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Plan for lower rate for VAT?

As of Thursday, April 10, 2014

By KHRISNA VIRGIL

Tribune Staff Reporter

kvirgil@tribunemedia.net

THE Christie Administration still plans to implement Value Added Tax in July, but at a much lower rate of around seven to 10 per cent, a source close to the government’s tax reform planning revealed yesterday.    

Initially, there were plans to introduce VAT at 15 per cent with a forecast to increase revenue by around $160 million each year.

With the announcement, the plan was met with fierce opposition from business owners, among them grocers, who predicted that at 15 per cent VAT would dramatically increase the price of retail food items for consumers.

Speaking to The Tribune yesterday, the official who spoke on condition of anonymity, said the government would discuss the matter in the coming weeks with Prime Minister Perry Christie who has been advised to consider a seven to 10 per cent VAT rate.

Last month, Mr Christie announced that VAT would likely be introduced at a lower rate than previously anticipated.

However, when asked yesterday, Financial Services Minister Ryan Pinder said he could not confirm what the new VAT rate would be. That decision, he said, was the sole decision of the Prime Minister. He could not say when the announcement would be made, but did say that it had not come up for Cabinet discussion as yet.

The government promised a national education programme on VAT, but little has been said since Tourism Minister Obie Wilchcombe announced plans to regularise and tax webshops by July 1.

“Nothing has changed,” Mr Pinder said, “with respect to the educational process and the preparation for Value Added Tax.

“Consultation continues on and preparation within in the Ministry of Finance from a technical point of view continues.

“You know this administration, we can chew gum and walk at the same time (and) until the Prime Minister announces otherwise (we are still on track with VAT implementation).”

The government has also been under heavy scrutiny in the political arena. Along with urging the government to delay the coming of VAT, the FNM has said sufficient information and transparency is lacking.

Back in February, FNM leader Dr Hubert Minnis questioned whether the Christie administration had undertaken any analysis to determine which form of taxation is best for the Bahamas.

Dr Minnis said that while his party acknowledged the need for tax reform, the government should delay introduction until it could be shown that there was a decrease in spending and improved tax collections.

Comments

HarryWyckoff 10 years ago

You know this administration, we can chew gum and walk at the same time

Seriously, Mr Pinder?

This administration is barely able to unwrap a piece of gum, yet alone actually manage to get in in their mouth and chew it.

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Tarzan 10 years ago

The fundimental reason VAT was designed, was to permit a "sales" based tax that would not adversely impact exports. Economies such as those of northern Europe are export dependent. If a "sales" type tax were to be added to each stage of the purchase of materials and provision of services associated with the production of their exported goods, the resulting price would render their cars, washing machines, computers etc. too expensive and they would lose market share to other competitor countries, like the U.S. who are less dependent on a sales based tax.

The "cost" for this export friendly benefit, is a very complex accounting process that must be scrupulously applied at each stage of purchase associated with production. Those economies who have successfully employed VAT are those that have developed through their primary dependence on the income tax, a highly sophisticated accounting structure, involving multiple layers of business based and independent accounting personnel. To impose and enforce their income based taxes, pre VAT, their governments were staffed with large, well trained, accounting and audit staff fully capable of administering and regulating such a complex regime.

I will leave it to the reader to answer these three basic questions:

  1. Who in the Bahamas can suggest that this country has either the industry based, or private independent accounting structure to support such a complex tax scheme?
  2. Who in the Bahamas would even suggest that the government has the management skill and trained staff to administer and regulate such a complex tax scheme?
  3. As the Bahamas exports nearly NOTHING, and inasmuch as a simple sales tax on retail consumers which could be easily implemented, collected and administered, at a much lower rate, would work just as well, who in the Bahamas thinks going to a VAT under such circumstances is a good idea?
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