Financial Secretary warns that the Bahamas cannot afford to discuss alternatives to VAT indefinitely
The government must move quickly to get its fiscal house in order or the country will face severe economic consequences, Financial Secretary John Rolle warned.
And, as the clock ticks down, Mr. Rolle told the Rotary Club of Nassau that none of the suggested alternatives to Value Added Tax (VAT) has measured up in terms of revenue generation. The complexities of the local business environment is that the alternatives, whether income, or payroll taxes would have operate on a narrower base with fewer taxpayers than with a consumption tax.
Those pay under the alternatives would have to pay higher rates. “For the average wage earner the payroll tax is the income tax, because it is all that they earn.” Yet many more fortunate Bahamians earn dividend, rent and other income that would not count as wages, he said.
“We do not have the luxury of time,” he said. “Trust me, there needs to be action now.
“The bottom line is that we have to make a serious dent in our level of debt. In the next three years or so, the government needs to be in a position where on a yearly basis, its revenue is at least $500 million improved over where it is today.”
If not, he warned, the Bahamas could be subjected to credit rating downgrades, a severe reduction or total loss of its ability to borrow internationally, and even be on a path towards eventual devaluation of the Bahamian dollar.
Rolle noted that opponents to VAT have urged the government to improve collection of existing taxes before moving to impose new ones. He said that while the Ministry of Finance is working diligently to reduce lost Customs revenue and is acting to significantly improve on the collection of Real Property Taxes, this will not be enough.
“A very generous estimate is that the government is owed $500 million in real property tax, but even if we collected all of that, that’s just a one-time shot. Where are you going to get the $500 million every year after that?
“We are already doing a better job in collecting what we are owed, whether in terms of Customs, or improving Real Property Tax administration, but it is simply not enough.
“The point is that the revenue system needs to be strengthened, irrespective of whether we implement VAT.”
Meanwhile, despite the fact that Prime Minister Perry Christie announced VAT implementation will be pushed back from July 1 to a date yet to be announced, Rolle said the urgency of the situation means his team is continuing to forge ahead with its plans.
“We have not slowed down in terms of our preparations. We are working steadfastly, even as we continue to hold conversations with consumers and the business community” he said.
For more information on VAT implementation or for a schedule of upcoming public meetings, call the Ministry of Finance VAT hotline between 9 am and 5 pm, Monday-Friday at 225-7280; or visit the official Facebook page at www.facebook.com/vatbah242.
Diane Phillips And Associates
Caption: TIME RUNNING OUT – The government is still willing to consider alternatives to Value Added Tax (VAT), but Financial Secretary John Rolle warned Rotary Club of West Nassau members that action must be taken sooner rather than later. Rolle is flanked by businessman Wesley Bastian (left) and West Rotary President Carleton Blair. (Photo by Derek Smith Jr. for DPA)
