The implications of a Value-Added Tax for The Bahamas were discussed at a seminar hosted by the Bahamas Trade Commission and the Caribbean Technical Assistance Cooperation, on Thursday.
The VAT option is used in some form, in over 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 the one-day seminar held at the Nassau Beach Hotel, Deputy Governor of the Central Bank and co-chairman of the Bahamas Trade Commission, Wendy Craigg, said a key mandate of the commission is to examine the likely impact of membership in regional and global integration initiatives like the Free Trade Area of the Americas and World Trade Organisation on the tax structure of this country.
Another mandate of the government-appointed commission is to submit recommendations to the government for alternative tax measures.
Ms. Craigg noted that the compatibility of the country’s existing tax regime, characterised by a high dependence on trade taxes (constitutes some two-thirds of government revenue) will need to be reexamined, given the requirements of the WTO that tariff rates be negotiated and bound at such levels, and the FTAA objective to eventually eliminate tariffs on imports.
It is within this context, she said, that the commission considered it useful to arrange the seminar for its membership with the main purpose of building capacity in this area.
“Our goal is not to commit ourselves or the government to any particular change in the tax structure,” Ms. Craigg said. “But instead, we want to assess the status quo, increase our knowledge base of the options available to us ﾖ from the perspective of both their costs and benefits ﾖ and armed with this enhanced awareness of the issues, hopefully formulate meaningful recommendations to the government.”
Ms. Craigg said that the commission intends to pursue a consultative approach in its consideration of these matters, so as to reflect the broadest views possible.
She stated that the commission’s requirement to understand taxation issues accords well with the main mission of the Caribbean Technical Assistance Cooperation (CARTAC), which is to enhance the institutional and human resource capacities of countries in the Caribbean region, so as to enable them to achieve their economic policy objectives.
“A country’s tax regime is a mixture of historical, social, political and economic considerations and therefore any contemplated change is a very delicate challenge,” Ms. Craigg said.
It has been suggested that the best recipe for tax reform is one that takes into account taxation theory, empirical evidence and political and administrative realities, and then blend them with a good dose of local knowledge and sound appraisal of the current macroeconomic and international situation, to produce a feasible set of proposals.
It has further been suggested that these proposals should be sufficiently attractive to be implemented and sufficiently robust to withstand changing times, within reason, and still produce beneficial results.
Ms. Craigg said that the commission would be mindful of these considerations when it deliberates further on this “extremely important” aspect of its terms of reference.
Other seminar presenters were Janet Stotsky of the Fiscal Affairs Department, International Monetary Fund, Paulo dos Santos, tax advisor with CARTAC, and Kelvin Dalrymple, Caribbean Development Bank.
Participants attending the seminar were from the Ministry of Finance, the Bahamas Institute of Financial Services, the Bahamas Financial Services Board, and the Small Business Association.
By Lindsay Thompson, The Nassau Guardian
