Thursday, February 20, 2014
By KHRISNA VIRGIL
Tribune Staff Reporter
kvirgil@tribunemedia.net
APART from the imposition of Value Added Tax (VAT), the Bahamas has no other viable option to spark the required streams of revenue it needs to arrest government debt, according to State Finance Minister Michael Halkitis.
While the government has for months urged business owners to come forward with alternatives to VAT, Mr Halkitis suggested that remaining options, used around the world, were simply incapable of generating the needed funds.
He was speaking to Parliamentarians yesterday of the downfalls regarding systems such as payroll tax, personal income tax, immovable property tax and corporate income taxes. MP’s were debating changes to the excise and tariff acts during the first sitting of the House of Assembly.
Mr Halkitis said when VAT is brought on stream in July, the government will have created an on-line system for business to file invoices and other documents.
The government anticipates around 4,000 businesses will register.
He said:”One of the benefits of the VAT is that it acts to promote savings and investment as a tax on consumption rather than on income. It promotes work ethic and entrepreneurship rather than acting as a disincentive as income tax. As I said, they have differences and people say well the fairest thing is to do a progressive income tax, those who make more pay more, but by stimulating savings and investment we believe that VAT leads to higher savings and improvements in productivity.
“Beyond the economic effects, it’s also important to consider compliance issues related to the various instruments as well as their adequacy in generating sufficient revenue.
“The VAT will feature a relatively large registration threshold to ensure that we do not entangle smaller businesses that will have difficultly with complying with the tax, while still securing taxation of over 95 per cent of the turnover in the economy.”
According to Mr Halkitis, a payroll tax leads to higher prices or lower profit margins. It has been suggested, he said, that NIB would take an additional five per cent to cover collection of the tax. But it is “highly unlikely to work in an economic climate such as the Bahamas”, Mr Halkitis said.
“A tremendous amount of people operate in the informal economy and are paid in cash and not captured. That is one of the reasons with one of the difficulties that NIB has because there is a tremendous amount of self employed people.
“Also by taking the money out before you even get it is an indiscriminate tax, so you just take it out at the beginning and there is also the question of the ability of a payroll tax to generate the levels of revenue that are necessary for the government to achieve its revenue targets. On the basis of experience it is estimated that payroll tax at five per cent would only generate something like one half of the revenues that we expect from VAT. A higher payroll tax would therefore be likely required (and) that in turn would be disastrous in terms of achieving our goals.”
He added that with an income tax, the average working Bahamian would experience up to 30 per cent of their income being taxed.
Comments
B_I_D___ says...
Or you could do something REALLY radical and do an income tax that is light on the poor and heavy on the rich...seems like governments around the world have a problem mastering that and leave loop hole after loop hole for the rich to dodge the tax. Tax the dang churches and see how fast the debt gets paid!!
Posted 20 February 2014, 12:07 p.m. Suggest removal
Thinker says...
Income tax is a horrible example! Going from one evil to the next. How can a few tell the masses how much of their income is acceptable to take??? You cannot tell someone that makes 200 a week that they now only make 175 bc it's going to government for the "benefit of all" whilst wheeling and dealing between Big Gov and Big corporations take place. Seriously?? Let's look at Vegas, please, because this is a fine example of a freer state with legal gambling, no income tax, no VAT... It's sales, gaming, hospitality tax that support the state, and the freedom of the people to make money as they are able.
Posted 21 February 2014, 12:58 p.m. Suggest removal
Thinker says...
http://www.tribune242.com/news/2014/feb…
Posted 21 February 2014, 1 p.m. Suggest removal
Thinker says...
Although I agree with most of your comment, I very much disagree with income tax.
Posted 21 February 2014, 1:01 p.m. Suggest removal
henny says...
If you legalize the web shops you can get millions in tax. Quit procrastinating!!!
Posted 20 February 2014, 12:22 p.m. Suggest removal
ThisIsOurs says...
40 million is what they estimated. Even James has said its a drop in the bucket. Believe that this mixing up of VAT vs legalizing webshops is another scam perpetrated on the Bahamian people. The only thing legalizing webshops will do is make the webshops owners richer and allow them to put their money in the bank...oh and probably more gambling addictions, but that's it. It will do nothing for the country. All money is not "good". We had years of drug money flowing in and look at the destruction it wrought in its wake.
Posted 20 February 2014, 11:17 p.m. Suggest removal
Thinker says...
Your words are also an example of the willingness to support tax for the State. Entirely untrue what you have said, creating more gambling addictions... Who are you to control anyone's life? Who is anyone to tell me HOW AND WHY AND WHO I must pay to appease the mafia-tax man? SO it's OK if they force it from us out of our checks and businesses? For what exactly? WHAT TAX IS "GOOD"???? ARE THE COPS DOING A GOOD JOB? ARE THE POLITICIANS SPENDING APPROPRIATELY....EVER??? ARE MUH ROADS PAVED ENOUGH? I honestly can spend my own money much better than Big Gov. Thanks.
http://www.tribune242.com/news/2014/feb…
Posted 21 February 2014, 1:12 p.m. Suggest removal
ThisIsOurs says...
As I understand it "some" tax has to be taken. The discussion now is on the best mechanism to use. This argument over gambling vs VAT is a RUSE. They know the 40 million they estimated is nothing....think of it, they just signed a contract for 1 building at 20 million, what 40million going to do? They will legalize the gambling houses, get their cut under the table and then tell us, oh sorry, we tried our best but we still have to tax you. They are just trying really hard to diffuse public opposition before they do what they always intended to do.
I did not say "tax" is good, I said not all money is good. The drug dealers have lots of money too, why don't we tax them?
Posted 21 February 2014, 4:49 p.m. Suggest removal
proudloudandfnm says...
Halkitis sit with Ishmael Lightbourn and ask him about his $534.00 property tax bill he has not paid in 10 years...
Bout no other viable option. Clean up first. Then we can talk about other options.
Posted 20 February 2014, 1:27 p.m. Suggest removal
B_I_D___ says...
...and he is just the TIP of the iceberg of people who have not paid their bills...I love how he says it 'gives him angst'...I guess that will suffice...it's all good now, continue with your non-payment of your due taxes and carry on with pushing taxes on those that will pay it. TEN YEARS!! He claims he has not paid the tax because of his financial position...but wants to RAISE taxes...because he knows he's not going to pay any new tax either!!
Posted 20 February 2014, 1:37 p.m. Suggest removal
hj says...
I suppose that he is not interested in running for public office again. Even his leader has admitted that he would be writing "the political epitaph" of the younger members of his party if they go ahead with VAT. So follow your leader
Posted 20 February 2014, 2:26 p.m. Suggest removal
bruceba says...
We need to shrink government. Too many government employees create a tax load that can not be recovered.
Posted 20 February 2014, 2:37 p.m. Suggest removal
Thinker says...
AMEN!!!!!
Posted 21 February 2014, 1:13 p.m. Suggest removal
GrassRoot says...
oh yes, hundreds of viable options.(I) introduce a flat tax for residents non doms (how about 50k GBPs per head p.a.), (ii) introduce an income tax, (iii) introduce a luxury tax for cars, houses above a certain threshold,, (iv) establish an estate zoning with higher property tax, (v) introduce economic citizenship (e.g. with no right to vote in the first five years) for USD 2,0 Mio per pop, (vi) allow foreigners to work in the Bahamas at a high price for a work permit, (vi) create investor visas with investments in crucial sectors (similar to EB5 in the US) that must at least provide 10 jobs for Bahamians, etc. come on guys and girls, no rocket science. look around what other nations do....
Posted 20 February 2014, 4:48 p.m. Suggest removal
Thinker says...
NO INCOME TAX!!! NO! IT IS NOT FAIR OR RIGHT TO TAKE FROM WHAT PEOPLE HAVE LEGITIMATELY EARNED! Take $15 bucks from the poor and they will be poorer!
Posted 21 February 2014, 1:15 p.m. Suggest removal
HarryWyckoff says...
Halkitis is an idiot.... with the party's agenda firmly shoved up his a$$.
He's my rep and useless.
Why run with a tax that THROUGHOUT THE ENTIRE REGION has done endless damage.
Payroll tax, The Freedom of Information act (which the PLP have buried in fear, despite it being a REQUIREMENT of UN participation), and collecting taxes already owed are more than enough.
The PLP is DESPERATE to keep the poor ingratiated, poor and subservient, so none of the above will ever happen.
True story, bro.
Posted 20 February 2014, 5:08 p.m. Suggest removal
pro_test says...
well you can't blame the guy, when you are given an incentive to sell the people VAT and you will get a million dollars bonus.
Posted 20 February 2014, 7:25 p.m. Suggest removal
sheeprunner12 says...
Explain yur comment pro_test......... "sell ..... bonus"
You may be sued like the Punch
Posted 21 February 2014, 1:32 p.m. Suggest removal
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