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Eliminate Vat Need Via 70-80% Tax Compliance

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Tax Coalition’s co-chair has suggested that increasing tax compliance rates to 70-80 per cent under the existing system would eliminate the need for Value-Added Tax (VAT) or any other revenue reforms.

Speaking after the International Monetary Fund’s (IMF) Article IV report on the Bahamas revealed that both Customs and the real property tax department were performing “below 50 per cent of revenue potential”, Robert Myers said the situation was equivalent to the private sector “doing all the work and not getting paid”.

“If you had compliance to around 70-80 per cent of existing taxes, there’s no concern to be had,” Mr Myers told Tribune Business. “I’m interested to find out that if you did get compliance to those levels, what percentage of GDP revenues would be.

“Probably around 20 per cent. We’re at 18 per cent or worse because we don’t have compliance. You’re just taxing people money, but not getting the money. It’s like in the private sector, doing the work and not getting paid. We’d be out of business.”

The Government estimates it is owed more than $550 million in outstanding real property taxes alone, and Mr Myers implied that it was extraordinary to have allowed such an ‘accounts receivables’ position to build up.

“I watch receivables like a hawk. Revenue and receivables are the two things I focus on,” the Coalition for Responsible Taxation’s co-chair told Tribune Business of his own business interests.

“I do the work, collect the money, and then my eye goes to profit. It’s not profit until it goes into your bank account.”

Given that the Customs Department collects between $600-$700 million in revenues annually, with real property tax generating another $90-$100 million, the IMF’s report suggests that both these figures could at least be doubled.

If that was achieved, the Government would earn at least another $700 million annually - enough to move than cover its existing $443 million fiscal deficit, and greater than the $500 million revenue increase projected from VAT and other fiscal reforms.

Mr Myers is far from alone in urging the Government to maximise revenue earnings from its existing tax system before it looks to implement VAT and other new taxes.

Businessman Rick Lowe, a Nassau Institute executive, told Tribune Business: “My position is that Government should get its fiscal house in order first, reduce the debt-to-GDP ratio but not by getting new revenues; instead getting the revenues they should be getting.”

He added that the Government, if it still needed new revenue streams, should go to VAT at a much lower rate than 15 per cent and eliminate all exemptions and carve outs. This, Mr Lowe said, would ensure all persons paid their fair share, with those consuming more paying more.

“To implement this without getting our fiscal house in order is foolish,” Mr Lowe said. “No amount of new taxes will be helpful or useful. That’s where the problem lies, and most people give it a pass.”

Comments

Cornel 6 years, 7 months ago

Oh, I see now. We do not need new taxes, we simply need the current taxes to be paid. Well, if past history is any indication that will not happen. They can add and add and add, and no one will pay, pay, or pay.

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The_Oracle 6 years, 7 months ago

I love the way they write new laws, IE, in the criminal code, but fail to enforce or enact! Same with Taxation, the same dodgers will dodge! No arrears will get collected. the same few will pay...... tings tough becomes a viable defense apparently.

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John 6 years, 7 months ago

For tax compliance to improve, government will have to give some property owners the opportunity to get rid of their tax arrears and start anew. Some persons taxes are so far behind that they now exceed the property value. Others may pay as much as $10,000 a year and will not be able to catch up in 20 years because the interest and new taxes will consume most of the payment. if not all of it. Then there are others for whom the property (i.e. buildings have become dilapidated or uninhabitable and so it produces no income. However they are still being assessed taxes and so they cannot even sell the property because no financial benefit will accrue to them. Then there are a number of homes and some commercial properties that banks have foreclosed on. The owners still occupy the property because the banks don't want to evict them and have the property sit empty to be vandalized and destroyed. Many persons built homes in the 80's and 90's when employment was high and the economy was robust. Now many of those home owners are unemployed or underemployed and they have consumed all of their savings. Many who owned businesses have seen these business fail and shut down over the past seven years of brutal recession. The tell tale signs are the number of 'for sale' signs in many middle and upper class neighborhoods and the number of vacant storefronts and 'for rent' signs on commercial properties, especially in the inner city of New Providence. It is not only depressing. it is scary. SO many mom and pop stores, that usually withstand hard times like these, have closed. ANd so the owners have no income. And in Grand Bahama some Family Islands even many of the homes that are exempt from property taxes are in a bad state of disrepair, evidence of the toll the recession has taken on the Bahamian economy. But despite this, government needs money to operate.

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Reality_Check 6 years, 7 months ago

No breaks of any kind should be given to those who have not paid, as they will be the same ones not to pay in the future! Let the axe fairly and equitably fall where it may, even if it means our Public Treasury reaps a huge windfall and becomes by far the largest real property owner in the country. A business that hasn't been paying has had a most unfair advantage relative to its competitors, many of whom have probably gone out of business as a result of their honesty. The dishonest property owners must now be made to pay a dear price, period! NO BREAKS FOR ANYONE AND STOP WITH THE EXCUSES ABOUT POSSIBLE UNEMPLOYMENT AS THIS IS JUST GOVERNMENT ONCE AGAIN ENGAGING IN VOTE BUYING OR FAVOURITISM TO BUSINESS CRONIES WHO THROW MONEY THEIR WAY COME ELECTION TIME!! Start enforcing the law by targeting all of Christie's friends who have enjoyed his favouritism at the expense of the average hard working honest Bahamian!!!

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sheeprunner12 6 years, 7 months ago

Do we have any precedent for this????????? This lack of tax compliance has become the norm. We need a new tax regime and compliance strategy starting July 1, 2014. That is if the government serious about taxes and not talking VAT foolishness.

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