Delivering the keynote address at the Counsellors-sponsored Bahamas Business Outlook on Tuesday, Senator Smith said, “taxes on income are not considered to be an option and therefore we are being advised to look closely at some form of sales or value-added tax.”
The VAT option is used in some form, in more than 120 countries, including Barbados, Jamaica, Trinidad and Tobago, Haiti, and Great Britain, where it was introduced in 1971. It has been described as a difficult-to-understand and challenging system.
Value-added tax is a general consumption tax assessed on the value added to goods and services. It applies to all commercial activities involving the production and distribution of goods and the provision of services. It is a consumption tax because it is borne ultimately by the final consumer, and not companies.
Addressing pending trade agreements, Senator Smith said that
any future prospects for The Bahamas must necessarily be examined within the context of globalisation issues.
More particularly, he said, is the extent to which the local economy would have to be adjusted to reflect its participation in regional, hemispheric or world trade arrangements.
“It would seem to me that at some point in time, possibly this year, The Bahamas will have to decide on its future relationship with the Caribbean Single Market and Economy,” the senator said.
The majority of Bahamians have expressed through numerous avenues they don’t support certain provisions of the CSME such as the free movement of people.
“If that is indeed the case, then it would seem to me that the logical approach to the CSME would be to seek derogations or exemptions from those parts of the agreement which are deemed to be unpalatable,” Senator Smith said.
He also observed that by January, 2005, The Bahamas will have to decide whether and on what terms it would wish to join the Free Trade Area of the Americas (FTAA).
“If we acknowledge that it is important to participate in international trade in a systematic manner so long as the arrangements are fair to all parties, then we should be in a position to join the FTAA on our own terms and at our own pace in accordance with the recent decisions taken at the ministerial meeting in Miami in December last year,” he said.
As regards the World Trade Organisation, the relevant documentation on The Bahamas would have been submitted by the end of the first quarter of last year and negotiations for entry into WTO should begin later this year, he said.
He explained, however, that if The Bahamas participates in any of the trading arrangements, it would be obliged to restructure its existing tax base.
“Indeed, even if we opt not to join any of the trading groups, there is still a need for tax reform in this country,” he stressed.
The country’s tax structure relies on customs and stamp duties for the majority of government revenue. Customs duties or import tariffs are said to be discriminatory and regressive and ought therefore to be reduced and or eliminated over time to be replaced by some other form of taxation.
He told the business forum that over the next few years the matter of restructuring the country’s tax regime would be carefully studied with the assistance of international tax experts.
“At the end of the day, if we do decide to change, the new regime would have to be broadly acceptable to the public, it should be equitable and it should be administratively easy to collect,” he said.
In addition to restructuring the tax regime, the government intends to expand its use of information technology to bring more efficiency to the tax collection and other government services.
By Lindsay Thompson, The Nassau Guardian
