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Showing posts with label Value Added Tax debate Bahamas. Show all posts
Showing posts with label Value Added Tax debate Bahamas. Show all posts

Tuesday, October 1, 2013

The Value Added Tax (VAT) debate in The Bahamas ...and the Bahamian politicians, politics and healthy political discourse involved...

Bahamas will ‘pay savagely’ for VAT politics

Consultant fears VAT delay would lead to credit downgrading, loss of policy choices


BY ALISON LOWE
Guardian Business Editor
alison@nasguard.com
Nassau, The Bahamas

The Bahamas will “pay savagely” if plans to implement valued added tax (VAT) gets “bogged down in politics”, a consultant to the government has warned, suggesting that delays in implementing the new revenue measure could lead to serious fiscal woes.

Noting some of the negative response to the proposed new regime to date, Ishmael Lightbourne told Guardian Business that there is “no question” that the new tax regime would represent good fodder for political fireworks when the legislation is introduced in Parliament.

However, pointing to the situation in crisis-stricken Greece, Lightbourne said that The Bahamas’ choice is one of either implementing VAT – or some other revenue raising measure – or being forced to implement new taxes or expenditure cutbacks by “external forces”, like the southern European country.

“I think the essential issue is the country’s fiscal position which is consistently showing a deficit gap, and that is not getting better from our present tax regime, and we are putting ourselves further and further into deficits and national debt,” he said.

“In that position, my focus has always been that if we do not get off that path, we’ll be losing a chance to voluntarily make these changes in terms of expanding the revenue base or reducing the cost of government. When we can’t do that ourselves, external forces come in and impose certain conditions. If you look at Greece, Greece has been under IMF watch or care, and they are having to do things like cut some 12,500 public servants. Those are the types of issues we want to try to avoid.”

Highlighting a continuous “gap” between government’s revenues and expenditures in recent years that has led to a spiralling national debt, which stands at 60 percent of GDP and is projected to hit $4.8 billion by the end of this fiscal year, Lightbourne suggested that The Bahamas’ fiscal situation could take a turn for the worst if a further downgrade occurs as a result of international agencies perceiving that The Bahamas is not committed to fiscal reform, which would increase borrowing costs.

The situation to date is already “pretty dismal”, he highlighted in a recent presentation to the Bahamas Society of Engineers, with the government borrowing to pay administrative and operational expenses such as salaries racking up around $200 million in recurrent deficits alone per year as a result.

To date, it is unclear exactly how the official opposition, the FNM, will respond to the VAT plans. Earlier this year, former junior finance minister Zhivargo Laing suggested that had the party been re-elected during the last

general election, it would have implemented VAT within two to three years of taking office.

In a recent statement, FNM Chairman Darron Cash suggested there need to be more “public discussion” on VAT and the government was not doing a good job on the education process.

The Democratic National Alliance, headed by former FNM Minister Branville McCartney, has recently come out against the tax. In an email sent to supporters yesterday entitled “VAT will destroy us”, the party which ran a slate of candidates in the last election tells supporters that if VAT is implemented, The Bahamas “will never be the same”.

“The cost of living will be going up, the cost of your food, your cable bill and school fees!” said the party.

During an appearance on Guardian Radio’s “Coffee Break”, DNA Chairman Andrew Wilson charged that the tax will destroy the middle class and suggested the government consider a sales tax instead.

Lightbourne said: “You have to look in the real world of politics, any opportunity that presents itself for the opposition to catapult itself in the political arena, they will take. That’s the nature of politics. Now whether they will do that to the detriment of country and allow government to be the fall guy, I’m not sure, [but] that may be their strategy...”

The VAT consultant said that in a recent presentation to the Killarney Constituency Association on VAT, Opposition Leader and Killarney MP Hubert Minnis “made no comment.”

He said that a presentation on VAT to the entire parliament has “yet to come off” but he is hopeful that one can be made shortly.

“They need to be able to see the issues and challenges that we face as a country and how we go about resolving those issues. I’m still hoping that will happen so we can bring to their attention the kind of decisions that need to be made. No matter who is government these issues will present themselves and won’t go away.”

“It’s not VAT or nothing, it’s got to be VAT or something, in order to close this enormous gap we have growing by the year,” he added.

Pauline Peters, another newly-hired VAT consultant and a former head of Grenada’s inland revenue service who led the implementation of VAT in that country, told Guardian Business that while that country may remain challenged with reducing its debt burden, the introduction of VAT in 2010 in Grenada has been helpful.

“It has certainly raised additional revenue that can assist in that process (of reducing debt). One would recognize that the revenue is going to the consolidated fund and the government would prioritize with respect to how that is spent.

“There would’ve been areas that would’ve benefited from increased revenue, such as infrastructural development in the country, the social safety net would’ve been increased, and other financial issues that government would’ve been dealing with.”

October 01, 2013

thenassauguardian

Monday, September 30, 2013

Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC), and the Value Added Tax (VAT) debate in The Bahamas

Tax Coalition Not Out To 'Kill Vat'




By NEIL HARTNELL
Tribune Business Editor
Nassau, The Bahamas


The Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) proposed tax reform committee is aiming to bring “more leadership to the debate”, its chairman emphasising: “This isn’t a Coalition to kill VAT.”
 
Chester Cooper told Tribune Business that the BCCEC was keeping a “very open mind” on the direction the Bahamas should take, telling Tribune Business that tax reform in this nation was inevitable.
 
Providing more details on the BCCEC’s ‘Tax Coalition’ plans, first revealed by this newspaper last week, Mr Cooper said its purpose was effectively to ‘bridge the gap’ between the Government and private sector when it came to educating and informing the latter on VAT and other tax reforms.
 
He added that the Tax Reform Committee would also “examine the fundamentals” of the Government’s VAT proposal to see whether it was the best tax reform option for the Bahamas, of if a revised version - or entirely different tax - was the best option.
 
And Mr Cooper also acknowledged that the Committee was intended to “calm the hysteria” that had arisen over VAT and the Government’s wider tax reform plans, given that most commentators and statements on the issue were vehemently opposed to the proposals.
 
“In a nutshell, over the past several weeks, we have become a little concerned about the level of debate on the issue of VAT, and the level of criticism,” Mr Cooper told Tribune Business.
 
“We want to see this [the Committee] bring more leadership to the debate, organise and elevate it.”
 
Acknowledging that the Government had begun to ‘ramp up’ its VAT educational initiatives, via speeches and presentations, Mr Cooper said the proposed tax reform committee will be co-chaired by Robert Myers, the BCCEC’s vice-chairman, and PricewaterhouseCoopers (PwC) Bahamas accountant and partner, Gowon Bowe.
 
Its objective, he added, was to “bring together a broad private sector coalition” featuring all key industry associations in an effort to engage both the Government and private sector, analysing VAT’s likely impact on both the overall economy and individual sectors.
 
Mr Cooper promised that the Committee would “really look at the facts and fundamentals of what is being proposed, look at it scientifically, and look at the impact on some of the sectors”.
 
It will also arrange a series of meetings with sister Family Island Chambers, industry associations and their members, in collaboration with the Ministry of Finance, to educate them and explain how VAT will impact their businesses.
 
“By and large there’s been a bit of a feeding frenzy coming out and opposing VAT,” Mr Cooper told Tribune Business.
 
“We [the BCCEC] believe in national tax reform. When the rating agencies downgraded us were dismayed by that. We want to have fiscal prudence, but want the Government to have enough revenues and exercise restraint in spending.
 
“We expect, at the end of the day, to have a balanced, equitable tax structure, whether its VAT in its current form or revised form, or a new form of tax altogether.”
 
The BCCEC chairman added: “I think it’s important we find a way to calm the hysteria a little bit, and have a productive, mature discussion that provides leadership from the private sector in that regard.
 
“This is not a Coalition to kill VAT. I don’t want the public to get any form of impression, or the Government to get its back up, that this is a Coalition to kill it.
 
“If it happens, at the end of the day, that all the Associations and people we talk to are opposed to VAT in a very drastic way, because it’s detrimental and their analysis shows the impact is negative, we might take that position. At this point, the Chamber is very open-minded.”
 
The VAT debate has intensified since the Nassau Institute economic think-tank published the results of its study, which showed that the implementation of such a tax would cut Bahamian GDP by between $322-$483 million annually.
 
That sparked senior Ministry of Finance officials and consultants into lining up to slam the report’s findings. One, former PwC senior partner, Ishmael Lightbourne, last week blasted the Nassau Institute’s study as “one of the most extreme, ridiculous and exaggerated” reports he had ever seen.
 
Mr Cooper, though, pointed out that the Wall Street credit rating agencies, plus both the International Monetary Fund (IMF) and Inter-American Development Bank (IDB), had all emphasised the need for “significant tax reform in the Bahamas”.
 
“We want our economy to be fiscally sound, by generating enough revenues to service debt and build hospitals road and schools,” the BCCEC chairman added.
 
“What is important is for us to have a balanced, equitable tax structure that improves government revenues but, at the same time, not slow down the economy or disincentivise entrepreneurs from going into business or staying in business.
 
“We are also strong advocates for more efficiency and less waste in government so that we can have prudent spending of the revenues that we are now getting.
 
“There is also a need to stamp out corruption to minimise leakages, and the Government needs to demonstrate that it has the will and the teeth to implement appropriate controls so that we maximise the benefit to the country of the taxes that are now in place and the new taxes that might come.”
 
Emphasising that he did not believe in ‘Soap Box Advocacy’, Mr Cooper said: “Obviously, when I hear a few members opine that VAT will kill their business, I become concerned.
 
“Likewise any suggestion that VAT will slow down the economy, cause businesses to put investment on hold is a cause of concern for me a chairman of the BCCEC.”
 
And he told Tribune Business: “By and large, the public does not understand what is being proposed, and large elements of the business community have not zeroed in on VAT and its impact.
 
“We’re calling on the private sector to be more informed and engaged, and will do our part to make that happen.”
 
September 30, 2013