By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
The Government was yesterday urged to delay this nation’s World Trade Organisation (WTO) accession and bring it into line with Value-Added Tax (VAT) implementation, giving the Bahamas a perfect opportunity to “align all the stars”.
Gowon Bowe, the Coalition for Responsible Taxation’s co-chairman, told Tribune Business the Bahamas could not allow its planned accession to full WTO membership to “get ahead’ of fiscal reform because of both initiatives’ impact on government revenues.
With the WTO demanding significant rate cuts to the Bahamas’ main Customs duties revenue source, Mr Bowe explained that the Government had to take extra care to ensure that whatever tax replaced it - whether VAT or another option - generated enough revenue to enable it to run the country.
He added that moving ahead with fiscal reform, and implementing, for example, a 10 per cent VAT tax, would not be wise if the WTO accession requirements left an unexpected revenue gap that needed to be filled.
Mr Bowe said Ryan Pinder, who has ministerial responsibility for the Bahamas’ WTO accession, had confirmed to him that his Ministry of Financial Services was working closely with the Ministry of Finance on tariff reductions to ensure this nation met both its own fiscal needs and the WTO’s demands.
“The short answer is that WTO accession cannot get ahead of overall fiscal reform, because we need to, one, protect the level of revenues we have at this point in time,” Mr Bowe told Tribune Business, “and second, when we understand the accession requirements, we ensure other forms of tax - be it VAT or another type - are able to compensate for it.
“While there is good merit to the WTO, I presume, there are also internal ramifications, so we have to be sure that when we do tariff reductions we don’t lose out, as that could put us in the same [fiscal] situation.”
Mr Pinder has previously said the Government was seeking to complete negotiations over this nation’s accession to full WTO membership by December 2014.
However, Mr Bowe said his impression was that Mr Pinder was prepared to delay the accession process, given all the related fiscal and tax reform discussions that needed to happen at the same time.
The Tax Coalition co-chair added that while many might view fiscal/tax reform and VAT, and WTO accession, as “two distinct functions, they go hand in hand and go together”.
“We cannot have VAT brought in at a rate that does not allow you replace WTO-related revenue losses,” Mr Bowe told Tribune Business.
“If you’re considering delaying VAT, you should delay WTO accession so that both can be perfectly aligned, or as best aligned as they can be, so that going forward from a fiscal picture perspective you know you’re going to get the revenues you need to run the country, and not have a result that causes upheaval or unforeseen difficulties with revenue.”
Mr Bowe said the Coalition had informed Mr Pinder that given the volume and scale of tariff rate changes, the private sector would need more time to adjust than normal.
However, he revealed that the Government could not publicly disclose the revised Tariff Schedule for fear that it would put the Bahamas at “a disadvantage” in the WTO accession.
“There’s a little bit of trust that is required, as they negotiate this without the country knowing what they [new tariff rates] are,” Mr Bowe said. “Because of confidentiality they may not be shared with us now, but there must be interconnectivity once the WTO terms are known.”
With the Bahamian economy facing numerous challenges simultaneously, in the shape of fiscal reform and entry into rules-based trading regimes, Mr Bowe said this nation was facing “the perfect storm”.
But, echoing the words of a US commerce secretary who argued that crises should ‘not be wasted’, the PricewaterhouseCoopers (Pwc) Bahamas accountant said this nation could use its current difficulties to chart the desired course for the economy.
“In reality, we have a hard time ahead of us getting the big ship on course,” Mr Bowe told Tribune Business. “While it may seem an overwhelming task, I believe this is an opportunity to align the stars.
“That’s the silver lining, if there ever was one, because it gives us the opportunity.”
While neither the Coalition nor its members were “soothsayers or have a crystal ball”, Mr Bowe said the tax-related studies being conducted by Oxford Economics, Ernst & Young and the Government’s own consultants meant the Bahamas would have an “abundance” of information to help it reach informed decisions.
Mr Pinder could not be reached for comment yesterday, despite messages being left on his cell phone.
Prime Minister Perry Christie has confirmed that VAT will be brought in at a rate lower than the initially proposed 15 per cent, a move that implies a shallower cut to existing Customs tariff rates. How this impacts the demands made by the WTO accession process is less clear.
Comments
TheMadHatter 9 years, 12 months ago
I like the part where he says ... “While there is good merit to the WTO, I presume, there are also internal ramifications..."
Just like everybody else, Mr. Bowe cannot list ONE SINGLE BENEFIT the Bahamas would obtain by joining the WTO. We don't export anything except a few million dollars worth of crayfish and a couple bags of salt.
However, the assault on our revenue raising structure and the tons and tons of regulations both internal and regarding foreign relations that we would be required to follow as a member are well known by many. The United States, for example, cannot prevent the importation of poisonous dog food from China because its hands are tied under the WTO. They cannot prevent US manufacturers from being put out of business due to the enormous influx of cheap Chinese rubbish sold in stores due to their hands being tied under the WTO.
The WTO will bring enormous restrictions to the Bahamas - but WHAT benefit will it bring.
Perhaps the Tribune can do an article, after interviewing MP. Ryan Pinder and do like a David Letterman's top-ten benefits of the Bahamas joining the WTO - so we can all be informed.
Then again, maybe it's like the Obamacare legislation during the days preceding its passage in the House in the USA where Nancy Pelosi said "We have to pass it to find out what's in it."
TheMadHatter
newcitizen 9 years, 11 months ago
You are entirely right, there is absolutely no reason to join the WTO unless we are exports as much as we are importing and that is not something that will ever happen here in the Bahamas.
We should be pulling out of joining the WTO immediately. We're going to be handicapped for no reason.
TheMadHatter 9 years, 11 months ago
Thank you for your agreement. I comment on a lot of things on here and sometimes get good reviews. In people's profiles (by clicking on their name) you can see their historical postings.
Unfortunately, Perry Christie only consults with me once every 5 years. I cannot force him to consult me any more often than that. I am generally happy with his leadership, but I feel that we can be doing many many things better as a nation.
TheMadHatter
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