By NATARIO McKENZIE
Tribune Business Reporter
The Tax Coalition’s chairman yesterday said it was “reassuring” to hear government promises that it will not increase the 7.5 per cent Value-Added Tax (VAT) rate in the immediate future, warning that such action could destabilise the economy and reduce disposable income
Gowon Bowe said a VAT rate increase was not likely under the current administration. Last week, while speaking at the College of the Bahamas (COB) Alumni Leaders panel discussion, Michael Halkitis, minister of state for finance, said: “I could tell you definitely that we won’t be raising the rate any time soon. Some people have the fear about that. That’s not our intention at all.”
Mr Bowe, who was also a part of that panel, told Tribune Business yesterday: “While he didn’t use these terms, I read that to mean during this administration, prior to the election. They will have only a year of it going into 2016, and I doubt they would want to have any rate increase going into election in 2017, which is good news for the business community.
“The business community has indicated that when switching to inclusive pricing, any changes in the rate will have a massive requirement to reprice and restock items on the shelf. From that perspective, rate shifts could incur further operational costs but, more importantly, any further rate increase would have a destabilising effect.”
Mr Bowe explained that the selected 7.5 per cent VAT rate was seen as keeping a sufficient check on inflation such thart the average citizen would be able to absorb the tac, with certain provisions made for those less fortunate.
Mr Bowe added: “Any increase in the rate is effectively a further reduction in disposable income for the consumer, and from that perspective, given that we haven’t a complete round in the economy, and unemployment rates are continuing in a negative direction, I think those all put together would lead to greater hardship if the rate was to be increased anytime in the foreseeable future.”