Value Added Tax consultants brought in by the Christie administration say that aside from Real Property Tax, Value Added Tax (VAT) is the best form of taxation a government could introduce.

According to Don Brash, one of the VAT consultants who helped introduced the tax to New Zealand in 1986; just as is happening in The Bahamas now, they were faced with great rejection from private entities.

However, he said it’s now been so widely accepted, that New Zealand’s initial VAT percentage has jumped from 12 to 15 per cent.

John Shewan, another VAT expert, said people should be a bit more accepting of the tax as it is not among the worse.

“The most distortionary tax is in terms of what it does is tax on company profits,” he said, “that is considered to be the worst kind of tax.”

“The next worst is payroll tax, then VAT and then property tax. So if you put it the other way, the best overall is property tax, then VAT.”

Many Bahamians have expressed concern over VAT’s initially proposed 15 per cent rate and the number of goods and services that would be exempted.

But according to the experts, it is in the best interest of The Bahamas that there be as little to no exemptions as possible.

Mr. Brash said quite frankly, the more things that are exempted, the higher VAT’s percentage will be.

“It’s no surprise that the New Zealand regime is heralded as being the most successful in the world,” he said.

“The reason for that is because we adhere to a very firm principle that if you want the tax to be at the lowest rate possible and as simple as possible for both the public and businesses then you need to have the widest base possible.

Increasing exemptions is not the most effective way to use VAT.”

One of the things highly debated over is whether electricity should be exempt.

However, Mr. Brash said it is not a good idea for a country to place an exemption on electricity bills.

“If you exempt it, what do you do for the power company’s coal supply?” Mr. Brash questioned.

“If electricity is exempt, it means that they don’t claim any credit back for the oil they buy. They pay VAT on the oil, they pay VAT on their transformers and they pay VAT on everything they buy. But they can’t claim it back because electricity in itself is an exempt supply.”

According to the New Zealand experts, the Christie administration has requested that they turn in a formal document of recommendations before mid-May.

The men are expected to return home this week.