A leading author of the Tourism Taskforce’s report on Trade Liberalisation, which recommended that the Bahamas introduce a phased-in sales tax if it was forced to alter its taxation system, yesterday told The Tribune he was surprised the government seemed tobe leading instead towards Value Added Tax (VAT), arguing that the latter option was likely to create increased evasion and handicap this nation as it struggled to cope with numerous challenges.
Ralph Massey, an economist, who is also a Nassau Institute director, said that when the Tourism Taskforce met to discuss the preferred alternative for the Bahamas if it was forced to alter the current customs duties regime, the agreement was that the VAT should be avoided because of its complexity and the amount of government resources consumed in implementing such a tax.
He added that during discussions a financial analyst from Europe employed by several New Providence-based hotels was the one who suggested that a VAT tax would create scope for companies to evade their due payments.
Mr. Massey said, “The problem you have with the VAT is it’s a complicated thing. The thing has room for malfeasance in its administration.”
VAT would not just be collected at docks and other ports of entry, as taxes are now by Customs, but would be imposed at every stage of the distribution chain, meaning it would be paid by both retailers and wholesalers before the final sale to end consumers.
Mr. Massey said that an added difficulty in administrating a VAT regime was the different accounting systems employed by companies, another factor that was likely to lead to greater “on-the-spot pilferage” compared with the current structure, where all taxes were collected at relatively few points of enry, such as the airport.
The Taskforce report also suggested tax evasion was likely to be greater under a sales tax regime than customs duties, but this option would be much simpler and less costly to implement than VAT>
Source: Neil Hartnell, The Tribune
