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New Zealand Vat Success Due To ‘Education, Almost No Exemptions’

By RASHAD ROLLE

Tribune Staff Reporter

rrolle@tribunemedia.net

NEW Zealand Value Added Tax (VAT) experts emphasised yesterday that a strong education campaign and “virtually no exemptions” are responsible for their country’s successful implementation of VAT.

John Shewan, an Adjunct Professor of Accounting at the Victoria University of Wellington and one of the experts expected to give the Bahamas government a report on implementing VAT next month, said: “The reason our education campaign was so successful was because their was a commitment to an 18-month educational programme, six months of which was prior to the implementation date, but the most important things happened 12 months after the implementation because there were a series of detailed explanation programmes targeted at all kinds of groups.”

He added that ideally, the Bahamas government, which is still seeking reports from the private sector before finalising its VAT plan, should actively promote VAT only when the tax’s design has been finalised.

He said it took six months of intense education programmes before VAT was implemented in New Zealand following the finalisation of its makeup and legislation.

Don Brash, the former governor of the Reserve Bank of New Zealand, added that the compliance cost of VAT is low in New Zealand because “everything was taxed at the same rate and virtually no exemptions were given.”

VAT exemptions are sometimes made for certain items and services in order to alleviate the burden that the “regressive” tax may have has on the poor.

However, the New Zealand tax consultants said the government should seek other ways of helping the poor.

To help the poor of New Zealand, he said the country’s government makes direct payments to low income families through tax credits.

The question of who deserves those credits, however, is controversial, he said.

“If you have a large number of exemptions your rate has to be higher. With a smaller number of exemptions the rate will be lower. We found that the one rate, no exemptions framework worked extremely well,” said Mr Brash.

The two experts said that ultimately New Zealand’s government recorded a revenue intake that far exceeded its expectations following their tax reform.

Comments

ohdrap4 5 years, 10 months ago

“The reason our education campaign was so successful was because their was a commitment to an 18-month educational programme, six months of which was prior to the implementation date, but the most important things happened 12 months after the implementation because there were a series of detailed explanation programmes targeted at all kinds of groups.”

We are now 2 months away from implementation, 80% of the education campaing comes from non- govt group. I believe there is ONE person on the hotline who does not answer the phone. mind you the phone is not busy, no one answers. So, this advice comes too late.

In addition, 60 days from implementation, no one knows the rate, the exemptions, the legislation. All a secret.

Another thing is that this expert should have been advised that there are not "tax credits" in the Bahamas because there is no income tax, and that our prices are ridiculously high because 95% of our items are imported.

Did anyone tell him that the govt cannot collect the existing taxes?

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JohnDoes 5 years, 10 months ago

The Government is not going to admit or own up to their own incompetence. The government is not going to allow one rate and no exemptions. We are already paying double the original retail price on products and to no pay a tax on top of that is going to hurt many Bahamians. They simply believe that because they are government, we should do as they say without asking questions, and based on all questions we have yet to receive answers. When last has Christie spoken to the public about all of these issues? Christie is hiding in the back somewhere.

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TheMadHatter 5 years, 10 months ago

Govt has already said there will be exemptions on all of the price control food items and even many that are not price controlled. Why should this be the case? Are they too ignorant or incompetent to calculate what the lower-adjusted rate of VAT would be if those items were included? In other words, instead of taxing only some things at 15% - why not tax ALL at 10% or 7%? But since we haven't seen any bus raids by immigration ever since that staged "incident" with the Swiss banker, we know why.

Basically anything that an illegal immigrant would need or want will be VAT exempt.

Hard working Bahamians who own cars and put gas in them, thus paying gas tax, and who pay BEC instead of running generator, and who spend their money in the Bahamas instead of doing wire transfers abroad - will have to pay VAT.

If you are a Bahamian trying to run a business or raise a family and operate in the economy - God help ya - cause VAT coming for you.

If you're an illegal immigrant, come here to multiply and feed your kids Ramen noodles, and suck the blood out of the Bahamas - then you're in luck. 99% of what you buy will be VAT free, along with your free clinic, free education, and free land to build shacks on. And don't forget the free trip you got on the boat when you ran out of gas at Ragged Island and the Defense Force towed ya up to Nassau - no charge.

TheMadHatter

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Alltoomuch 5 years, 10 months ago

@MadHatter - this is a serious business - do we really need to muddy the waters worrying about how its NOT going to affect illegal immigrants - one way or another, it's going to affect everyone!! cept maybe the politicians!! Just you wait! Do we really think that two aged New Zealanders have the answer to our problems!!

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ohdrap4 5 years, 10 months ago

madhatter ezagerates, illegal immigrants pay more for many things: they pay exhorbitant rents because the landlords know they are illegal, and other extra money to keep their status as illegals. They buy fuel to run their generator and pay taxes, and purchase the generators too. They pay more for food because they can't stock up, for example, they can't buy 5 gallon water because it is too heavy, so buy the smaller ones retail.

Also, they don't send money back home for free, those fees to remit money are 10% or more, risk free to the bank. One presumes the banks employ many bahamians.

The middle class is going to be hit really hard. If it were not for duty exemptions, I would not purchase my prescription glasses locally-- it is cheaper here.

When the blood pressure monitor is duty free, I can go to the doctor before I require hospitalization and cost the govt more money. Free pre-natal care saves money in the long run.

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Emac 5 years, 10 months ago

You are way off on this one ondrap4. I have listed some facts regarding Haitian illegals living in the Bahamas that you or many other Bahamians may not be aware of: 1. Most illegals live for FREE on farmlands that are supposed to have ONE caretaker.
2.Most illegals do not use generators. They pay a monthly fee to one person who has a temporary electrical supply on the free living farm land (Mainly setup by someone who has a Bahamian passport) 3.They do not pay more for food. Many Haitian vendors drive their Shop-Vans throughout these villages to sell food supplies, clothes etc. to their Haitian brothers and sisters. Most of the squatters on the FREE farm land purchase five gallon water $1 from the automated water depot. 4.As far as sending money back home is concerned, there are many unregulated services that can be found throughout the Bahamas to do this. So yep, MadHatter is 100% spot on with this one. Most illegals will NOT be affected by VAT at all.

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