By NATARIO McKENZIE
Tribune Business Reporter
nmckenzie@tribunemedia.net
Slashing Customs Duty rates below 20 per cent when Value Added Tax (VAT) is introduced is “not a far stretch”, a senior Ministry of Finance official said yesterday, adding that shifting the tax burden services should reduce the levy on imported goods.
Speaking with Tribune Business at a Bahamas Institute of Chartered Accountants (BICA) conference on VAT, John Rolle, the financial secretary, said: “That is a very rough estimate.
“The Government, unfortunately, has to manage what’s going to happen with Customs Duty reductions with whatever obligations it takes on for the World Trade Organisation (WTO).
“Customs duty reductions, in many if not most cases, will be the outcome of the negotiations The Bahamas does with other countries in joining the World Trade Organisation,” Mr Rolle added.
“It doesn’t mean that the Government doesn’t have a reference point in mind. The negotiations are going to determine where we end up relative to that reference point. On average, the intention is that these [Customs Duty] rates would be considerably below what they are currently, so saying that we’re going to be below 20 per cent is not a far stretch.
“The VAT is not going to be a tax on top of Customs duties and Excise taxes. You’re lowering one category of taxes and adding a new tax. If it’s done in the right way, the total amount of taxes collected from the Customs items should not increase because of the change in tax. The intent of this really is to shift more of the tax burden to other areas in the economy. There is a lot of activity not benefiting the Government with revenue.”
The Government is proceeding with plans to establish a Central Revenue Agency (CRA) that will collect all taxes bar Customs duties, with the two departments expected to receive 90 per cent of all due revenues.
“The Central Revenue Agency has already been approved. At this stage really it’s just about implementation, getting the staffing in so that they can focus on pulling together the various stands of tax administration,” said Mr Rolle.
“The Central Revenue Agency, as it is conceived, is really to strengthen the overall administrative machinery for tax collections and enforcement. At this point, the agency is in its skeletal form.
“The Central Revenue Agency is very pivotal in terms of the revenue administration. It’s intended to consolidate a lot of the existing non-Customs duty collection functions that exist within Government.”
The Government is proposing to implement VAT on July 1, 2014, at a rate of 15 per cent, with the hotel industry subject to a lower 10 per cent rate.
The Government is estimating that implementation of a VAT will generate a $100 million net increase in its annual revenues, with the new tax generating equivalent to 2 per cent of Gross Domestic Product (GDP).
Mr Rolle said the July 1, 2014, target date for VAT implementation was “doable”.
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