While the government is determined to push ahead with implementing Value Added Tax (VAT), the introductory proposed rate will not be as high as 15 per cent.

Prime Minister and Minister of Finance Perry Christie assured as much in the House of Assembly last evening, adding that while the actual rate has not yet been settled neither has the actual date for its introduction.

The government had initially announced that VAT would be implemented on July 1.

“The government is awaiting the completion of dialogue with the private sector and the public generally on these and other matters, including frankly, the question as to whether we are indeed absolutely convinced that there really is no viable alternative to VAT,” Mr. Christie said while wrapping up debate on the mid-year budget.

“In this regard, the government has facilitated the engagement of consultants by the private sector to thoroughly study the matter and only when this and the resulting dialogue have been completed will we make a final commitment. In this sense, therefore, although the proverbial door is closing, it is still open at the moment.”

The Coalition for Responsible Taxation believes there are options other than VAT including implementing a payroll tax. The group’s report on its recommendations is expected to take another few weeks.

Hoping to avoid an “unnecessary” fight with the business community, Mr. Christie, however, made another strong pitch for VAT, a system his government insists is needed to expand the country’s revenue base, but no doubt one that has given rise to much anxiety.

At the time, he assured that his government is pursuing an aggressive, though measured fiscal plan over the medium term and not for the sake of multilateral institutions but rather because it is convinced of the “absolute” necessity for it.

In fact, he said it is critical to preserving the country’s confidence as a secure and attractive destination for investment, which can be achieved “no other way.”

The government has stressed that to ignore such fiscal planning imperatives would be at the country’s peril.

The International Monetary Fund (IMF) has branded the country’s current tax system as both inefficient and inequitable.

“It is therefore vitally important that Bahamians understand that redressing the public finances in a sustainable manner is a critical means to an end that we all desire,” the prime minister said.

“Indeed this is critical to the preservation of confidence in our nation as a secure and attractive destination for investment. In no other way can we set a secure foundation for even stronger and more sustained growth in employment generating economic activity for Bahamians.”

The prime minister however made it clear that he is not oblivious to the “psychological dislocation” that comes with any new tax.

But he said while his government must be sympathetic to such anxieties, it must remain ever so mindful that the public finance challenge that the country faces is one that can no longer be shirked or deflected.

The Bahamas, he said, can no longer keep kicking the can down the road, leaving it for some future government to deal with. Instead, the time is now.

“Daunting though the challenge may be, we must remain steadfast in our resolve to deal with the problem of fiscal reform with urgency that is required,” the prime minister said.

Some in the business community have preached doom and gloom should the government push ahead with the proposed tax.

Super Value President Rupert Roberts has not minced any words on the subject.

He has warned that VAT would be disastrous to the country and that if the tax is imposed, the prices of items in his food stores would have to increase.

However, the prime minister last night revealed that a number of items will be exempted from VAT, making it possible for the “old age pensioner and others on very limited income would be able to walk into the grocery store and purchase a number of healthy food items.”

These items include baby food, fresh fruit, fresh vegetables, fresh meat (chicken, beef, pork, mutton), seafood, bread, rice, grits, flour, oatmeal, sugar and vegetable oil.

“There are also exemptions for utilities for identified households that consume moderate amounts of these services. That is on electricity and public water and sewerage services,” the prime minister added.

“Minimal impacts would also be sought for organised and properly constituted charities. These would be able to qualify for some refunds of their VAT costs.”

The Christie administration is also proposing to limit zero-rating under VAT primarily to exports.

It is also the government’s intention to register only businesses with a turnover exceeding $100,000 per annum, thereby avoiding the “entanglement of smaller business in the system of VAT collection and filing.”

“We would still capture well over 95 per cent of the total turnover in the economy in this way,” Mr. Christie explained.

“Focusing on the larger firms will also ease the administration of the VAT.”