By NEIL HARTNELL

Tribune Business Editor

VALUE Added Tax (VAT) is not the complete solution to the Bahamas' taxation reform needs, this nation's leading World Trade Organisation (WTO) negotiator yesterday warning that changes also needed to encourage targeted investment and be trade agreement-compliant.

Pointing out that tax reform in the Bahamas would effectively be a balancing act requiring in-depth analysis before any changes were made, Raymond Winder said the issue had to be looked at from an economic development stance, not just the requirement for more revenue.

Returning to the Bahamas after the second meeting in Geneva with the WTO Working Party negotiating the terms of this nation's accession to full membership, the Deloitte & Touche (Bahamas) managing partner also warned that this nation's relatively high per capita income could act as a barrier to obtaining much-needed financial and technical assistance to aid this process.

Noting that the Bahamas would also have to negotiate bilateral trade agreements with the likes of Canada and the US, as well as deal with the accession to full WTO membership, Mr Winder said: "We as a country are going to have to do an analysis, not only looking at taxation from the revenue point of view, but looking at how we use taxes that are WTO compliant but provide incentives to encourage industry in new sectors.

"Decisions like that cannot be made in a unilateral kind of way without factoring in what we are really trying to accomplish."

Using the real estate industry, and its Stamp Duty/real property tax structure as an example, Mr Winder said that when it came to tax reform, the Bahamas needed "to be clear first of all, what will happen, and be clear that when we make the decision we get the answers we want".

The Bahamas, he added, had to "make sure" it was "for the good of the country, not just one particular industry". In the case of the real estate sector, Mr Winder added: "We still have an environment in real estate where people can sit and wait, and you have to ask the question: Do we have the right kind of policies in place to encourage individuals to develop, or trade and sell, real estate?"

The Bahamian tax reform debate seems to have settled on VAT as the answer to the Government's revenue and, by extension, national debt and deficit woes, but Mr Winder told Tribune Business: "VAT is not the only answer. VAT is only part of the process. It's not the end game.

"We need a far more integrated and complex system that addresses all the needs of the country. As we begin to make the move to address the shortfalls from revenue, we ought not to do a significant change like that without considering how we can develop this economy by putting in place the right kind of incentives."

While a key aspect of the Bahamas' accession to full WTO membership was putting the necessary legislation in place to ensure it was compliant with rules-based trading regimes, Mr Winder said just as critical was putting in place the mechanisms and institutions to enforce these laws.

"We must have the infrastructure in place to ensure the legislation will be adhered to," he told Tribune Business. "That's going to be a challenge, and we did get a positive response from some of the countries that they will assist the Bahamas in helping to set up this infrastructure."

Mr Winder, conceded, though that the Bahamas' position as having the third highest per capita income in the Western Hemisphere would not help in this regard. Other nations would consider the Bahamas a wealthy country not needing help, and be unaware of its income inequalities and vulnerable, service-based economy.

"Our net per capita income is very high, and when people look at that they will form the perception that the Bahamas does not need the level of assistance some other countries have gotten," Mr Winder told Tribune Business.

"A huge percentage of people fall below the poverty line, and because of the vulnerability of the economy we need assistance and resources to ensure we adhere to the new rules and regulations that will be passed in the coming months and years."