cooperation and Development (OECD) cracks down on "tax havens", making it mandatory for offshore centers to have at least 12 TIEAs with other countries. Introducing a VAT system, said Moss, would help The Bahamas in meeting the new international standards.

"It's something to look at from an open mind because this particular system can probably take us into identifiable TIEAs," Chipman said. "It might take us into reverse strategies and set the stage for a new culture... a culture of payments, compliance and taxation."

Currently The Bahamas has TIEAs with the U.S., Monaco and San Marino. Prime Minister Hubert Ingraham last week said eight more TIEAs with other countries had already been negotiated.

However, some analysts argue those TIEAs may not be enough to satisfy those more developed nations now looking for additional ways to make up lost revenue.

In fact, attorney Paul Moss suggested in an earlier interview with Guardian Business that the Bahamian government should aggressively seek to enter into double taxation treaties with countries as well as those in the G-20 group of nations. That would see us taxing foreign individuals and entities - seeking to take advantage of our tax structure - at a lower rate than their home countries, only to then split that revenue with those originating jurisdictions, at the same time exempting the investor from further taxation.

It's the only way, he said then, to put a stop to the hounding.

"This system should be of no more than 2 percent of either the gross or 3.5 percent of profits or 1 percent of funds under management," Moss outlined in an earlier interview. "If we had a policy of 1 percent under management for $1 trillion that would mean $10 billion in revenue to the government."

But not even adopting a double taxation system, say analysts, may help The Bahamas fend off such attack, given Obama's proposal also called for a crackdown on low-tax jurisdictions.

October 19, 2009

thenassauguardian