The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Prime Minister Perry Christie last night confirmed that Value-Added Tax (VAT) would be introduction at a lower rate than the initially proposed 15 per cent, with the implementation date also subject to potential change.

In a move widely anticipated by many in the private sector, who had predicted this to Tribune Business in recent days, Mr Christie effectively confirmed that his administration was backpedalling on the details of its VAT proposal.

“As to the rate of VAT, I can assure you that it will not be as high as 15 per cent,” the Prime Minister told the House of Assembly as he wrapped up the Mid-Year Budget debate last night.

“I can assure the Bahamian people that when we put the final package together, the rate will not be 15 per cent,” he reiterated for dramatic effect.

“The actual rate is not settled yet, although I expect it will be in the very near future, along with the final list of exemptions as well as the date for the introduction of VAT.”

Mr Christie added that the Government was waiting to complete public and private sector consultations before deciding on these issues, “including, frankly, the question as to whether we are indeed absolutely convinced that there really is no viable alternative to VAT”.

“In this sense, therefore, although the proverbial door is closing, it is still open at the moment,” Mr Christie added.

“My government therefore welcomes further input from the private sector and the public generally, so that we can seriously consider alternatives to VAT and, if need be, change course accordingly. We need to get it right.

“I want to emphasise, therefore, that the VAT position I have outlined is not cast in stone. It is not yet a foregone conclusion. My Government has clearly demonstrated its openness to entertaining varying proposals from the public on VAT and alternative sources of revenue. We will therefore await the outcome of the study being conducted on behalf of the Coalition for Responsible Taxation.”

The Prime Minister’s comments last night represent the first public concession by his government over VAT, although there will be repercussions from dropping the proposed tax - if it is implemented - to a new rate.

Many have predicted, or suggested, that VAT either be implemented at a 10 per cent or 7.5 per cent rate. But either way, a lower VAT rate means a smaller drop in Customs/import tariffs, which had been due to fall by a projected 17 per cent if the new tax came in at 15 per cent.

Well-known businessman Dionisio D’Aguilar last week projected that the Government would drop the VAT rate and push back the implementation date, arguing that government officials including financial secretary, John Rolle, had sent subtle signals indicating this would happen.

Elsewhere, Mr Christie last night effectively said that the Government was looking to privatise real property tax collection, as it moves to deal with an outstanding bill that totals more than $500 million.

“In the case of real property tax we have engaged private assessors to deal with the backlog of assessment, and we are engaging private collectors as well,” he confirmed.

Many in the private sector have been suggesting that the Government take such a course for years, and Mr Christie said the Government had also signed an agreement with the International Air Transport Association (IATA) to aid departure tax collection.

He reaffirmed that the Government was seeking a $500 million gross revenue increase by the 2016-2017 fiscal year, with $200 million to come from VAT and $100 million from economic growth.

“The modernisation of the real property tax system and the Customs Department is expected contribute to additional revenues, on the order of roughly $100 million and $80 million, respectively,” the Prime Minister said.