Chairman of the Bahamas Chamber of Commerce and Employers Confederation Gowon Bowe said that the recent presentation on the 2017/18 Budget Communication by Deputy Prime Minister and Minister of Finance Peter Turnquest with regards to eliminating value-added tax (VAT) on certain items will complicate the system.
In a press conference held at the chamber’s office yesterday, Mr. Bowe gave several reasons why he felt the system would be complicated, although he recognized the reasoning behind the minister’s intentions.
“The chambers expressed the view and I could reiterate that from the coalition that when we looked at VAT, it was best served by a broad base and a low rate,” Mr. Bowe said.
“When you start cherry picking items that you do not charge VAT on there are several consequences.”
Indicating that as it stands now, with VAT, simplicity is best with the system that is already in place for the tax implemented in January of 2015, and therefore eliminating certain items from VAT will complicate things.
“In order to compensate for the same revenue, you will have to increase VAT on everything else. Secondly, it will complicate a system where now every business knows that everything they do has VAT on top of it so the system do not need to bifurcate between those that are charged VAT and those that are not charged VAT,” he said.
“So, while that is a one-time system fix that complicates the system, because the ability to audit it then becomes more difficult from the Department of Inland Revenue, are persons charging VAT on what they should? [Are] they not charging VAT on what they shouldn’t so it takes it from a system of simplicity?”
Mr. Bowe further noted that although there may be a reason behind the minister’s reasoning for the elimination of VAT on certain items, he said there was no verifiable proof that eliminating the tax on certain things reduces cost to businesses that are marginalized.
“There is not empirical evidence that says it will reduce the cost to those that are marginalized because as businesses are unable to take input credits, because they would be exempt, and if the government goes ahead and says zero rated it would get the input credits so businesses could lower the price,” Mr. Bowe said.
“Then government revenue declines and that means the VAT rate goes up.
“I think we know what the government’s intent is that they want to ensure that those who are marginalized have the ability to live a dignified life and be able to afford the basic needs in terms of putting food and services before their children and families.
“The best way of doing it from the analysis we have done is that it would be better served by taking the surplus revenues and allocating a certain portion of that to social contributions.”
