Tamara Van Breugel on Value Added Tax (VAT) in The Bahamas

Citizens Must Unite To Be Heard In The Vat Debate

MY NAME is Tamara van Breugel and I am a citizen of the Commonwealth of the Bahamas. I am a young working mother, my family owns a small business in the city, and I strongly believe there are responsible alternatives to VAT.

 

First of all let me say that I am by no means an expert on economic theory or taxation, I am not a representative of any political persuasion, and I have no special interest ties other than a special interest in the growth and prosperity of the Bahamas and of every Bahamian man, woman and child.

 

The Nassau Institute has kindly granted me a few moments in tonight’s programme to share with you my personal thoughts on VAT, and I am extremely grateful for their kindness.

 

Over the months since the announcement of the imposition of VAT I like many of you here tonight have been following the news media, scouring the internet and attending various speaking forums to better understand this new tax proposal.

 

In my research I have learned a few important things:

 

Our nation, has over many decades and successive administrations become excessively burdened by debt. Our national debt is projected to exceed the $5 billion mark by the end of this fiscal year. This is the equivalent of 61.5 per cent of our gross domestic product and nearing a danger zone of 70 per cent debt to GDP ratio.

 

Governments have not been effective in collecting existing taxes or in safeguarding public funds from waste and mismanagement.

 

The 2010 / 2011 auditor general report illustrates some of these collection gaps, identifying:

 

• 5,980 cargo manifests that had not been presented to Bahamas Customs for clearance

 

• $95 million in real property taxes went uncollected taking the total sum outstanding to $541.886 million

 

• $302,866 of unpaid fuel from the Ministry of Works

 

In the 2014 /2015 fiscal budget subsidies have been allocated as follows:

 

• $20 million to subsidise Bahamasair

 

• $20 million in subsidise to Water and Sewerage

 

• $7 million to the Bahamas Broadcasting Corporation

 

... Ok, you get the point.

 

The Bahamas is preparing for ascension to the Wold Trade Organisation by the end of 2014. As a part of this process the Bahamas must commit to dramatically reducing import tariffs. The expectation could be for an average peak tariff of approximately 15 per cent. Down from the current average of 55 per cent.

 

To avoid the potential ill effects of a credit risk rating downgrade the government has determined that a Value Added Tax mechanism would be the best option to help our nation combat the double-edged sword of a swelling deficit and the need to reduce the revenue from tariffs.

 

And on top of that the government believes a swift implementation is required to steer us off the path of economic failure. The increased revenue goal with the implementation of Value Added Tax is $200 million.

 

And so this in a nutshell defines the events that lead to us all being in this room tonight.

 

Early on when the idea of VAT was being mentioned I did not know much about it but I did recognise that for better or worse, this tax was destined to be the most significant adaptation our modern economy has ever seen. I also started asking myself some basic questions like, what is this tax? How does it work? How will it work for us?

 

Like most, I waited and waited for the government to provide full details and education on how this tax plan would work. But as the information was slow to come I started to reach out on my own to learn more.

 

Here is what I have found.

 

Firstly, VAT is a regressive form of taxation.

 

Burden

 

This means that the economic burden will be greater on households with lower incomes. And while our customs duty system was also regressive, the VAT system does not seem to rectify this imbalance. As an offset to the regressive nature of this tax our government has provided for some VAT exemptions including breadbasket items, medical services and educational services. Offering comfort to the most needy in our society through this bare-bones survival kit of exemptions implies to me that VAT planners do anticipate a raising tide of prices that would overwhelm our poorest citizens.

 

And then from there I start to wonder... when these struggling lower income households become burdened with higher prices on their non-exempt consumption what will they do to get by? Take a second or third job? Forego access to modern amenities like electricity, running water and telecommunications? Lean more heavily on the social services network? Or perhaps fall prey to the lure of white collar and blue collar crime?

 

Next, VAT will increase our cost of living.

 

Though the exact amount of this increase seems to become more and more difficult to define as we get closer to implementation, the estimates I have heard range from 3 per cent – 30 per cent and according to a Ministry of Finance official: “On the cost of living there will be some initial impact from the VAT but that initial impact will disappear in a very short time-frame, over six, eight years. That is not long,”

 

Can we as citizens really afford a cost of living increase now? And could we endure it for six to eight years?

 

According to statistics released by the Central Bank of the Bahamas, 95 per cent of Bahamian dollar personal savings accounts have a balance of less than $10,000 and the average balance is $704. Additionally a Ministry of Finance official recently disclosed that around 70 per cent of government payroll is dedicated to salary deductions which service consumer loans.

 

By the looks of it the People of the Bahamas may be just as cash strapped as the government of the Bahamas.

 

On a personal level, as I sift through my household bills I am always left to wonder will there be enough money to get through the month? And the thought of any increase makes me scratch my head and wonder … where do they think this money is going to come from? Will it come from a decision to cut back on my child’s education? Will it come from a decision to shop only in the breadbasket aisles at the supermarket? Or will I have to start making some even tougher decisions?

 

Additionally, VAT will increase the cost of doing business.

 

If you own a business that is just getting by today how will you handle it when your prices increase and your customer volume goes down? Will you make the shift to lower quality products and services? Will you make some tough decisions about which staff to let go? Or will you start preparing your business exit strategy?

 

The other thing about doing business is that VAT will require businesses to divert a portion of their time and resources from usual business activities to take on the new and uncompensated role of tax collector.

 

Most VAT registrants will be required to install new systems and acquire the services of a professional accountant to implement and administer the tax. Additionally the filings will be required on a monthly basis and amounts will be payable at the time the invoice is issued and not when payment is received. How will businesses manage this new expense? Do you think they will absorb it into their profits? Or will they build it into the price? And beyond that, might some businesses even try to evade paying these taxes altogether?

 

These are just some of my findings from my research on VAT. It seems however, that the only sure thing that comes out of each new discovery is even more questions. Regardless of where you live, how much you earn or who you voted for don’t you also have some questions?

 

I will admit I did learn one other thing through this process. And that is that the people of Turks and Caicos were able to successfully convince their government to stall their VAT plans and implement alternative measures to get a handle on their economy.

 

Success

 

From what I can tell a few factors combined to make their effort a success. Firstly they are a UK overseas territory, which obviously does not apply to us. But what I also found out was that when ALL the people came together and spoke in a unified voice they were able to demand that their decision makers move toward alternative revenue generating and debt reducing strategies.

 

Based on this insight I believe that the VAT debate in the Bahamas has the potential to engage and unite our country like no other issue of our time.

 

In the Bahamian context, I believe that the road-map towards alternative economic strategies could include:

 

• Enactment of the Freedom of Information Act so that we can understand how our tax dollars are being managed.

 

• Full enforcement and collection of outstanding taxes

 

• Implementation of further reductions in government expenditure

 

• Develop near-term plans to relinquish under-utilised or unprofitable government assets and corporations

 

• Legislate strict conditions and limits under which future government debt could be approved

 

And if following these initiatives, additional tax revenue is still deemed necessary, I believe that a comprehensive economic impact assessment should be conducted to determine the appropriate economic and tax reform strategies our nation should implement.

 

Fellow citizens, in a time when we are being asked to forego some aspect of our quality of life to sustain our government through this fiscal crisis I believe that it is every citizen’s obligation to ask serious questions about how the financial affairs of their country are being managed and I also believe it is a citizen’s right to receive full and serious answers from its government.

 

Additionally, I believe it is only through the unity of people power that we can move this conversation with our government forward.

 

I know that there are many concerned groups forming and strategising on this issue as we speak. These groups will vary in their objectives, their access to professional advice, and financial resources.

 

However, what if we consider for a moment that the most powerful and important participant in this discourse could be THE PEOPLE?

 

At the moment, the people are in general disconnected, distracted by the daily grind and without adequate information on legislation that will impact their lives.

 

Right now the people need several things to be effective – they need to be focused, they need to be educated about VAT in plain language and they need to be given a forum to express their opinions to their decision makers.

 

To assist in this process of engaging the people on this issue, a group of young Bahamians called Citizens for a Better Bahamas aims to launch a broad based educational campaign on VAT throughout our community streets, through social media and on our webpage: www.citizensforabetterbahamas.org.

 

Our core campaign objective is to launch a petition both on-line and on the street specific to each constituency and addressed directly to each member of parliament. The petition will request each representative to vote NO to a VAT implementation of July 1 and to consider responsible alternatives.

 

We understand that this is a tall order on a tight time-line but we believe it is through activities like these that we will be able to help our decision makers know that we are all here, we are all aware and we wish to be heard.

 

You are here tonight because you are aware and you want to know more. But is your neighbour aware? Or your co-workers? Or your extended family? It will only be through a re-connection of our entire community that we will have our voices heard.

 

Citizens for a Better Bahamas is poised to become that re-connection point for our nation. But we recognise that on this issue there is a need to move quickly and we recognise that we cannot do it alone. We need YOU, EACH AND EVERY ONE OF YOU, we need your time, we need your talent, and yes we need your financial support.

 

We each have a vested interest in the outcome of the VAT debate. If we put aside our differences of background and social status and denomination and political affiliation and bind together as Citizens of the Commonwealth of the Bahamas I believe our voice will be heard and acknowledged by our decision makers.

 

It was Margaret Meade who once told us “Never believe that a few caring people can’t change the world. For, indeed, that’s all who ever have.”

 

Fellow citizens, if you believe in this simple idea I ask that you join us. Together we are better and together we can build a Better Bahamas.

 

November 17, 2013

 

What do you think? Send your comments to pnunez@tribunemedia.net or join the conversation on tribune242

A report on the administration of justice in The Bahamas ...and improving the justice system in The Bahamas

IDB Concerned With Bahamas Justice System

by Ianthia Smith
The Bahama Journal




Officials at the Inter-American Development Bank (IDB) have expressed major concerns with the administration of justice in The Bahamas, particularly as it relates to the low conviction rate and the fact that more than 300 accused murderers are out on bail.

In fact, the IDB is so concerned with the dismal statistics that the organisation has pledged to pump $250,000 into improving the justice system in The Bahamas.

In a recent report, the IDB said during the 2005 to 2009 period only 5.1 per cent of murder cases resulted in convictions, adding that within the last five years, 305 accused murderers have been released on bail.

“This situation can partly explain why The Bahamas, although superior to the regional average, has recently shown a marked decline in its values for the world governance indicator related to the rule of law,” the document added.

That figure dropped from more than 85 per cent in 2007 to just over 65 per cent in 2011.

The report went on to point out that in The Bahamas there is consensus about the limited institutional capacity of the justice system to respond to the public’s demands and added that this situation is contributing to the recent dramatic increase in incidents of violence and crimes that remain unresolved amid an increasing judicial backlog and a diminishing number of convictions.

“Today, few people doubt that sustainable development depends on the credibility of the legal system, the quality of the legal framework, the effective protection of property rights and the honesty, effectiveness and efficiency of the agencies in charge of applying the law to specific cases,” the document added.

“To properly perform its role, a justice system should also be expeditious, which means that the system effectively completes cases in a reasonable time.”

It is for that reason that the IDB has approved technical cooperation for a pilot project to support the government’s Swift Justice Programme and has committed to giving The Bahamas $250,000 and an additional $24,000 local counterpart funding, to assist with this fight.

To improve court reporting and transcript generation, which the IDB notes still consists of a transcriber, while the modern digital court reporting includes broadcast quality microphones and digital recorders, the IDB has committed $110,00 while another $77,000 will be to support the implementation of an integration justice information system with an efficient business model that will seek to strengthen cooperation, coordination and communication among the Attorney General’s Office, the police and the judiciary and $66,000 will go towards the reduction of the Supreme Court’s backlog.

But with this technical cooperation comes risks, the IDB noted that the government and judiciary may not be sufficiently coordinated, there may be difficult interaction between the different government agencies as well as delays in execution due to a lack of knowledge and experience with IDB-financed operations.

November 20, 2013

Jones Bahamas

Caribbean Blog International

The private sector in The Bahamas was challenged to present a viable alternative to Value Added Tax (VAT) ... by Prime Minister Perry Christie

Pm Challenge On Vat Alternatives

By AVA TURNQUEST

Tribune Staff Reporter

aturnquest@tribunemedia.net

PRIME Minister Perry Christie yesterday challenged the private sector to present a viable alternative to Value Added Tax.

 

Responding to the concerns of businessmen worried about how VAT will affect the cost of doing business, Mr Christie pointed out that after the public rejected the option of boosting revenue by regulating web shop gaming, the government had to find some form of taxation to sustain development.

 

“We require additional revenue to be able to meet debt servicing obligations,” he said, “we need additional revenue to be able to have a resurgence in the economy, we need additional revenue for infrastructural development. The question is, when the government sought to seek the Bahamian people’s approval on the referendum, the Bahamian people indicated no.

 

“The government then brought forward what has been in play for a very long time – Value Added Tax. If there is serious objection to it, the government must listen and the government must give consideration, but the government surely would not be expected to just listen to those who oppose without having an alternative.

 

“Everyone in the country must know that to sustain our development, for there to be sensible, serious, forward looking discussion, it has to be accompanied – particularly from people who are involved in the economy – it has to come with alternatives.

 

“I would expect therefore if [businesses] are going to present me with a paper, they will be arguing to agree on a different form of taxation.”

 

Mr Christie has hinted that he might be open to postponing the VAT target implementation date of July 1, 2014, if the government is not prepared for it.

 

He said the private sector needs to realise it is on a collision “cause” with government over the need for additional revenue, and asked “what is the alternative” to VAT?

 

The Prime Minister added that he was not at all concerned over the level of angst being expressed by the business community regarding VAT and the potential problems it might cause for individual businesses.

 

“Quite frankly,” he said, “I am appreciative of all of the discussions that are taking place on VAT.

 

“At some stage I am sure the business community, (will recognise) that we are on a collision cause – c.a.u.s.e – with respect to this matter, that we need additional revenue.”

 

The government is proposing to implement VAT on July 1, 2014, at a rate of 15 per cent, with the hotel industry to be subject to a lower 10 per cent rate.

 

Mr Christie said, however, that ultimately, he will have the final say on implementation.

 

For their part, the co-chairs for the private sector’s Tax Coalition have praised indications that the Prime Minister was open to postponing VAT implementation day as “fantastic”, warning it was “paramount” that the economy be protected.

 

Pointing out that the government would not achieve its revenue-raising objectives if the economy “went to hell in a hand basket”, Robert Myers said he was interpreting the indications positively, and as a sign that the government was listening to the private sector’s concerns.

 

November 08, 2013

 

Tribune 242

 

Caribbean Blog International

 

Value Added Tax (VAT) and Tax Reform in The Bahamas

By Dennis Dames:

We, the Bahamian people must realize that we cannot continue to borrow more than we are collecting in taxes.   We should appreciate as one people that something has to give now, as it relates to getting our fiscal house in order.  Either we increase taxes, or cut spending significantly.  We do not have years left to answer that question, and to take sound and prudent fiscal action, my brothers and sisters.

So, that is why we are debating the impending institution of value added tax in The Bahamas; to help us to live by a balanced budget until further notice.  This Bahamian has already accepted the reality that we need some kind of tax reform in The Bahamas, so that the government could collect more money on our behalf, in order to contain the outrageous deficit spending – year after year.

Our National debt is projected to officially double in the seven years; from $2.4 billion in July 2007, to $4.9billion to June of 2014 – coming-up.  The fiscal deficit for the past two years is reported to be more than $500.00 million.

It is a pity that the education process on the principles of value added tax (VAT) did not begin when the Bahamian government had signed on to the various international agreements years ago, like: the Economic Partnership Agreements (EPAs) with the European Union, and the World Trade Organization (WTO).   We know it was coming nonetheless, because the Progressive Liberal Party (PLP) and the Free National Movement (FNM) made it known that value added tax (VAT) is in the pipeline.  We went through the 2012 general election - recently, and the electorate voted overwhelming for the PLP and FNM.

So, what’s the problem?  Who’s shocked, who’s surprised, who’s outraged and who didn’t know that value added tax (VAT) was on the horizon?  The FNM has reminded us recently, that if they were elected in 2012, they had plans to employ value added tax (VAT) by 2015 or in thirty-six (36) months; the PLP plans to install value added tax (VAT) by July 2014 or in twenty-two months of their 2012 general election victory.

I think like the pundit, Dr. Gilbert Morris in the Turks and Caicos Islands, when he sounded in that nation’s context, that it was not that the TCI people are against value added tax (VAT), but it was felt nationally, that more time was needed to prepare the people for the realization of value added tax (VAT).  The United Kingdom was seen to be rushing the brush and had to eventually relent, in the wake of public pressure from every political house - and cancel the Turks and Caicos Islands’ value added tax kick-off date of April 01, 2013.

Our Prime Minister has said publicly, that he is open to delaying The Bahamas’ value added tax (VAT) execution date, which is scheduled for July of 2014.  It’s a great gesture, Mr. Prime Minister.  Now it’s time for all Bahamian people to face the music of looming tax reform in our country, and let’s start dancing and debating.  Our children and the generations yet unborn, deserve to enjoy the fruits of our wisdom.

November 13, 2013

Caribbean Blog International

Value Added Tax (VAT) is viewed by governments as an attractive option ...as it taxes both goods and services

VAT: A regional perspective

Bahamas behind region in implementation of VAT

By CANDIA DAMES
Guardian News Editor
candia@nasguard.com

A 15-minute video on the impact Value Added Tax (VAT) has had on the twin-island state of St. Kitts & Nevis has been making the social media rounds in recent weeks, posted and re-posted by many Bahamians linked in the online community.

The video, moderated by Rev. Conrad Howell of the Turks and Caicos Islands (TCI), was created ahead of what had been the planned April 1, 2013 implementation of VAT in TCI.

The video features a number of prominent citizens of St. Kitts & Nevis, including business leaders, former Minister of Finance Richard Caines, and also everyday citizens outlining the “negative” impacts VAT has had on their economy since its implementation three years ago.

Business leaders speak of having to close their businesses, of the sharp and sudden rise in the cost of living.  Other citizens speak of the stunning decline in their quality of life.

Such reports have increased fears among an already worried Bahamian population preparing for the introduction of VAT at a rate of 15 percent on July 1, 2014.

In the absence of information on the likely impact of VAT on their way of life, and on their economy, many Bahamians view this video as a model of things to come, notwithstanding recent reports from the International Monetary Fund (IMF) that St. Kitts & Nevis is seeing signs of an economic recovery.

Calvin Cable, executive director of the St. Kitts & Nevis Chamber of Industry and Commerce, told National Review that VAT had a “multiplier effect in terms of hardships on the populace”.

Cable said a consumption tax was removed and the VAT of 17 percent was introduced.

Two other taxes, the customs duty and the customs service charge, were retained in addition to the 17 percent VAT, he explained.

“It was tremendous on the cost of living,” Cable said. “You could have felt it in the number of packages being taken out by householders out of the supermarkets because the prices of goods went up pretty high, maybe about 25 percent overnight.”

As a result of VAT, many people in St. Kitts & Nevis cut back significantly, he said; many of them eliminated all luxuries.

“People stopped going out to restaurants to eat and that sort of thing because it was proving to be too much to carry,” he said.

VAT is viewed by governments as an attractive option as it taxes both goods and services.

The current narrow based tax system in The Bahamas has long been in need of an overhaul, according to government officials and various international agencies examining The Bahamas’ tax structure.

Cable also noted that prior to the implementation of VAT, there were very few charges or taxes on services in St. Kitts & Nevis.

“And so, what the population had to deal with now was that services were being charged VAT, which was not the custom before,” he said.

“For instance, doctors fees, lawyers fees, services in the tourism sector — and I know The Bahamas is big on tourism.  For instance, rented cars had to pay the 17 percent.”

Cable said VAT provided a “windfall” for the government in taking from the services sector, “but most of that was coming out of the local population”.

“So the amount of disposable income that they had on their side was drastically reduced and the buying power was drastically diminished,” he said.

In St. Kitts & Nevis, VAT is credited with bolstering the government’s fiscal position, but Cable said it happened “on the backs of the local people”.

Prior to the implementation of VAT, the country experienced debt levels above 200 percent, which made it one of the world’s most indebted countries.

The debt to GDP ratio is now inching closer to the 100 percent mark.

St. Kitts and Nevis’ Minister of Information Nigel Carty previously pointed to the “herculean effort that has been exerted to bring great relief to the country’s fiscal position at such an economically challenging time”.

IMPACT

While The Bahamas’ debt situation has not been as dire as that of St. Kitts & Nevis, it has reached a position where it is now unsustainable.

The Bahamas government has outlined its own efforts to bring relief to this country’s fiscal position.

As we noted in this space last week, government debt as at June 30, 2014 is projected to be $4.9 billion, compared to $2.4 billion as at July 2007.

Over the last two fiscal years, the government has seen a total deficit in excess of $500 million.

Almost one out of every four dollars in revenue collected by the government must be allocated to pay the interest charges on the public debt and cover the debt repayment.

With a significant change in the country’s tax system on the horizon, The Bahamas government has not yet produced any studies to show the likely impact VAT will have on the cost of living.

In every sector, there are understandably questions about how this new regime will affect business.

The man and woman on the street are equally concerned, as they already exist in a climate of high unemployment, where many are finding it hard to meet their obligations and disposable spending has been stretched to the limit.

The government is now asking citizens to shoulder the burden of reversing a burdensome debt situation.

Again, there is no doubting that it is time for action.  The chosen route is of course value added tax, which the government says is a central element of its tax reform strategy.

A new IMF report “Tax Reforms for Increased Buoyancy”, which was prepared for the government, notes that The Bahamas has low taxes compared to the rest of the world, excluding Central American countries.

It points out that many countries in the region have already introduced VAT, thus providing “a stable source of tax revenues”.

The report notes further that almost all the countries in the region have taxes on income and profits.  Furthermore, they have high excises on petroleum products.

While The Bahamas is only now moving in the direction of VAT, several of its Caribbean neighbors — among them, Barbados, Jamaica, Trinidad & Tobago — implemented VAT more than a decade ago.

Speaking of the Barbados experience, Lalu Vaswani, president of the Barbados Chamber of Commerce and Industry, described VAT as a “very efficient means of collecting tax as it increases the base on which the taxes can be collected”.

“I think it has been a positive impact, although it was not without its challenges,” Vaswani said in an interview with National Review.

Vaswani said that prior to the implementation of VAT in Barbados in 1997, the country had as many as 11 different types of duties or imposts that could be charged on imports.

“The increased effectiveness of collecting revenue gave the government more scope to do their development projects,” Vaswani said.

“From a business perspective, there are always anxieties associated with changes, and it is always desirable that there is a maximum amount of consultations even when the final positions are not known.

“So there is an understanding from ground level what are the goals, specific objectives and how you propose to do it because very often what you theoretically are trying to do may have a unique challenge, which may be identified before it is implemented and resolved and prevented.”

Former Barbados Prime Minister Owen Arthur noted in a 2010 interview with Erasmus Williams, press secretary to the prime minister of St. Kitts and Nevis, that high debt levels are inevitable in the absence of a tax base to generate the revenue needed to run a country.

“I supported the VAT when I was in opposition in Barbados because I thought it stood the test of reasonableness, but it was absolutely necessary,” said Arthur, whose administration introduced VAT.

“You’re living in a set of countries where year by year, period by period, governments will have to remove import duties.  What are you going to replace them with? And that is the basic question.”

Arthur said VAT created the basis for sustained growth “without fiscal difficulties”.

“It allowed us to be able to introduce programs to aggressively mount and sustain policies to eradicate poverty and we did that by creating the base for sustainable growth in the country,” he said.

NECESSARY EVIL

The most recent Caribbean country to implement VAT was St. Lucia, which did so just over a year ago at a rate of 15 percent.

Gerard Bergasse, president of the St. Lucia Chamber of Commerce, Industry & Agriculture, noted that VAT pulls more people into the tax net.

“When you are relying on other forms of taxation, they are not as broad based, so you have a much narrower tax base, which means that the tax on those people has to be higher to achieve your revenue targets,” Bergasse told National Review.

“But when you have a broad based tax like VAT, it means that everybody is contributing, so it makes it fairer.  And it does not take the fiscal tool out of government’s hands because they can still zero rate items, or zero rate a basket of goods that they feel would help less advantaged people.”

The Bahamas government’s White Paper on Tax Reform notes that zero-rating a supply implies applying a zero VAT rate and allowing credits for VAT paid on inputs.

It says that zero-rating should definitely be applied to exports as a VAT is designed to tax only domestic consumption.  Other than that, zero-rating should be strictly limited, if utilized at all, the document says.

Bergasse said that based on anecdotal evidence, many people would say that VAT was a necessary evil in St. Lucia.

“I still believe that VAT was the right thing for the government to have done and it’s moving in the right direction,” Bergasse said.

He said while the government is not now experiencing a huge windfall, as far as he is aware its revenue targets have been met.

Bergasse said the Chamber of Commerce supported the implementation of VAT from the beginning and was a part of the government’s pre-implementation VAT team.

Bergasse pointed to the need for proper consultations ahead of the implementation of VAT.

But he recognized that making VAT understandable to a cross-section of people is “very difficult”.

“I will warrant that there are still business people in St. Lucia who still do not understand VAT,” Bergasse said.

“...It is a bit of a complicated tax, so it does take people a while to wrap their heads around it and it does make a difference the way your legislation is structured.  We didn’t get the legislation until very late in the day and even after we got the legislation there are the regulations that go along with it that are very important, because the legislation is the ‘what’; the regulations are the ‘how’.”

He noted that the fundamental change created by VAT is that the business community is changed from being solely taxpayers to being tax collectors.

When properly structured, VAT is a tax on consumption, not business.

In The Bahamas, the proposed VAT legislation and regulations have not yet been released to the public, so the specifics are still unknown.

The government, meanwhile, is planning on increasing public education and awareness in a series of meetings set to begin this week.

Prime Minister Perry Christie has said the July 1 implementation date is not set in stone and he, as minister of finance, needs to be satisfied that businesses and the country at large are ready for the implementation of VAT.

As the government prepares to intensify public education on VAT, it is hoping to quiet what appears to be growing public sentiment against VAT.

November 13, 2013

thenassauguardian

Caribbean Blog International

Father Sebastian Campbell says: Be real with the numbers business ...It is here to stay ...Effectively tax the number houses

 Priest: Tax Web Shops

  by Rogan Smith




A leading clergyman is suggesting the government tax the illegal number houses as a way of generating revenue and offsetting the impending value added tax (VAT).

The government has announced plans to introduce VAT on July 1, 2014 as a means of broadening the country’s tax base.

The Bahamas will apply a 15 per cent VAT to a broad range of goods and services.

In the past, many Bahamians have suggested the government tax the web shops, which are raking in millions of dollars annually.

“Be real with the numbers business. It is here to stay. Effectively tax the number houses,” said Father Sebastian Campbell, rector at St. Gregory’s Anglican Church.

“Research has already shown that this is an oasis of wealth sitting in our midst. Governments sometimes must make hard and unpopular decisions for the good of the country; go for it. It is common knowledge that many involved in the numbers business voted against the referendum in January. By so doing they guarantee greater gains for themselves.”

In January, the Christie administration held a referendum to give Bahamians an a chance to vote to regularise the numbers industry.

The majority of Bahamians rejected the referendum. A legal battle has ensued since then with the government taking steps to shut down the numbers racket and the attorneys for the web shop operators attempting to keep it open.

“In January, please be honest and admit, we had an opinion poll, it was loaded with flaws. I urge the government to do the most appropriate thing, lead. The resource is here; let’s tax it for the common good. As parliament goes into the debate of gaming now is the time to level the playing field. Do not give away rights to foreigners that Bahamians don’t have in their own country,” he said.

“This is a hot button topic; it is not prudent to do it near an election, therefore now is the time. We have no luxury in waiting for this one. By 2017 Bahamians would have experienced the results and government would have had time to tweak and show the public the benefit of the new regime.”

Father Campbell said The Bahamas’ financial system must be overhauled, as is it is “totally inadequate and not real to the times.”

In fact, he said it is “miraculous” that Bahamians have survived so long without radically overhauling its tax structure.

He also suggested the government make improvements in the area of tax collection. Millions of dollars, he said, are alleged to be outstanding.

“We must confess our failure to successfully achieve maximum results in tax collection. VAT, mind you, is said not to be a progressive form of taxation, I am no tax expert, but I’ve heard the cry from friends in the region that have it,” he said.

“Income tax is said to be more progressive and will cause those who have more to carry a greater portion of the burden as opposed to a VAT, where all men will be equal in contribution. Bahamians ought to also beware that some countries in our region have both VAT and income tax. Yet remember, too, The Bahamas is an archipelago. We have to repeat maybe some 60 plus times that which regional countries might only have to do once.”

Father Campbell also called on his colleagues within the church to prepare their congregations and the nation as a whole for this reality.

“This is where leadership is warranted now in our development. It is not the duty of only the government and politicians in educating our people and to give leadership. The church must assist in leading the way and not get in the way of this necessary, progressive, albeit radical move. It might be a good gesture for government to launch its plan education programme with the church,” he said.

VAT has been implemented in 140 countries around the world.

November 06. 2013

The Bahama Journal

Caribbean Blog International

The Coalition for Responsible Taxation on “phasing in” Value-Added Tax (VAT) over a three-year period in The Bahamas

Tax Coalition: Phase Vat In Over Three Years

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government should examine “phasing in” Value-Added Tax (VAT) over a three-year period, a co-chair of the private sector’s Coalition for Responsible Taxation warning: “You can’t implement taxes to the peril of the economy.”

Robert Myers, speaking to Tribune Business as the Coalition released its VAT ‘Queries and Recommendations’ submitted to the Government on October 28, reiterated that the “fear” in the private sector about the consequences of tax reform stemmed from the Government’s failure to-date to prove adequate information and consultation time.

Agreeing that the Government could be “100 per cent right” over the direction it was taking with tax reform, Mr Myers said it needed to show this was so by “sharing” all the studies and specifics it possessed.

“This is a fundamental change in this country’s way of doing business,” he told this newspaper. “This is a fundamental change in the way everyone lives and does business.

“Let’s get all the facts on the table and hash it out. There’s no need top throw rocks at each other. We all benefit from the right solution. Let’s make the right decision as a nation.”

The Coalition identified 12 areas of ‘macroeconomic concern’ in its latest missive to the Government over VAT, and Mr Myers told Tribune Business: “First and foremost, you cannot implement taxes to the peril of the economy.

“That is the primary objective. There are just too many examples, in Barbados, Grenada, where their economy was troubled. They tried to resolve it by introducing new taxes, and that sent the economy backwards.”

Mr Myers said Grenada, for example, was now reducing VAT on construction materials and providing incentives to encourage contractors after the tax’s implementation “killed” the sector there.

While there was no evidence to suggest something similar would happen in the Bahamas, he added: “It’s just to say that if this is happening elsewhere, maybe we should take a look at it.”

In the ‘Queries and Recommendations’ sent to the Government, the Coalition reiterated that VAT’s implementation was “a seismic change to the system” that meant both the Government and private sector needed adequate time to prepare.

Restating its previous call for VAT implementation to be delayed for at least 12 months after the relevant legislation, regulations and Tariff Schedule had been released, the Coalition added: “Consideration should be given to phasing in VAT over a reasonable period, for example, three years, to minimise the potential negative impacts of inflation.”

Government minister and Ministry of Finance officials, particularly those working on VAT’s implementation, have suggested that the Bahamian business community’s fears are “unwarranted” and, in some instances, amount to ‘scaremongering’.

But Mr Myers and the Coalition have both pointed out that this has resulted directly from the ‘information vacuum’ created by the Government’s failure to publish the specifics on VAT, including studies on its likely impact that have been done - or are being done - by the likes of the International Monetary Fund (IMF) and Inter-American Development Bank (IDB).

Acknowledging that this had sometimes resulted in “hysteria and one-sided debate”, the Coalition added: “The lack of such information to date has contributed to the paranoia and apprehension of the business community and consumers.”

Mr Myers told Tribune Business: “There is this perception, fear in the marketplace, and you are having the result of not providing adequate time and information.

“Maybe you [the Government] know what we don’t know, but share it. Maybe you’re 100 per cent right. We don’t know, but share it. It’s so frustrating.

“You can already see certain businessmen, the fact that they’re now backtracking themselves on certain projects, is not good for the economy. That creates uneasiness.”

The Coalition, meanwhile, told the Government that VAT’s inflationary impacts, which has admitted itself, could have “consequences” for the Bahamas’ economic recovery.

Calling on the Christie administration to collaborate with the Bahamian private sector “to obtain the greatest possible buy-in by registered businesses and consumers”, the Coalition warned: “The majority of businesses have been experiencing an inability to increases prices in the past few years.

“Gross profit and net profit margins have been reduced following the recession, with no evidence of an ability of consumers to withstand price increases.

“Low net profits or net losses threaten the viability of small and medium-sized businesses.”

Mr Myers praised the Government for containing inefficiency, waste and shrinkage in its spending, and agreed that it needed more revenue to tackle its chronic deficit/debt problems, and the imbalances in the public finances.

But he warned: “To make a mistake and it backfires.... Do you want growth to slip by 2 per cent, 4 per cent, slip into negative growth? I don’t think that’s the desired result.

“Maybe take longer to get into this. No one says you don’t need more revenue, but let’s be measured.”

And the Coalition co-chair added: “We’ve got to make sure this is right for us, and not just right for the business community or right for the Government.

“It’s got to be right for the consumer, right for the private sector and right for the Government. Right in the broadest sense of the word. It’s just not been done. That kind of inclusiveness is not there.”

October 04, 2013

Tribune242

Caribbean Blog International