By NEIL HARTNELL
Tribune Business Editor
Prime Minister Perry Christie yesterday slammed the “doomsday prophets and pundits” over Value-Added Tax (VAT), lauding its implementation as “remarkably smooth” and suggesting it would serve as a model for reforming other existing taxes.
Mr Christie, in his mid-year Budget address, said the Government would seek to use the ‘broad base/low rate’ model established with VAT to reform other taxes “in short order”, although he did not identify which ones.
“As VAT has demonstrated, a broad tax base inevitably allows all taxpayers to benefit from a lower rate of tax. This is what we hope to achieve in short order for our other significant taxes as well,” the Prime Minister said.
Private sector pressure ensured the Government eliminated many of the VAT ‘exemptions’ it initially imposed, allowing it to go with a lower rate, 7.5 per cent levy that has a much wider tax base.
The Prime Minister said yesterday that the Government’s revenues had grown by 6.2 per cent since his administration took office in May 2012, compared to a 1 per cent decline under the former Ingraham administration.
The latter’s revenues were impacted by the global recession, while the Christie administration has also introduced new and increased taxes of its own.
Praising VAT’s introduction, Mr Christie said yesterday: “I wonder what the naysayers in the land, and especially in the party opposite, are going to say now? Who among them will now have the courage to admit that their prophecies were wrong. Who among them, I ask?.....
“VAT is going to be a major success story for the people of the Bahamas. Believe me when I say that. I am absolutely convinced of it.”
Picking up this theme later in his address, Mr Christie continued: “Contrary to what the doomsday prophets and pundits had been saying would happen, the introduction of VAT did not lead to panic or hysteria on the part of consumers, nor did it lead to the mass closure of businesses.......
“While there have been some instances of violations of the legislation, the VAT Department has been following up to ensure that these violations are quickly and decisively addressed.”
The Prime Minister said the Government had exceeded by 7 per cent its VAT registration target for ‘very large’ businesses, those with greater than a $20 million annual turnover, and ‘large’ companies with annual sales between $5-$20 million.
“This bodes well for VAT revenue collections, as the combined category of ‘very large’ and ‘large’ firms, while accounting for just 9 per cent of total VAT registrants, is expected to generate between 70 to 80 per cent per cent of total VAT revenue,” Mr Christie said.
And, while the Government had exceeded its total VAT registration target by 1,694 firms, the Prime Minister said achieving the Government’s VAT revenue goals depended heavily on compliance.
Acknowledging that linking VAT registration to Business Licences had helped the Government combat delinquencies with the latter, Mr Christie said the VAT Department and Department of Inland Revenue were now well placed to consolidate, with the latter now responsible for Stamp duty, Customs duty, Business Licences and real property tax.
The two are set to move to their new offices at Carmichael Road and Alexander Boulevard, with the National Insurance Board (NIB) also eyeing a sub-office there to make it “a true one-stop shop for businesses and taxpayers”.
The Central Revenue Agency (CRA) will be created before year-end, the Prime Minister said, adding: “The Government will be bringing forward regulations under the Financial Administration and Audit Act to harmonise revenue administration efforts across all taxes.
“This will tie directly into the Government’s recent efforts to modernise all revenue information systems. Systems for the collection of Customs duties, Business Licence fees, property taxes and motor vehicle and drivers’ licences will all be updated or replaced before the end of the next fiscal year. For property tax and Business Licences, taxpayers will begin to see visible changes before the end of this calendar year.”
Elsewhere, the Prime Minister promised that the Bahamas “‘knee jerk, ad-hoc approach to governance is going the way of the dinosaur”.
Mr Christie said: “It is simply no longer viable or credible. Worse than that, it is dangerous. We have to embrace instead a new ethos, a new model for governance, one that stresses sound, rational, well-researched, methodical planning as the necessary precursor to, and determinant of, government policy and government action.
“There is no other sensible, sustainable way to do it any more.”
He pledged that the new Economic Development and Planning Unit within his office “will perform a critical ‘centre of government’ coordination function as well, one that will help ensure that red-tape and bureaucratic bottlenecks and inertia are overcome and neutralised”.