Government extends consultation period for corporate income tax green paper – Eye Witness News

Government extends consultation period for corporate income tax green paper – Eye Witness News

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NASSAU, BAHAMAS – The government has extended the consultation period for its corporate tax green paper until the end of August, Prime Minister Philip Davis announced yesterday, stressing that the document is simply intended to stimulate stakeholder discussion and contains no commitment to any particular policy action. .

The Department of Finance released a green paper last week outlining four corporate income tax strategies for the Bahamas.

In July 2021, the Bahamas became one of more than 138 members of the OECD Inclusive Framework that agreed to support the implementation of the second pillar tax reform, under which all multinational entities whose revenues are 750 million euros or more will be subject to a minimum effective tax rate of 15 percent in each jurisdiction in which they operate.

Prime Minister Davis explained: “The Bahamas became signatories to the OECD Pillar 2 framework on July 1, 2021, with approximately 350 countries, agreeing to the implementation of a minimum corporate income tax of 15% .

“The Bahamas is not obligated to impose a 15% corporation tax. However, entities above the €750 million annual threshold will be liable for additional tax in their respective jurisdictions, where they have offices or already pay this income tax.

He continued, “This incentivizes the Bahamas to impose the 15% tax. If we don’t impose it on multinationals, the jurisdiction where they are headquartered will increase the taxes that will not be paid to 15%. Instead of the funds going to that jurisdiction, it becomes an incentive to pay them here. »

Davis said the second motivation for exploring a corporate income tax is to meet the government’s goal of ensuring greater fairness and equity in the Bahamian tax system.

“Overriding concerns arise over the bias inherent in enterprise license fees. Companies bear a significant tax burden even in loss years, because the calculations are based on turnover and not on profits.

Davis noted that companies that pay corporate income tax will not have to pay a business license fee.

He stressed that the green paper was intended only to solicit reactions. He further noted that a The white paper will include explicit policy statements on the government’s intended approach, propose legislative changes and introduce new laws where necessary.

The strategies outlined in the Green Paper are as follows: Option 1 applies the OECD minimum tax rate of 15% to multinationals earning more than €750 million. Option 2 adds a 10% rate for other businesses. Option 3 includes a 12% rate for companies above B$0.5 million, while maintaining the Business License Fee (BLF) for companies below this threshold. Option 4 imposes a corporate income tax of 15% on all businesses except those under B$0.5 million, which would be subject to a 10% rate .

Interested parties had been invited to comment on the Green Paper’s proposals and provide responses to the set of questions contained therein by July 3, 2023, but that deadline has been extended to August 31.

East Grand Bahama MP and opposition finance spokesman Kwasi Thompson called the green paper “incomplete,” arguing that more information is needed.

“The government needs to have a plan to grow the economy and improve the ease of doing business,” said Thompson.

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