|Authored by:||Ministry of Finance|
|Source:||Ministry of Finance|
|Date:||February 3, 2014|
Value-Added Tax VAT) is not an end in itself, but an important part of a broader platform that includes governmental cost-cutting measures to put The Bahamas’ financial house in order, a leading financial expert told more than 100 people who turned out for a presentation on tax reform in Grand Bahama this week.
Ishmael Lightbourne, a former chair of the Bahamas Chamber of Commerce, a senior partner at PricewaterhouseCoopers (PwC) and one-time Executive Director of the World Bank, told a packed house at the First Baptist Church in Freeport January 29 that VAT, along with increased collection of other taxes and a belt-tightening by government, would allow The Bahamas to enjoy a high standard of living without facing devaluation. While a VAT rate of 15% is being proposed, Lightbourne said when VAT takes effect, customs duties will be reduced by about $300 million a year.
“The government of The Bahamas, like countries around the world, has to prioritize its financial activities and find ways to raise funds to reduce its debt,” said Lightbourne, currently serving as a consultant to the Ministry of Finance for VAT implementation. In 1993, the country’s debt stood at just over $1 billion, he noted. Today, it stands at just over $5 billion and is expected to reach $5.5 billion by June 30. And while borrowing for capital expenditure including infrastructure and facilities like hospitals is understandable, economic challenges, stagnant growth and insufficient revenue have combined to cause government borrowing for operational expenses, including payroll for some 18,000 civil servants in the public sector. VAT is expected to generate some $525 million a year, or more than $220 million more than the present revenue system, to allow government to meet its debt obligations and avoid currency devaluation. But VAT alone will not be enough, said Lightbourne. Efforts will be stepped up to collect real property tax, excise tax and other fees to make up the shortfall.
Admitting that confusion about VAT was circulating, Lightbourne said the Ministry of Finance which had been s focusing on public consultation is now turning its attention to public presentations and education, explaining how VAT works, who will be required to register and who can benefit from voluntary registration to earn VAT credits.
Businesses earning sales of $100,000 or more must be registered to charge and submit VAT. This amounts to about 4,000 of the some 19,000 registered businesses in the country. Collection of taxes combined with fiscal reform, will allow the Government to continue to provide essential services to the public and continue to improve physical infrastructures, improve health care, education and social services.
For more information about Value Added Tax, email firstname.lastname@example.org or call the toll free number 225-7280.