Bahamas: Prime Minister Davis defends newly introduced tax on multinational corporations

The Bahamian government is standing by its decision to implement the nation’s first corporate income tax, with Prime Minister Phillip Davis emphasizing that this new law will target only large multinational corporations. He pointed out that the tax could potentially bring in up to US$140 million in revenue for the country.

During a speech in Parliament, Prime Minister Davis clarified that the Domestic Minimum Top-up Tax is specifically designed for multinational companies operating in The Bahamas that have annual earnings exceeding €750 million (US$800 million). This initiative is part of the country’s strategy to comply with international tax standards, particularly the OECD’s Global Minimum Tax framework, which aims to curb tax avoidance by large corporations that shift profits.

“If you do not own a multinational entity earning €750 million or more annually, this tax does not concern you,” Davis assured lawmakers, addressing worries about imposing new tax burdens on local businesses and residents. He also noted that his administration has reduced taxes for the majority of Bahamians over the last three years, including a decrease in value-added tax (VAT) from 12 percent to 10 percent and a reduction in customs duties on various essential goods.

The new legislation is in line with a global initiative involving 140 countries that have agreed with the Organization for Economic Co-operation and Development (OECD) to implement a 15 percent minimum corporate tax rate, starting January 1, 2024.

Davis explained that the OECD’s initiative aims to prevent corporations from taking advantage of low-tax jurisdictions while generating revenue elsewhere. “The OECD believes this change will create a fairer global tax system,” he stated.

He stressed that if The Bahamas does not adopt this tax, other jurisdictions would reap these revenues instead. “This would deprive us of the chance for our citizens to benefit from the presence of these corporations,” Davis remarked.

Additionally, the Prime Minister mentioned that The Bahamas is actively involved in shaping international tax policies, with Attorney General L. Ryan Pinder serving on the UN Committee tasked with ensuring fair application of these standards.

According to Davis, the anticipated US$140 million in revenue will support government programs and enhance the country’s fiscal stability, reiterating that the legislation aims to generate substantial revenue without placing a burden on Bahamian citizens or businesses. -(CMC)