NASSAU, Bahamas, CMC -The Bahamas government has presented to Parliament a tax-free US$3,54 billion budget. Prime Minister Phillip Davis said many components of this fiscal package carry forward and build on the measures that his administration has implemented since coming to office in 2021.
Davis told legislators that the estimated revenue excludes reimbursement of US$75 million from the Grand Bahama Port Authority (GBPA) as he insisted that the total amount due to the Government by the GBPA is US$357 million.
He said that total expenditures are estimated to amount to US$3.61 billion, of which recurrent expenditures account for US$3.27 billion and capital expenditures for US$344.5 million.
Davis said the fiscal deficit is estimated at US$69.8 million or 0.5 percent of gross domestic product (GDP), with the primary balance showing a surplus of US$586.9 million or 3.9 percent of GDP. Given this, the debt-to-GDP ratio has been projected at 75.3 percent of GDP at the end of the fiscal year 2024-25.
Prime Minister Davis said that earlier this month, his administration officially launched Cloud Bahamas, the name of the new Government Enterprise Resource Planning Application.
“This application or ERP will modernize how we do business in the public service. As we’ve referenced, the previous Government put a compendium of financial legislation that included reporting obligations that could not be met using the Government’s existing financial information systems.
“We decline to speculate as to whether an error of this magnitude was intentional, but subsequent complaints about missed reporting deadlines, when the government’s existing systems made reporting impossible, cannot be taken seriously,” he said, adding, “Thus, we have ignored the noise and focused on the remedy”.
He said that beginning in January 2025, Cloud Bahamas will bring change and innovation to the public sector.
“The new system will allow for improved financial reporting, including a public sector income statement and balance sheet,” Davis said, highlighting the need for improved financial reporting capacity and the significant benefit of lowering the costs of operating the public sector.
Prime Minister Davis said that his Government’s revenue philosophy has always been to lower the overall tax burden for ordinary Bahamians and to focus on tax efficiency and enforcement.
He said this budget has no new taxes, but some adjustments have been made to fees on government services where the cost of providing that service has increased.
“Since we started prioritizing this focus, we have gained favorable results. The revenue to GDP ratio has shown consistent growth, rising from 18.7 percent at the beginning of our first term to 20.4 percent in the most recent fiscal year, 2022/23.
” in the future, we will continue on this path of revenue enhancement toward the attainment of our medium-term revenue target of at least 25 percent of GDP.”
Davis said that the revenue measures in the fiscal package fall within four main priorities: enhancing the well-being of Bahamians and creating opportunities; increasing revenue from foreign direct investment; addressing the revenue underperformance of VAT on real estate transactions; and developing an equitable and competitive business environment.
Davis said that a key policy priority for his Government is supporting new opportunities for Bahamians and incentivizing Bahamian participation in a growing economy.
“Accordingly, we are expanding the list of duty concessions in the fishing industry.
push poles, poling towers, trolling motors, refrigerated trucks, fiberglass tanks, troughs, raceways, aquaria aquariums, aquaculture heaters, and Chillers.”
He said that the list of duty concessions would also include water chemistry probes and meters, water quality supplies, powerheads, aquarium and aquaculture lighting, and ultraviolet lamps.
“We believe Bahamians should be given every opportunity to participate in a more modern fishing industry in The Bahamas,” Phillip said, adding, “We want to create greater opportunities in manufacturing and reduce barriers to entry.”
He said that by encouraging more opportunities in industry and manufacturing in The Bahamas, the Government is broadening the economy and lessening its dependency on imports.
“Therefore, we are removing the bond requirement for authorized manufacturers under the Industries Encouragement Act. In addition, we are removing customs duty on parts for machinery for businesses under the same act.
“We are always working to expand Bahamian ownership in our tourism industry. In this budget, we are adding a new provision, specifying that only Bahamians may be issued a license for the commercial operation of all motorized watercraft, including jet skis.”
Davis said the recreational watercraft industry in the Bahamas must be owned and operated by Bahamians, adding that this includes ownership and operation of jet skis for hire and other commercial leisure boating activities.
“Bahamians should get the maximum benefit from our successful tourism industry,” he said, adding, “We have included several additional custom duty reductions in this budget.”
Davis said that the Tariff Act and Customs Regulations will be amended to allow fire extinguishers, drones, laundry detergents in the form of paper sheets, sea moss for health benefits, and digital camera parts to enter the country duty-free.
He said duty on cotton sheets, bed linen, and cotton bed linen will be reduced, as will duty on composite rebar of plastic, compostable bags, and paper bags, to encourage the use of eco-friendly packaging items.
He also said the environmental levy on kayaks would also be reduced.
Davis said that the First Schedule of the Customs Management Act will be amended to add ATM skimmer machines to the prohibited list of imported items. Upon investigation, it was clear that this item was being imported for illegal transactions, particularly by foreign nationals.
He said provisions were made to the Consular Fee Schedule so that the Passport Office can now courier Bahamian passports to residences aboard, including in the USA, Canada, and the UK.
“This means that passports can now be delivered directly to the recipient’s address overseas, rather than requiring travel to an embassy. This is especially beneficial for individuals far from an embassy, such as those living on the west coast of Canada, where there is no Bahamian consulate.
“Currently, Bahamians living there need to travel long distances to collect their passports, for example, to the consulate in Toronto, the embassy in Ottawa, or the consulate in Los Angeles. When this arrangement comes into place, passports will be delivered to home addresses of our citizens.”
Prime Minister Davis also said that to support talented Bahamian artists, the budget will continue provisions allowing Bahamian artists to import supplies and equipment duty-free.
He said the Ministry of Finance would also create a web interface to make the process easier for Bahamian artists, “and in the coming weeks, we will bring forward new intellectual property legislation that will benefit Bahamian creatives enormously, incentivizing them to create here, where they will have new intellectual property protections, and empowering them to negotiate from a stronger position with content platforms abroad.”
Prime Minister Davis said that foreign investment has long been one of the primary drivers of the economy. Another key focus of the budget is to enhance the income generated from foreign direct investment and streamline the processes for better collection efficiency.
“Therefore, the Department of Immigration’s expedited fee will now be 10 percent of the actual cost of the work permit, with no change in the minimum fee of US$400. The Immigration Department will also implement a visitor stay extension application Fee of US$200. This will cover the costs of issuing a visitor’s card. ”
In addition, Davis said the Trusted Traveller program would begin this new fiscal year. It is designed for frequent visitors to the Bahamas and will speed up immigration processing at the border. He said a fee of US$200 would be set for this program.
He said the Government is also imposing a US$500 reinstatement fee for Permanent Resident Applications, which have been successfully concluded but have yet to be finalized after 90 days.
Davis said the requirements for application for economic permanent residency have been updated. The minimum investment requirements to qualify for economic Permanent Residency status will increase and diversify.
As he said before, the requirement only called for US$750,000 in Real Estate investments. This will now increase to one million US dollars in real estate investments or the purchase of Zero Coupon Bonds from the Central Bank of The Bahamas. In both cases, the asset must be held for at least ten years. This measure will come into effect on January 1, 2025.
“The legislation is clear that the proceeds from these bonds can only be used for investment in Education, Health, Culture, and Family Island Infrastructure, and not to fund ordinary expenses of the Government,” Davis added.
He said the Government is also amending the Immigration Act to clarify that foreigners cannot use the Deed of Gifta to make an application or qualify for permanent residency.
“Additionally, we propose to enforce rules when submitting applications for economic permanent residency based on the purchase of real estate,” he said, adding, “It is not right to sign away acres of seabed to commercial ventures for minimal amounts, something I am sorry to say has occurred in the past.”
Davis said that the Government is currently undergoing a comprehensive evaluation of all seabed leases to guarantee that we are receiving fair compensation for using our resources.
He said that in addressing the revenue underperformance of the value-added tax(VAT) on real estate transactions, the authorities have discovered that information provided by the local real estate sector about the buoyancy of the high-end real estate market is not reflected in the Government’s receipts.
“We have witnessed a sizable drop in revenue this year for this category. This is the primary underperforming revenue item that we have identified, and we have included several administrative measures to address the underreporting of real estate transactions.
“One such measure is the requirement that the Real Property Tax Assessment Number provided by the Department of Inland Revenue must be affixed on the Certificate of Registration and all certificates before forwarding to the Department of Immigration.”
Davis said further that the Department of Immigration must ensure that the Real Property Tax Assessment Number is captured on its approval documents for economic permanent residence and homeowners.
“This administrative step will help streamline the process and ensure that the real property tax number is carried throughout all processes across all government agencies, allowing auditing to ensure that the correct tax amount is paid. ”
Prime Minister Davis said that another area of concern is that the Government is aware that there are a number of unstamped documents held by people, which results in these people needing help to prove land ownership to the Department of Inland Revenue and elsewhere.
“This impedes development and commerce in this country. So, the Government has decided to grant amnesty to allow documents to be stamped at the value of the time the transaction took place rather than at the current market value. This regime is temporary and effective immediately with an expiration date of December 1, 2024.”
Davis said that this is a significant concession, noting that, at present, all documents are stamped at their current market value, regardless of when they were purchased.
“For example, suppose an individual purchased a property 30 years ago for US$25,000 and sold that same property for US$50,000 but never stamped the documentation. Later on, a new prospective buyer wants to acquire the property through a mortgage. The property now has a tiny house on it that is worth US$150,000. To have the property financed, all transactions for the last 30 years need to be recorded, that is, to have the VAT paid at the current market value of $150,000 plus penalty.
“Unfortunately, this is all too often a deal breaker, preventing the transaction from moving forward, hurting both the buyer and the seller, and acting as a drag on the real estate market,” Davis told legislators.
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