By NATARIO McKENZIE
Tribune Business Reporter
The Deputy Prime Minister yesterday confirmed that the VAT rate increase’s medium-term goal is to offset revenue loss stemming from WTO-related import tariff cuts.
KP Turnquest, pictured, told a Bahamas Chamber of Commerce and Employers Confederation (BCCEC) breakfast that the Government does not view the inevitable reduction in Customs duties, caused by this nation’s accession to World Trade Organisation (WTO) membership, as a “bad thing”.
He said: “We anticipated that we would have some reduction in Customs duties. If you look at revenue today, Customs duties are already being reduced. With increases in VAT last year, after paying some arrears, we are going to be left with a bit of surplus to offset a reduction in border taxes. We are looking at overall tax strategy to determine whether the current model is one to carry forward considering all pressures that exist.
“We anticipated reductions in Customs duties. We don’t see that as a bad thing. We believe we have built in some safeguards and cushions to absorb that and, if we are successful on both ends, it will result in GDP growth.”
This nation’s opening WTO offer will require the Government to forego about $40m in Customs duties, Zhivargo Laing, its chief negotiator, has said. Previous studies, though, had placed this figure at between $100m to $200m.
Mr Turnquest, meanwhile, pushed back against claims that reduced government spending will result in a reduction in Bahamian economic growth.
“I think all would agree that there is tremendous waste and unwise spending over many years. In fact, I think some of the cutbacks that have happened will actually be a net positive to the economy because it will stimulate the private sector,” he said.
“This whole idea about the WTO has pros and cons, no doubt about it. As we have to do in financial services, we have to figure out where The Bahamas is going to be in the world going forward because the fact of the matter is circumstances are changing. The Bahamas is a small country with an open economy, which has inherent risk.”
Ava Rodland, project manager at the ministry of financial services, trade and industry and Immigration, said: “The strategy going into negotiations is to maintain those areas that are reserved. Tour operators is one of the areas that is reserved; watersports, boat charters are areas reserved for Bahamians. The intention is to go into negotiations and maintain those reservations.
“There is a need for more transparency. Mr Laing has committed to working together with the private sector on this. If we go into the negotiations, and our negotiating partners say we want you to open the tour operations sector, we have every intention of coming back to the tour operators, discussing that and seeing how we proceed. The Government is not going to be making decisions in isolation.”
Mike Maura, the Chamber’s chairman, said it had raised $300,000 to have Oxford Economics study the likely economic impact of this nation’s WTO accession.
“The entire project will take six months,” he added. “They are meeting with various sectors and they are conducting interviews. The Government has agreed to take the work they are doing, and take the final report they will produce, and include it into a consideration into what our negotiation needs to be.
“This is not just the Chamber saying this is what we came up with, it’s that the Government of The Bahamas has accepted the fact that more information is good and we need to get this right; whether to join or not to join.”