VAT to create pricing, tax 'transparency'

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

THE Government’s proposed Value Added Tax (VAT) regime will create a more transparent pricing and tax regime, a senior official said yesterday, although there would not be “a 100 per cent offset” against reduced Customs and Excise duties.

John Rolle, the Ministry of Finance’s financial secretary, who was a speaker at a Bahamas Institute of Financial Services (BIFS) seminar yesterday, told Tribune Business: “The Value Added Tax is a consumption tax, but what it does is show the consumer how much taxes they are paying.

“We will have a consumption tax where individuals are able to see the actual dollar amount they are paying. I think that’s one of the important things with this tax, the transparency. At the same time it’s going to give the Government the flexibility to do things that are not very easy to do with Customs duties.”

Mr Rolle added: “Customs duties will be reduced, and the Excise tax rates will be reduced. Then, the Value Added Tax will be brought in, for the most part, to offset the reduction in Customs duties.

“It is not intended to be a 100 per cent offset because, at the same time, the Government will be looking at other activities in the economy that can generate taxes.

“Most businesses will have the opportunity to offset these against their tax liabilities so that, at the end of the day, we have a more transparent pricing system where the customer can see clearly what the Government taxes are that they are paying.”

Mr Rolle said VAT’s arrival on July 1, 2014, could serve as an incentive for businesses - which will be required to register and pay it - to invest capital in their operations.

“If you are a manufacturer and you are exporting things, you get a refund on you Customs duties, but under VAT we say that is an input cost which we are going to give you as a credit for,” Mr Rolle said.

“It is an incentive. Additionally, today we do not get offsets for, say Customs taxes on your capital input if you buy equipment or vehicles for your business.

“The component of those costs for Customs duties is going to be reduced with a VAT, and that reduction is a direct benefit for every business that makes an investment. The VAT component of your cost will be credited as an offset. That is for businesses who will be registered for VAT, which are the majority of the large businesses.”

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.

The Government’s White Paper on Tax Reform proposes to exempt those companies with an annual turnover of $50,000 or less from having to pay VAT and register.

Mr Rolle noted that the shift to VAT, as part of the Government’s tax reform agenda, goes “hand in hand” with disciplined spending.

“It’s improving revenue and keeping spending very disciplined, so that together the Government gets the desired outcome in terms of reducing the debt growth and eventually beginning to pay down on its debt. That’s a part of the bigger picture that’s been set out in the medium term fiscal strategy,” Mr Rolle said.

Comments

GilbertM says...

a. There are no significant excise taxes in the Bahamas that justify a change in tax models.

b. VAT will raise prices because compliance for business will be onerous.

c. VAT will not produce transparency. Instead it is likely to add to and cultivate a large cash underground economy.

d. The Bahamas lacks the administrative depth to administrate VAT and its anathema to our money related culture.

e. Barbados - which has greater administrative depth then the Bahamas - has experienced severe arrears in VAT compliance.

f. Most Caribbean nations have significant delays in paying VAT refunds.

g. Since VAT is just a stepping stone to the WTO, nothing the government says on VAT can have credibility.

h. Everywhere in the Caribbean (except the Dominican Republic, where hardly anyone pays), the VAT rate has increased by more than 50% within the 7 years after implementation.

Professor Gilbert NMO Morris

Posted 16 May 2013, 9:30 a.m. Suggest removal

mattcoleman says...

transparency indeed is the key to a successful leadership
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Posted 16 December 2014, 12:15 a.m. Suggest removal

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