The Bahamas government has unveiled a tax-free budget of US$3.54 billion to Parliament with Prime Minister Phillip Davis saying that many elements of this fiscal plan extend and enhance the measures initiated by his administration since assuming office in 2021.
During his address to legislators, Davis highlighted key elements of the budget, emphasizing that it excludes an expected reimbursement of US$75 million from the Grand Bahama Port Authority (GBPA), stressing that the government is owed a total of US$357 million by the GBPA.
He said that total expenditure is estimated to amount to US$3.61 billion, of which, recurrent expenditure accounts for US$3.27 billion and capital expenditure for US$344.5 million.
Davis said that 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 per cent of GDP. He said given this, the debt to GDP ratio has been projected at 75.3 per cent of GDP at the end of the fiscal year 2024-25.
The Prime Minister said that earlier this month, his administration officially launched Cloud Bahamas, which is the name of the new Government Enterprise Resource Planning Application.
“This application or ERP is going to modernize how we do business in the public service. As we’ve referenced in the past, the previous government put in place a compendium of financial legislation which included reporting obligations which 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 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.
Davis also shared 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 revealed that this budget has no new taxes, with some adjustments made to fees on government services where the cost of providing that service has increased.
“Since we started prioritizing this focus, we have gained favourable results. The revenue to GDP ratio has shown consistent growth, rising from 18.7 per cent at the beginning of our first term to 20.4 per cent in the most recent complete fiscal year, which was 2022/23.
” Going forward we will continue on this path of revenue enhancement toward the attainment of our medium-term revenue target of at least 25 per cent of GDP.”
Davis stated that the revenue measures in the fiscal package can be categorized as falling within four main priorities, namely, the 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.
He further remarked 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, including push poles, poling towers, trolling motors, refrigerated trucks, fiberglass tanks, troughs, raceways and aquaria aquariums, aquaculture heaters and Chillers”.
He said that 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 by encouraging more opportunities in industry and manufacturing in The Bahamas, the government is not only broadening the economy, but lessening its dependency on imports.
“Therefore, we are removing the bond requirement for authorised 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 this includes ownership and operation of jet skis for hire and other commercial leisure boating activity
“Bahamians should get the maximum benefit from our successful tourism industry,” he said, adding “we have included a number of additional custom duty reductions in this budget”
According to the PM, that the Tariff Act and Customs Regulations will be amended to allow for fire extinguishers to enter the country duty free, as well as drones, laundry detergents in the form of paper sheets, sea moss for health benefits, digital camera parts.
He said duty on cotton sheets, bed linen, and cotton bed linen will be reduced as well as that on composite rebar of plastic, compostable bags and duty on paper bags will be reduced, to encourage the use of eco-friendly packaging items.
He said also the environmental levy on kayaks will 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. He said upon investigation, it was clear that this item is being imported for illegal transactions, particularly by foreign nationals.
He said provisions were made to the Consular Fee Schedule, so that the Passport Office will now be able to courier Bahamian passports to residences aboard, including in the USA, Canada, and 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 residing in locations 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.”
Davis also said that in order to support talented Bahamian artists, the budget will continue provisions which would allow Bahamian artists to import supplies and equipment on a duty-free basis.
He said the Ministry of Finance will 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”.
He said that foreign investment has long been one of the primary drivers of the economy and another key focus of the budget is to enhance the income generated from foreign direct investment, and to streamline the processes for better collection efficiency.
“Therefore, the Department of Immigration’s expedited fee will now be 10 per cent 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 Visitors Stay extension application Fee of US$200. This will cover the costs of issuing a visitors’ card.”
In addition, Davis said the Trusted Traveller programme will begin this new fiscal year and is designed for frequent visitors to The Bahamas and will speed up immigration processing at the Border. He said a fee of US$200 will be set for this programme.
He said the government is also imposing a US$500 reinstatement fee for Permanent Resident Applications which have been successfully concluded but not 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 be increased and diversified.
He said before, the requirement only called foUS$750,000 in Real Estate investments. This will now increase to one million US dollars in real estate investments and or the purchase of Zero-Coupon Bonds from the Central Bank of The Bahamas. In both cases, the asset must be held for a minimum of 10 years. This measure will come into effect 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 Deed of Gift cannot be used by foreigners to make 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 in order to guarantee that we are receiving fair compensation for the use of our resources.
He said 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 a number of 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 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, 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, which would allow for auditing to ensure that the correct tax amount is being 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 persons, which results in these persons not being able to prove land ownership to the Department of Inland Revenue and otherwise.
“This is an impediment for development and commerce in this country. So, the Government has made the decision to grant amnesty to allow documents to be stamped at the value of the time in which 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 small house on it that is worth US$150,000. In order to have the property financed, all of the 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.
