Vat Rate Rise 'Criminal' If No Compliance


Tribune Business Editor


A former Bahamas Chamber of Commerce president yesterday it was “criminal” for the Government to already be talking about increasing the 7.5 per cent Value-Added Tax (VAT) rate prior to getting the existing tax system’s compliance levels to 80 per cent.

Dionisio D’Aguilar described suggestions by John Rolle, the Ministry of Finance’s financial secretary, that the VAT rate would likely increase in “the not too distant future” as “premature”.

“It’s too early for them to say what’s going to happen or not,” he told Tribune Business. “They don’t know how much revenue it’s going to yield. It’s premature of him to say that.

“The Government has a lot of legwork to do to improve revenue collection and the enforcement of collection. It would be criminal for them to talk about increasing the rate before they’ve raised the compliance threshold. They should get it to 80 per cent before they raise the rate.”

Mr D’Aguilar added: “If we were to collect everything we were supposed to collect, we would not need the VAT, and it wouldn’t just be honest people paying the Government.

“The Government has to think about how they’re going to enforce compliance. They can’t keep increasing taxes or introducing new ones unless they collect the ones on the table.

“You talk to politicians about how to do it, and they skirt the issue all the time. They just don’t want to take tough decisions to implement collections. Talk to Perry Christie and John Rolle, and they have no answers.”

Given the problems the Government already has in collecting all the Business Licence fees, real property taxes and border taxes due to it, Mr D’Aguilar questioned how it would cope with VAT.

“People don’t pay unless you get vicious,” Mr D’Aguilar told Tribune Business. “Unless you crush that rock, I don’t think you can talk about increasing the VAT rate.”

Robert Myers, the Coalition for Responsible Taxation’s co-chair, yesterday told Tribune Business that fiscal reform had to “hold everyone’s feet to the fire”.

“Already the consumer’s feet are being held to the fire because we’re all going to be paying more in tax,” Mr Myers said, referring to the increased cost of living/reduced living standards that VAT will bring.

“Our position is that it cannot happen without government’s feet being held to the fire,” he added. “They need to be accountable for compliance and working towards a balanced Budget, and accountable for expenditure.

“That means expenditure control, as we’ve been living beyond our means. They’ve [the Government] been doing that almost year-over-year for the last 30 years.

“That’s where we’ve been very adamant that it’s got to be tough love. We don’t mind paying, but you in government have to be accountable, and have some control.”

Mr Myers agreed that much uncertainty surrounded the 2014-2015 Budget because its content was determined in the last 72 hours prior to the Prime Minister’s address.

“I think a lot of it has kind of been a bit unsure because the timing was not great,” he said. “We’re all guilty on that standpoint, but it couldn’t be helped. We moved as fast as we could.”


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