The Barbados value-added tax (VAT) experience debated in The Bahamas

Govt urged to learn from Barbados on VAT

By TANEKA THOMPSON
Guardian Senior Reporter
taneka@nasguard.com
Nassau, The Bahamas

Days after Governor of the Central Bank of Barbados Dr. Delisle Worrell said value-added tax (VAT) has hurt that island’s tourism industry, Free National Movement (FNM) Chairman Darron Cash said the criticism should give The Bahamas government another reason to delay VAT’s introduction.

Last week, Worrell told The Nassau Guardian that he has seen “declining enthusiasm” for VAT in Barbados, adding that the tax is “anti-tourism”.

Worrell also said Barbados’ VAT system is a “mess”.

“The recent comments from the governor of the Central Bank of Barbados provide a great example of good advice from a credible source,” Cash said.

“Dr. Delisle Worrell’s statements that in his country VAT has emerged as the anti-tourism tax should give the Christie government reason to stop, review and cancel their July 1 VAT implementation date.

“If the prime minister and his dutiful junior minister (Michael Halkitis) were listening they would have already come to the conclusion that there is an overwhelming strong public view that this administration has not thought [out] its proposed VAT program sufficiently.”

When asked for his take on Worrell’s criticism, Halkitis said several Barbadian government officials see the tax as beneficial.

“For example, I had the opportunity to speak with the Minister of Finance of Barbados Christopher Sinckler at a meeting in Trinidad last week,” Halkitis said.

“He is of the opinion that it is a suitable tax, but that we should be extra vigilant in collections and not allow arrears to build up from businesses that do not pay. Otherwise, he felt that the tax has served them well.

“Former Prime Minister of Barbados and Minister of Finance Owen Arthur is also a supporter of VAT as a tax.”

Halkitis stressed that the government has reviewed a number of studies that estimate VAT’s impact on economic growth.

He said these studies forecast greater productivity and growth if the government moves away from a system of high customs duties and toward a broad-based consumption tax such as VAT.

“Another warning we have received is to avoid a system that has too many different rates and exemptions,” Halkitis said.

“This leads to greater administration costs and could possibly lead to the mess Dr. Worrell is referring to,” he said.

Halkitis said The Bahamas can “avoid the mistakes made by earlier adopters” of VAT.

He said the government’s main concern is that delayed action in getting its fiscal house in order would have a negative impact on the economy.

During an interview with The Nassau Guardian, Worrell said his views on the tax are “very radical”.

“I think VAT is an inappropriate tax for a tourism-based economy,” he said.

“The rationale for VAT is that it is an export promoting tax, because if you are exporting physical goods (VAT is not charged on) those goods, but the producers are able to claim refunds/rebates on their inputs.

“ . . .So there’s a bias in the VAT in favor of export industries; that is if you are exporting physical things that are consumed outside, but not if you are exporting tourism, because the tourists come to you to consume.

“So VAT is an anti-tourism tax if you are a tourism producer because it makes your tourism more expensive than the people who don’t charge VAT, and that’s why all tourism countries who apply VAT have to apply it at a lower rate. A simple sales tax would be much better.”

February 24, 2014

thenassauguardian

Former Prime Minister of Barbados, Owen Arthur on The Bahamas' proposed Value Added Tax (VAT)

Former Barbados PM Chimes in on VAT Talks

The Bahama Journal
Nassau, The Bahamas

The country’s proposed Value Added Tax (VAT) has to be a relatively simple structure, with only two rates, few exemptions and a relatively high threshold, according to a regional leader.

Addressing Grand Bahama’s business community, former Prime Minister of Barbados, Owen Arthur said no matter how sound the reasons are for introducing a VAT and no matter how perfect its features are in their conceptual design, “the success of the new tax will depend on the strength and sensitivity surrounding the planning and administration of its introduction.”

“To address this challenge, no effort should be spared to design and to have in place a fully competent VAT implementation unit before the VAT is introduced,” he said.

“The drafting of the legislation for the VAT also has to draw from best practice. In particular, drafts have to make the subject of extensive discussion and refinement and the legitimate concerns of stakeholders have to be embraced and reflected in the bill to be presented to Parliament to secure strong stakeholder sense of ownership of the new tax.”

“A systematic effort also has to be made to deal with the registration of those liable to pay the tax, and to iron out the transitional problems which are sure to arise as one tax regime is replaced by another. One major transitional issue is sure to concern the procedures that are put in to be in place to enable businesses to manage inventories as one tax regime is replaced by another.”

The three-time PM was in town to offer his opinion on the likely impact of introducing a VAT in The Bahamas.

It was under Mr. Arthur’s leadership that the VAT was introduced to Barbados in the mid-90s.

For The Bahamas, the Barbados prime minister said he could not overemphasize how important it is to establish and prove the base of the tax before making adjustments.

“A VAT on a large base that yields more revenue than required can always be adjusted and right-sized,” he said.

“But it is almost politically impossible to start with too narrow a base and to hope thereafter to expand it. Policymakers in The Bahamas will have to contend with and to deal successfully with a number of other issues relating to the incidence and effects of a VAT.”

The Bahamas is one of the few countries that have not yet implemented the tax and the only country in the Western Hemisphere that has not joined the World Trade Organisation (WTO).

The Christie administration has however produced a white paper on the issue, looking very carefully at what Barbados has accomplished.

“For a country whose economic activities and performance are influenced, to an extraordinary degree, by its participation in the global economic arena, it is inconceivable that The Bahamas will be able to indefinitely maintain this ‘odd man out’ status where relating to a rules-based international economy is concerned,” Mr. Arthur said.

“The relevant issue therefore is not that as to whether The Bahamas should become a member of the WTO. It is that as to how best the nation should prepare for and negotiate the terms of its participation in this critical institution and how it should do so while giving equal priority to the other reforms that the forging of such a relationship with the global economy are sure to trigger.”

In Barbados the VAT was intended to yield the same revenue as the taxes it replaced.

The former prime minister said its yield, buoyancy having been established, verified and the fine tuning of the scope of its base was subsequently undertaken.

Its introduction coincided with the implementation of its obligations as part of the Caribbean Single Market and Economy (CSME), to reduce its extra-regional tariffs from a high of 45 to 20 per cent.

He said it also coincided with the OECD Harmful Tax Initiative threat to the functioning of Barbados’ International Business and Financial Sector that helped to reduce the growth prospects of its economy.

In Barbados, the VAT was used to replace 11 forms of indirect taxes, and 44 kinds of fees as a means of raising revenue.

Despite its challenges, Mr. Arthur feels Barbados is seen as a success story.

17 July, 2013

Jones Bahamas

Bahamas Blog International

Congratulations Barbados... on your 44th anniversary

Barbados celebrates 44th anniversary of independence
by Oscar Ramjeet


Barbados, which is known as Little England, will on Tuesday, November 30, celebrate its 44th anniversary of independence. It was at midnight on November 29, 1966, the Union Jack was lowered and replaced by the Bajan flag.

It was veteran politician Errol Barrow who saw the country into independence having followed up from work done by Grantley Adams.

On the eve of the 44th anniversary the country is experiencing grave financial difficulties, forcing the government to introduce "belt tightening" measures for the next fiscal year, including an increase in value added tax (VAT) and the introduction of a new prime minister, Freundel Stuart, who succeeded David Thompson, who died a month ago from pancreatic cancer.

Stuart, who is the eighth prime minister of Barbados, is not known on the international stage; in fact, he is not even heard of regionally. It is not certain whether he is of the calibre of his predecessors like Barrow, Tom Adams, Bernard St John, Erskine Sandiford, Owen Arthur and Thompson. Barrow had two stints between November 1966 to September 1976 and May 1986 to 1987 when he passed.

Barbados is the leading tourist island in the Caribbean -- famous for its white sand beaches; beautiful resorts, including Sandy Lane where Tiger Woods had his wedding; friendly people; very little or no crime; a sound judicial and legal system and, above all, a sober government and is one of the few countries in the region where there are no reports of corruption by government officials.

"Little England" is also the country where the royal family and the British aristocrats vacation from time to time. It is one of the most populated countries in the planet -- having a population nearly 300,000 in a 166 square mile area and an English writer once jokingly said that the island is so small that Garfield Sobers had to be careful not to hit the ball out of the island into the sea.

It is also famous for its high living standard and the government has a well organised family plan and currently has the lowest birth rate in the region.

Speaking about cricket, Barbados has produced a large number of world known and outstanding cricketers, so much so that during independence celebrations a Bajan squad challenged a World XI. It seems that the country produced the most cricketing knights in the Commonwealth. Among them are: Sir Frank Worrell, Sir Garfield Sobers, Sir Everton Weekes, Sir Clyde Walcott, and Sir Conrad Hunte. The other outstanding cricketers are: Malcolm Marshall, opening batsmen, Desmond Haynes, and Gordon Greenidge, pacers Wesley Hall, Charlie Griffith, and Joel Garner. Also in the spotlight were Seymour Nurse and Cammie Smith. Not to mention Collie Smith, who unfortunately died in a road accident in the United Kingdom in his prime.

Barbados is a melting pot, where nationals from all over the world live, mainly because it has been the hub of regional and international organisations, such as the Caribbean Development Bank (CDB), the Cave Hill Campus of the University of the West Indies, which hosts the Faculty of Law where the region's 7,000 lawyers received their Bachelor of Laws Degrees. Students cannot secure their LLB degrees from the University of Guyana, and other universities in the region.

The United States Embassy in Barbados services the entire Eastern Caribbean, and so do a few other international organisations.

Barbados is also famous for flying fish and, because the country wanted flying fish to remain a national icon, was engaged in a battle with Trinidad and Tobago, which had arrested several Barbadian fishermen, who they accused of fishing in the territorial waters of the twin island republic.

However, the Permanent Council of Arbitration has come to a decision and has established a maritime boundary between the two countries.

The land of flying fish and cricketers is not without criticism. It is said that the government is not too friendly to other Caribbean nationals and at times has breached the CARICOM agreement on the freedom of movement when it ordered several Caribbean nationals, mainly Guyanese, to leave the country -- many of them had spent several years working there.

Trinidad and Tobago is known as the land of steelband and calypso, but Barbadians are trying to compete with the twin island republic when they introduced Crop Over -- a annual carnival type festival. They have also produced a few outstanding calypsonians including Red Plastic Bag and the Mighty Gabby.

There are also a few spots that attract tourists -- Nelson Street -- the street that never sleeps, famous for night life and where one can get fried fish and barbeque chicken at any time in the night.

Congratulations, Barbados, on your 44th anniversary.

November 30, 2010

caribbeannewsnow

Bahamas Blog International