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VAT Registration Set

The registration process for Value Added Tax (VAT) will get underway next month, State Minister for Finance Michael Halkitis revealed as debate on the VAT Bill began in the House of Assembly yesterday.

Mr. Halkitis said work has been ongoing and thorough in order to ensure that VAT’s implementation which is set for January 2015 is a smooth one.

“Corporate services firms and the top 100 large tax payer will be catered to specifically for VAT registration purposes from September 2014,” Mr. Halkitis said. “Workshops are being planned from October 2014 for small and medium tax payers in New Providence and selected Family Islands. Permanent registration venues will be set up in New Providence and Grand Bahama from September 2014 and taxpayers will be able to register on the internet from September 2014.
“The implementation team continues to support other government departments that need to prepare for VAT.”
Business cannot continue as usual – with an outdated tax system and a growing financial debt due to the government’s inability to meet its financial obligations over the years, therefore the minister said fiscal reform is critical to future national development.

“When we look at the government’s fiscal position from July 1 1993 to June 30 2014, 21 years of data and I have made the point before, out of 17 of those 21 years the government has run a recurrent deficit, meaning that the government did not collect enough money for the day to day running of the country,” he said.

“And where did we get the money from? We burrowed it. What this shows us is that the time has come to reform our system to ensure that the government has adequate revenue to provide services that it must.”

Mr. Halkitis led off debate on for the Imposition, Assessment and Collection of VAT on the Supply and Importation of Goods and Services in The Bahamas.

Prior to the much anticipated debate reaching Parliament, the idea of VAT was met with wide spread black lash and opposition to its proposed implementation.

Concerns also grew for the poor in light of there being no exemptions for food items under the VAT regime.

Mr. Halkitis explained that exempting such items would have created more costs for the government.

“By exempting goods, that is a costlier method of trying to help the poor because more revenue is sacrificed in the process to those who are not poor,” he said.

“Take food for example, while a low income family spends a higher proportion of its income on food, a higher income family spends more on food in absolute terms so exempting food from VAT would provide a much larger dollar benefit for a high income family than to a low income family, having the means to provide direct assistance to low income families is thus a much more efficient mechanism than exempting food from VAT.”

Mr. Halkits maintained that the government’s Social Assistance Program will help to reduce the blow from VAT on low income earners affected by the tax implementation.

Overall, he painted this gloomy picture of the country’s future if VAT is not introduced.

“From the outset, we have been guided by the hard reality that the finances of the government of The Bahamas need to be returned to a positon of sustainability if we are to strengthen confidence in The Bahamas as an attractive and secure place for investment not only by foreigners but as well by Bahamian entrepreneurs,” he said.

“If that confidence is eroded by lax fiscal policies we all bear the consequences, credit downgrades and higher interest rates for the government, businesses and Bahamian citizens as well as the potential for further downgrades, higher interest rates if we fail to act decisively and stop mortgaging the future to support todays spending.”

However, VAT exemptions remain in place for financial services, educational services, sale of vacant land, the lease of land, government services, day care services, and services of care for the elderly and disabled, health, religious and charitable services.

There are also a number of Excise and Tariff reductions and Mr. Halkitis predicted that more reductions are projected to happen once VAT is implemented and government revenue improves.

As done around the world, Mr. Halkitis said that exports will be zero rated, thus allowing exporters to claim credit for VAT paid on input and thereby maintaining their international competitiveness.

Locally, businesses earning more than $100,000 will still be required to register their business.

There will be three filing periods however for businesses who earn more than five million dollars will be required to file monthly.

He added that businesses will now be granted up to 28 days to file their returns after their deadlines.

A taskforce will lead a full-fledged educational campaign by December on VAT with an allocated budget of $150,000.

“We firmly believe that the VAT Bill sets out a solid world-class policy and administrative framework for VAT that we are proposing,” he said. “I am confident that our programme of tax reform including VAT will be successful in moving our nation to a system of taxation that is both economically efficient and adequate to serve the needs of modern governance.”

VAT will be implemented on January 1 2015 at a rate of 7.5 per cent.

The debate continues today in the House of Assembly today.

Written by Jones Bahamas

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