A leading accountant has argued that commercial banks must pay more tax, urging the government to "look very seriously" at increasing the tax on repatriating profits out of the country to 10 percent.
Philip Galanis said that the increase in this tax in the last budget was "not enough" and Canadian banks in particular continue to make money "hand over fist" in The Bahamas.
In the 2013/2014 budget, the government imposed a 3.5 percent increase in the tax on remitting profits abroad, via an amendment to the Stamp Act. In the amendment, the government said that the first $500,000 converted for repatriation would attract a fee of 1.5 percent, while anything above this level would attract a conversion rate of five percent.
"I still believe and I maintain that we are not charging our commercial banks enough money. They're paying a pittance compared to what they are earning in this country.
"The government should increase the license fees on banks and I think they also should be charging a repatriation fee for the profits they repatriate in Canada, because what is happening is that we are paying for the Canadians to live a wonderful life at our expense," said Galanis, founder of HLB Galanis and Co.
Last year, the government also increased the business license fee paid by banks to three percent of gross annual revenue, with some experiencing multimillion-dollar rises in this figure as a result. Previously the banks had no business license fee, only asset-based fees.
All banks have noted that the rise has represented a challenge for them, particularly as they continue to face high levels of mortgages in default, for which loan-loss provisions have had to be made, further cutting into profits.
According to a report compiled by Commonwealth Bank, at the end of the 2013 fiscal year Commonwealth Bank reported the highest return on assets (ROA), at 3.54 percent. RBC Finco was second highest at 3.04 percent, while RBC (Bahamas) was second highest at 2.19 percent, along with Fidelity Bank. Scotiabank (Bahamas) recorded 1.59 percent return on assets, followed by FirstCaribbean International Bank (Bahamas) at -0.54 percent, and Bank of the Bahamas at -0.43 percent.
Galanis said that notwithstanding this, he continues to see a need for the government to further tax the sector.
"They are going to stay where they are making money, so I encourage the Ministry of Finance to look very seriously at increasing the tax on repatriation of profits.
"For some reason the banks seem to be a law unto themselves, they can do whatever they want to do and they don't seem to have to answer to anyone, and I think the government needs to seriously look at that," he added.
In an earlier interview, Galanis expressed concern that The Bahamas may be in for a "rough ride" economically over the next 18 to 24 months as the economy remains weak and few major development projects are likely to have a significant impact during this time, he said.
The government is set to implement value-added tax at 7.5 percent in January 2015, and has also moved to tax the gaming industry at a rate which Minister of Tourism Obie Wilchcombe has projected could lead to as much as $25 million in revenue annually.

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