New Zealand Vat Success Due To ‘Education, Almost No Exemptions’
By RASHAD ROLLE
Tribune Staff Reporter
rrolle@tribunemedia.net
NEW Zealand Value Added Tax (VAT) experts emphasised yesterday that a strong education campaign and “virtually no exemptions” are responsible for their country’s successful implementation of VAT.
John
Shewan, an Adjunct Professor of Accounting at the Victoria University
of Wellington and one of the experts expected to give the Bahamas
government a report on implementing VAT next month, said: “The reason
our education campaign was so successful was because their was a
commitment to an 18-month educational programme, six months of which was
prior to the implementation date, but the most important things
happened 12 months after the implementation because there were a series
of detailed explanation programmes targeted at all kinds of groups.”
He
added that ideally, the Bahamas government, which is still seeking
reports from the private sector before finalising its VAT plan, should
actively promote VAT only when the tax’s design has been finalised.
He
said it took six months of intense education programmes before VAT was
implemented in New Zealand following the finalisation of its makeup and
legislation.
Don
Brash, the former governor of the Reserve Bank of New Zealand, added
that the compliance cost of VAT is low in New Zealand because
“everything was taxed at the same rate and virtually no exemptions were
given.”
VAT
exemptions are sometimes made for certain items and services in order
to alleviate the burden that the “regressive” tax may have has on the
poor.
However, the New Zealand tax consultants said the government should seek other ways of helping the poor.
To
help the poor of New Zealand, he said the country’s government makes
direct payments to low income families through tax credits.
The question of who deserves those credits, however, is controversial, he said.
“If
you have a large number of exemptions your rate has to be higher. With a
smaller number of exemptions the rate will be lower. We found that the
one rate, no exemptions framework worked extremely well,” said Mr Brash.
The
two experts said that ultimately New Zealand’s government recorded a
revenue intake that far exceeded its expectations following their tax
reform.
April 25, 2014