The Tribune

THE proposal from government to only require Value Added Tax from companies making more than $50,000 in profits is discriminatory, according to director and operations manager of Nassau Motor Company Rick Lowe.

The government’s white paper points out that in many cases, countries have set the threshold at a level that is too low in the misguided belief that maximising the number of registrants will maximise net VAT collections.

Such a choice, the government believes, reflects an underestimation of the costs of collection of VAT, especially the costs of auditing activities, which are crucial to VAT success.

In setting a VAT threshold, the critical criterion is the trade-off between, on the one hand, the need to reduce the costs of compliance to business and the costs of administration to the government; and, on the other hand, the revenue foregone from exempting businesses from the VAT.

However, Mr Lowe feels that a tax that applies to one group but not another amounts to penalising a company for its success.

“If you have to keep making variations to a tax it means that it is not the right thing to do. If you have to make exceptions to your plan than your plan is not the right one,” he said.

Mr Lowe also questioned whether or not VAT was the best fit for the Bahamas.

• If you would like to have your VAT questions or concerns highlighted in The Tribune, please send a two-sentence description of your business, your name and bullet-pointed questions or concerns to rmissick@tribunemedia.net.