Prime Minister Perry Christie has said repeatedly that The Bahamas’ financial situation is in serious problems, but during the 2012/2013 Budget Communication in the House of Assembly Wednesday, he said the Bahamian people will not shoulder this financial burden.
Mr. Christie announced that for the fiscal year beginning July 1 there will be no new taxes introduced.
In fact, he announced that some tariff and excise rate decreases are on the way, particularly to encourage energy efficiency and provide relief to consumers.
“The tariff rate on solar generators is being reduced from 45 per cent to 10 per cent to align it with the rate of other types of generators and other solar equipment,” he said. “The tariff rate on wind-powered and other generating sets is being reduced from 45 per cent to 10 per cent to align it with the rate on other generators.”
“The tariff rates on plastic and steel doors are being reduced from 35 per cent and 25 per cent, respectively, to 10 per cent to align them with the rate on wood aluminum doors. The tariff rate on body lotion is being reduced from 45 per cent to 25 per cent to align it with the rate on other hygiene products. The tariff rate on toothbrushes is being reduced from 45 per cent to free to align it with the rate on toothpaste.”
The prime minister added that the tariff rate on ECG and EKG machines is being reduced from 35 per cent to free to align it with the rate of kidney machines, while the rates on filters for kidney machines are also being reduced from 45 per cent to free.
Rates on air conditioner parts and animal food are being reduced to 40 per cent to 35 per cent, respectively.
New headings are also being created for biodiesel at 45 per cent, baby pacifiers from 45 per cent to free and breast pumps from 45 per cent to free.
The Christie administration is also planning a complete overhaul of the country’s tax system.
Mr. Christie said it has been noted by many observers that the country’s tax system is inadequate to finance a 21st century public administration.
“At a level of 18.6 per cent of gross domestic product (GDP), recurrent revenue in The Bahamas pales in comparison to that in many other countries, where my government revenue to GDP ratio is in the mid 20 to 30 per cent range,” he said.
“Our tax base is too narrow, focusing as it does on goods to the exclusion of services. This is simply unacceptable in a modern economy where the consumption of services is predominant. The present tax system is also difficult and expensive to administer and subject to abuse and evasion.”
Prime Minister Christie added that tax reform is now of high priority for his government, he added that a white paper, which is an authoritative report or guide that helps solve a problem, will be prepared and will serve as a basis for extensive public consultation on the “disjointed, inefficient and inequitable system.”
“The paper will also serve to underpin the work on tax reform to be undertaken by the Council of Economic Advisors that the government will appoint following the enactment of the enabling legislation foreshadowed in the Speech from the Throne,” the prime minister added.
“A modern tax system can only be successful if it is widely accepted by the taxpayers. In turn, to be so accepted, the system must be administered effectively, efficiently, transparently and equitably.”
At present, the prime minister said there are more than 30 departments and agencies collecting a variety of taxes and fees that constitute both tax and non-tax revenue.
Mr. Christie said in order to remedy this situation, his government will proceed with the plans for the creation of a new centralised tax administration to consolidate revenue collections and maximise the effectiveness and efficiency of tax administration on the basis of international best practice.
“The mission of the new structure will be to ensure compliance with tax legislation by providing efficient and effective services and by conducting appropriate enforcement activities,” he further explained.
“When fully implemented, the new agency will feature an efficient function-based structure, responsible for administering a broad range of taxes.”
Proper control of tobacco imports and the collection of excise taxes due on such products is another area where major revenue dollars are leaked, the prime minister added.
He said it is estimated that some $20 million is lost annually through the widespread smuggling of tobacco products into the country.
“As a means of instituting proper controls and securing of excise revenues on tobacco products, the Ministry of Finance is in the process of finalising preparations, with the assistance of the Canadian Bank Note Company for the introduction of excise stamps on all tobacco products,” Mr. Christie said.
“Such stamps will attest to the payment of excise taxes, facilitate audit and compliance activities to combat smuggling and secure an important source of government revenue.”