Cries over value-added tax (VAT)

Value Added Tax (VAT) is Not The Answer

FNM MP warns on VAT

By KRYSTEL ROLLE
Guardian Staff Reporter
krystel@nasguard.com

Shadow Minister for Finance Peter Turnquest suggested on Saturday night that the country would be “jumping off the cliff” if it implements value-added tax (VAT).

Pointing to other Caribbean countries that have implemented VAT, Turnquest said the new tax regime would bring increased hardship.

He was speaking at the Free National Movement’s (FNM) rally in the Alley at the FNM Golden Isles constituency office.

“We don't want to be like Barbados,” he said.  “We don't want to be like Grenada.  We don't want to be like Haiti.  We don't want to be like any of those countries.

“They are crying about VAT.  St. Lucia is crying about VAT.  We don't want to be like that.  We are a prosperous nation.

“...We have a lot to protect.  So let's be careful; we don't have to follow the crowd. Everyone is jumping off the cliff.  That doesn't mean we have to jump off the cliff.  We can chart our own territory.”

He said the government ought to focus its efforts on the collection of outstanding taxes, including an estimated $500 million in real property tax.

Turnquest also called on the government to cut subsidies to public corporations.  He said the government also has other options to enhance revenue.

The government plans to implement VAT at a rate of 15 percent on July 1, 2014.  The government has said the new tax will reduce the gap between revenue and expenditure and offset rising public debt.

At the start of the next fiscal year, government debt is projected to be $4.9 billion.  This year, the government estimates that it will have to pay $230 million to service its debt.

VAT is expected to add an additional $200 million in revenue in the first year of implementation, officials estimate.

While acknowledging that his party had planned to give VAT “early consideration if re-elected”, Turnquest said that doesn’t necessarily mean that VAT would have been implemented under an FNM-led government.

“We would have given it widespread consideration,” he said.  “I ask the government to step back and consider other options.  Present the opposition with facts. We need proper analysis.”

But former Minister of State for Finance Zhivargo Laing previously said the former administration had planned to implement VAT.

Speaking to Rotarians on the implementation of VAT in August, Laing said: “We have an extraordinary opportunity not to do something modest, but to do something audacious.

“But alas, the only crippling thing that can frustrate that is our political consideration that time may run out on us before we get to the next round of votes.  I say to you, resist that temptation and encourage your leadership to resist that temptation.”

Despite earlier suggestions, Turnquest acknowledged that the opposition does not have “sufficient” information on VAT to make an official position.

“How can any responsible party declare a position on VAT without knowing the facts,” he said.

“We don’t know enough information.  We have no facts, no analysis, no legislation.  How can we give the government cover?  That’s silly.”

However, both Turnquest and FNM Leader Dr. Hubert Minnis have already indicated that they do not support the implementation of VAT.

Earlier this month, Minnis described VAT as “regressive”.

In a two-page statement, Minnis said VAT would “seriously impair the already weak, uncompetitive and struggling Bahamian economy and harm and diminish the quality of life of every Bahamian”.

During the rally, Minnis called on the government to stop taxing the country.

Turnquest offered similar statements.

“VAT is not the answer,” he said.

November 25, 2013

thenassauguardian

A Move to Overhaul The Bahamas Tax Structure

The Bahamas Government has engaged the services of two of the foremost Value Added Tax (VAT) experts of the Crown Agents group

Bahamas Tax System Under Review

By Candia Dames

Nassau, The Bahamas

26/04/2004

In its most tangible move yet to begin the process of overhauling the country's tax structure, the government has hired a U.K-based consultancy firm to review the present system and make recommendations for change.

"We've [made] good progress," Minister of State for Finance James Smith told the Journal.

He said the government has engaged the services of two of the foremost Value Added Tax (VAT) experts who are a part of the Crown Agents group.

Minister Smith said that once this study is completed, the government will make a determination on the way forward.

"The whole idea is to look at this new tax regime [to determine] if it's something we really want to do," he added.  "If we were to change from one to the other, do we do so immediately?  Do we do so over time?"

VAT is a form of indirect tax applied to goods and services that increases the prices of those goods and services.

Minister Smith noted that, "We can have an efficient tax regime which would benefit the government from the point of view of increased revenues, the public from lower prices and the businesses by releasing them from tying up funds in inventory."

For quite some time, government officials, economists and others in the private sector have been pointing to the need to overhaul the system of taxation in The Bahamas, given that various pending international trade agreements require discriminatory border taxes to be abolished.

The need exists for The Bahamas to depend less on customs duties, Minister Smith has said repeatedly, while pointing to the enormous challenges involved in instituting a new system.

"We are engaging the international trade, the [Free Trade Area of The Americas], the [World Trade Organization] and even looking at the [Caribbean Single Market and Economy] and for all international trade agreements, they start off with asking you to roll back tariff rates because tariffs are generally regarded as restraints to trade," Minister Smith said.

"But for us more importantly the bulk of our revenue comes from import duties and they are very distortionary in the sense that they are what the economists would call regressive.  They're applied in such a way that the lower income households bare the brunt of the tax because it's essentially a consumption tax."

He said the government is working on tax overhaul "quite earnestly."

"If we decide to go forward, clearly I would have to get the green light from the government and I would have to discuss with the wider community the way forward," he said.  "We've still got some things to do. Suffice it to say, it is in the pipeline."

JonesBahamas