By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas “couldn’t get away without” implementing Value-Added Tax (VAT), a prominent governance reform campaigner argued yesterday, because the national debt and annual deficits were simply “too high”.

Robert Myers, a principal with the Organisation for Responsible Governance (ORG), told Tribune Business that he “didn’t agree” with suggestions that VAT would have been unnecessary had the Government cracked down on tax cheats years ago.

This argument was advanced on Wednesday by Branville McCartney, the Democratic National Alliance’s (DNA) leader, who said the Government’s own forecast of an extra $400 million in revenues within two years, via its clampdown on tax dodgers, showed there was no need for VAT if it ensured near-total compliance with all other taxes.

Mr Myers, though, said that with fiscal deficits averaging around $500 million prior to VAT’s January 1, 2015, introduction, and the national debt racing rapidly towards $7 billion, revenue reforms were needed to help arrest the decline.

“We couldn’t get away without it. I don’t think we could. We’re too far in. The debt and the deficit are too big,” Mr Myers said in response to the ‘no need for VAT’ argument.

However, he added that if the Government enjoyed success with its tax enforcement offensive, this would eliminate the need for it to introduce new or increased taxes, including a rise in the VAT rate.

And Mr Myers also reiterated calls for the Government to focus revenue-raising efforts on its most efficient taxes, namely VAT, as a strategy to ultimately do away with inefficient levies, such as Business License fees and real property taxes.

“What it negates is any potential need to put VAT up,” he told Tribune Business of the Government’s tax cheat crackdown. “They don’t have to increase VAT if they get greater compliance with some of the other revenue streams.

“That’s the big fear if the Government doesn’t become more efficient, through internal efficiencies or creating greater efficiencies, or cutting some of its staff. It’s then got to figure out how to raise more taxes, either through existing compliance or increasing taxes.”

Simon Wilson, the Ministry of Finance’s financial secretary, told a Chamber forum last month that the clampdown had generated an extra $15 million in revenue per month on New Providence alone since its launch. He forecast that the initiative would generate $400 million in extra revenues within two years.

“If he’s talking $200 million a year, that’s excellent, but I don’t think it does enough to reduce existing taxes,” Mr Myers said, while adding that compliance and greater system efficiencies would eliminate the need for new or increased taxes.

The former Coalition for Responsible Taxation (CRT) head said the Chamber affiliate had suggested to Prime Minister Perry Christie and his government that once VAT’s revenue haul became predictable, there was scope for reducing the Government’s less efficient taxes.

He explained: “ORG and the CRT also believe it’s quite feasible that we could increase the more efficient taxes and reduce the inefficient ones.

“That means because VAT is 95 per cent compliant and efficient, duties and property tax, which are 40-50 per cent efficient, could be reduced.”

Mr Myers added: “What we said to the Prime Minister was: ‘Let’s understand what VAT brings in and, for example, for every one percentage point in the VAT rate, reduce duties by 10 percentage points.

“The 1 percentage point increase in the efficient tax recoups the same amount foregone by a 10 percentage point reduction of an inefficient tax.

“The beauty there is that you’re getting more compliance and efficiency out of an efficient tax, and doing away with the inefficient taxes over time.”

Mr Myers said the Government would shortly possess two years’ worth of VAT data with which to make an “educated and responsible decision on this issue, advocating that it should consider taxing “based on that concept”.

“Focus on the most efficient and compliant ones,” he reiterated to Tribune Business. “Because VAT has the self-policing mechanism, it has good compliance and efficiency.”