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The Tax Information Exchange Agreement (TIEA) between The Bahamas and Canada, which could result in greater foreign direct investment and employment opportunities, came into force Wednesday.
Canada's Department of Finance made the announcement yesterday, posting a notice on its website indicating that the agreement was signed. With the TIEA in effect, it means that Canadian corporations will be able to set up active business in The Bahamas and, once they meet the stringent qualifying standards and tests, take advantage of the special tax incentive.
According to Deloitte Bahamas managing partner, Raymond Winder, this TIEA creates a competitive advantage for the Bahamas compared to Barbados.
"The biggest thing about this is the fact that for years Barbados has had competitive advantage over The Bahamas because it had a tax treaty with Canada which allowed Canadian companies to be domiciled in Barbados and repatriate profits to Canada and pay a small corporate tax in Barbados," Winder said.
"The TIEA allows The Bahamas the same privileges that the Barbados tax treaty allows, the only difference is the Canadian subsidiary doesn't need to incur any tax at all in The Bahamas to get this treatment. So the TIEA actually puts The Bahamas and other countries that sign TIEAs [with Canada] at a competitive advantage as compared to the current tax treaty Canada has with Barbados."
Getting into some of the legal aspects of the agreement, Higgs & Johnson partner, Dr Earl Cash, honed in on Article 13 of the TIEA. That article spells out the terms of the agreement's entry into force. It indicates that activities that either government is seeking information about must relate to matters considered a criminal offense in its own jurisdiction.
Cash also pointed out that the agreement reaches back to cover a taxable period from January 1, 2004. He said this may have been done to not prejudice Canada's information exchange provisions with The Bahamas against those of the United States, which has tax information exchange provisions with going back to that time.
Initially singed-off since June 17th, Canadian legislators had to enact changes to its excise laws to bring the TIEA into force. "The Excise Act and Excise Tax Act" amendments received royal assent in Canada on June 26th, paving the way for the TIEA coming into force.
At the time, Canadian-based experts Guardian Business spoke to thought early fall was a likely timeframe for the agreement coming into effect.
Continuing its charge to foster the growth and development of the financial services sector of The Bahamas, the Ministry of Financial Services, led by the Hon. L. Ryan Pinder, M.P...
By NEIL HARTNELL
Tribune Business Editor
Bahamian economic recovery will not happen until 2012 unless foreign direct investment (FDI) rapidly rebounds to levels seen two to three years ago, a senior accountant told Tribune Business yesterday, as fears intensified that a rebound - and reduced unemployment - may not occur next year.
Describing foreign direct investment as "the only thing that could create a real stimulus today" for the Bahamian economy, Raymond Winder, managing partner at Deloitte & Touche (Bahamas), said: "When you look at the performance of the US economy, and the performance of our economy, if those numbers do not begin to turn around - spending, income, mor ...
It turned out that 13 was a lucky number for 25 seasoned and budding golfers, as they walked away with awards at last Sunday's Bahamas Hotel Association's (BHA) 13th Annual Golf Tournament at the Ocean Club Course on Paradise Island.
Despite the threat of inclement weather, a record number of 104 golfers registered to claim bragging rights while helping to raise over $20,000 for student scholarships and a range of programs which BHA is doing in the nation's schools.
"We are most appreciative of the tremendous support from our members, friends of BHA, and of course the golfers for supporting this year's tournament," stated BHA President Stuart Bowe. "The turnout was fantastic. It will go a long way next year toward matching and we hope exceeding the record 12 students who were awarded scholarships this year as a result of previous efforts. The tournament and our auctions have helped to put 81 young Bahamians through college during the past year with scholarships valued at $287,000, "added Bowe.
Tournament organizers Fred Lunn, John Spinks, Ted Adderley, Nelson O'Kelley and Billy Lee commended the golfers for their support, in announcing the winners of this year's tournament at an awards ceremony following the tournament. The tournament was sanctioned by the Bahamas Golf Federation (BGF).
Capturing first place was the team of Peter Muscroft and Doug Cowper which was sponsored by Royal Star Assurance. They were followed by Cliff Petford and Jake Neudorf. Third place honors went to the Royal Bank of Canada team of Phil Andrews and G. Hill. Fred Lunn and Errol Brown took fourth place and were sponsored by the Nassau Paradise Island Promotion Board.
Rounding out the top 10 teams, in fifth place was Roger Chow-How and Eddie Carter. Sixth place went to Andrew Burrows and John Kinger. Taking seventh was Jeffrey Walcott and Tyrone Cunningham representing BTC. Nicholas Knowles and Harrison Collins took eighth. Ninth place went to Jim Wilson and Patrick Knowles representing Scotiabank, and capturing 10th was the team of Nelson O'Kelly and Paul Burke from Kerzner International.
This year's sponsors included: Fidelity Bank, Kerzner International, Royal Bank of Canada, the Nassau Paradise Island Promotion Board, Bahamas Food Services, The d'Albenas Agency Ltd., Scotiabank, Bank of The Bahamas, the Bahamas Telecommunications Company, RoyalStar Assurance, KPMG, Graham Thompson & Co., Restaurants Bahamas (KFC), J.S. Johnson, the Lyford Cay Club, Banca del Sempione, Bahamas Wholesale Agency Ltd., Commonwealth Bank, Caribbean Bottling Company, Bahamas Hot Mix, N.U.A Insurance & Brokers, Deloitte & Touche, Nassau Motor Company, Pigeon Cay Beach Club, Providence Advisors, Wong's Rubber Stamp & Printing, American Hotel Register, Viva Wyndham Fortuna Beach, Sheraton Nassau Beach Resort, Pelican Bay at Lucaya, American Airlines, Bahamasair, Comfort Suites Paradise Island, Treasure Cay Resort, Green Turtle Cay Club, Sandals Royal Bahamian, Ocean Club Golf Course, Nassau Airport Development Company, Island Merchants, Ridge Farms, Pineville Motel, Sunrise Resort & Marina, Blue Lagoon and Dolphin Encounters, Senor Frogs, Diamond's International, Via Caffe, Toads Hall Square Hill Estates, Sands Beer, Jewels by the Sea, Security & General Insurance, Luciano's of Chicago and Old Bahama Bay Resort & Yacht Club.*Look for article images in our Online Gallery section.
The government is "putting heat" under plans to unify the public bus system, with an updated business plan being created to move the transportation system from one characterized by "damaging and harmful competition" to one that better serves passengers' needs, the minister of transport has revealed.
Glenys Hanna-Martin, minister of transport and aviation, met yesterday with consultants at Deloitte and Touche who are putting together the plan that will undergird the overhaul.
She called the plan "the most critical and difficult aspect" of the process, involving questions such as valuation of bus franchises.
While Hanna-Martin stressed that the plan has yet to be fully determined, and will only be completed in consultation with those in the
industry, she noted that it will essentially involve the movement of the 500 franchise holders and over 300 buses that currently exist under a single entity most likely organized as a public-private partnership.
"You have hundreds of individuals owners and you have to put on the table what the deal is in terms of how they would transfer their livelihood and ownership to a singular entity and how that would work.
"We haven't narrowed down a timeline, but we have said we have a very serious problem which is our public transportation system and we now must move forward urgently and expeditiously in consultation with the stakeholders," said Hanna Martin in an interview with Guardian Business.
The unification of the public bus system is part of the New Providence Road Improvement Program, funded by the Inter-American Development Bank, which also involved the upgrading of New Providence's road network.
Noting that talk of bus system unification has been ongoing for many years, Hanna Martin suggested that the government is now committed to seeing the process through to completion.
Emphasizing that the plan is in early stages, she said it is possible it will involve individual franchise holders becoming shareholders in the new entity.
"We're of the view that right now the public transportation system is a very profitable one despite its many inefficiencies and we believe under this (singular structure) it would be even more profitable, while at the same time creating rationality."
Once completed, bus unification should ensure a better passenger experience, with more comprehensive approach to routing, among other issues.
"What we are trying to do now is to create a singular structure, a corporatized structure that brings some orderly coordination. In built into that will be things we are really concerned about, which include good routing; ensuring that we cover areas that are not presently covered because they are not financially beneficial.
"We want a fair system that is efficient and creates ease for passengers, and which eventually involves upgrading the fleet to make it more energy efficient. We want employees who are bus drivers who have no incentive other than the wage that they make," said Hanna Martin.
Meanwhile, the Minister said that the government will meet on Thursday with bus franchise holders as it seeks to make progress with other issues that plague the bus industry, such as behavior of drivers and safety concerns.
The Ministry of Transport has received complaints that certain bus drivers play pornographic videos during the transport of passengers, Minister of State for Transport and Aviation Hope Strachan revealed yesterday.
The complaint comes as the Ministry of Transport is dusting off longstanding plans for the creation of a unified bus system, Strachan said as she headed into the weekly Cabinet meeting.
Officials from the Ministry of Transport held a meeting last week with jitney drivers and public franchise owners seeking support for the initiative and to address public concerns.
"We wanted to address the number of complaints that we get about the jitney drivers and how they operate their vehicles on the streets of New Providence, and we also wanted to hear from them about any issues they have with the Road Traffic Department and the ministry," Strachan told reporters yesterday.
In addition to the complaints related to the playing of pornography, public complaints regarding the public busing system also include the loud music played on some buses, drivers abandoning their routes and the inappropriate attire of certain drivers.
Strachan said that during last week's meeting the proposal for the unification of the public bus system was supported.
"For the most part they are actually going to support that initiative, so we hope to get that going in the next fiscal year."
The unified bus system was pushed by the former Christie administration, however, plans for that program subsided after the Progressive Liberal Party (PLP) lost the general election in 2007.
There are about 500 franchise holders in the public busing system. The government is looking to bring all of those owners under one umbrella.
"It is a huge undertaking and I'm sure the cost involved is going to be enormous. We haven't really valued it," Strachan predicted.
She added that accounting firm Deloitte is engaged in an exercise to determine the value of each franchise.
"We have to know the value for the franchise owners so they know what is due to them, and the government knows what its financial obligations are going to be."
By NEIL HARTNELL
Tribune Business Editor
Enhanced reporting requirements could give the Bahamian financial services industry the opportunity "to go after US clients" once again, a leading accountant said yesterday, pointing out that marginal, per client compliance costs would be "substantially reduced" by upfront systems investment.
Lawrence Lewis, the Deloitte & Touche (Bahamas) partner, speaking to Tribune Business after addressing a Bahamas Financial Services Board (BFSB) seminar on the issue, said the US Foreign Account Tax Compliance Act (FATCA) provisions would create a regulatory 'level playing field' since all jurisdictions would be required to adhere to i ...
A top accountant is questioning why small businesses with less than $50,000 in gross sales should be exempt from proper record keeping, arguing it stunts the growth of business and promotes bad practices.
Raymond Winder, the managing partner at Deloitte & Touche (Bahamas), said the exemption is being seen with a measure of "concern".
For starters, he told Guardian Business that the exemption itself makes it difficult for the government to even know if a firm did not exceed the $50,000 mark.
"In my view, any organization that is licensed by the government should keep some books on record. By doing that, it serves as a basis to understand what they are doing to further improve their business," he argued.
"And if you're not tracking your business, how do you move from a small business to a big one?"
The question is timely, as the government pushes forward on a revised Business License Act that enforces better record keeping.
According to Ryan Pinder, the minister of financial services, the purpose of the new legislation is to come more in line with the Organization of Economic Cooperation and Development (OECD) to ensure compliance.
Pinder, who is also the minister for manufacturing and trade, said he actually agrees with Winder.
"I think he is right. However, the culture we are at, especially with small companies in the economy that are cash based, the culture is they don't keep proper records," he explained. "We didn't want it to be a barrier to certain businesses so in the companies act, we modeled it after the Business License Act threshold. But that is not to say we don't encourage best practices."
The minister said the legislation is really not intended for these small businesses.
"The ambition is always for them to grow to medium or big businesses," he added. "If you are seeking capital you'll need to present these types of records."
In The Bahamas, businesses with under $50,000 in turnover are only required to pay a nominal fee for their license. For his part, Winder told Guardian Business that the lack of standards for smaller businesses only prevents growth and fails to encourage them to take positive steps.
There are also other instances where record keeping becomes useful, such as the recent Road Works Relief Plan debacle.
Following the disastrous project in New Providence, whereby hundreds of businesses lost money or shut down entirely, entrepreneurs have been unable to prove their losses.
"Records are always important," he said. "One of the fundamental infrastructures to be in place as we move towards taxation is record keeping. Poor record keeping leads to poor decisions on how to tax and who not to tax. Poor record keeping also leads to the inability to truly make people accountable."
It's time for politicians to "be real", and for the public to come to grips with the truth about how the governments get the money to execute social and other programs, according to the nation's lead negotiator to the World Trade Organization (WTO).
"As a country, we still have a lot of education to do with our citizens regarding how government expenses and revenue works," Raymond Winder, who is also a partner with Deloitte & Touche, told Guardian Business.
"Somehow, Bahamians think the government can just create revenue and we can just continue to burden the government with this and that obligation and they will just continue to find [the money for them]."
Winder's comments follow a Moody's downgrade of the outlook for the Bahamian economy from stable to negative last week, although it affirmed the A3 rating for government bonds.
The international ratings explanation for the downgrade included a 150 percent increase in the debt level over the past decade to nearly half of GDP by the end of 2010.
Other reasons were historically low growth rates limiting the prospect of the country growing out of its debt burden and challenges the government faces to raising additional revenues.
Politicians have an important role to play as the country needs honest dialogue and discussion around these challenges, according to Winder, who said future opportunities for the government to borrow will be reduced.
"Going forward, The Bahamas will not be in a position to borrow to the extent that it has in the last five years," Winder said.
"We are not having sufficient balanced discourse on issues relevant to the country and while we may want government to do more, the reality is we are not in a position to continuously meet those new obligations."
Any expansion of existing government programs should be accompanied with an explanation to the citizenry of how such expansion would be funded. Winder said the government is "really challenged" to control its existing expenses - the bulk of which are payroll related.
Addressing the challenges to raising revenue, the WTO negotiator said the most important part of that discussion must focus on the issue of leakage - losses in the amount of revenue the government actually receives versus what it should receive. The current import-duty based tax system is one that should result in a minimum of such losses, Winder said, as it requires for the primary source to be paid up front.
He compared that to value added tax or income tax based systems that require voluntary reporting from persons or entities. Typically, they produce greater losses through leakage, he said.
"Until we can put in place sound controls around identifying leakages, just changing the system may not yield as significant an increase in revenue as people may expect," Winder said.
"If those controls are not in place it would be very similar to real property taxes, and we all know there are huge sums still outstanding on real property taxes."
By NEIL HARTNELL
Tribune Business Editor
Freeport-manufactured products must attract the same tariffs as rival foreign-produced ones under World Trade Organisation (WTO) rules before they can enter other Bahamian islands, this nation's chief trade negotiator said yesterday, adding that the Bahamas "can really take advantage" of the Port area's 'special status' under a rules-based trading regime.
Raymond Winder, Deloitte & Touche (Bahamas) managing partner and the Bahamas' chief negotiator in the WTO accession process, told Tribune Business that while Freeport and its 'free trade zone' status could exist under the WTO's global rules-based trading mechani ...