Bahamas Must Run Sales & VAT Tax With Duties

The Bahamas will have to run a sales/VAT tax alongside its existing system "at some point", the Bahamas Chamber of Commerce and Employers Confederation's (BCCEC) chairman warning tax reform was inevitable and needed to be made "as least traumatic as possible".

Adding his voice to the growing debate on tax reform, Winston Rolle told Tribune Business that the Bahamas' import duty-dependent tax structure was incompatible with this nation's general policy direction of entering into rules-based, liberalised trade regimes.

Tariffs such as import duties are viewed as barriers to trade by the likes of the World Trade Organisation (WTO), and the Economic Partnership Agreement (EPA) requires either the removal or reduction of duties on goods originating from the European Union (EU).

"All of which is going to put additional pressure on Customs tariffs," the Chamber chief told Tribune Business. "We need to take a serious look at the mechanisms we can use that can either help or maintain government revenues to support the various projects and needs it has.

"The level of Customs tariffs is going to erode, whether that's in five years or 25 years. It's going to disappear."

Both the International Monetary Fund (IMF) and credit rating agencies, such as Moody's and Standard & Poor's (S&P), have been prodding the Bahamian government to introduce a "consumption-based tax" such as a sales or value added (VAT) levy, the former suggesting this would alter the "debt dynamics" of the public finances.

Reports on the best tax reform options for the Bahamas, and how to implement and administer them, were produced by the IMF and UK consultants, Crown Agents, under the former Christie-led PLP administration. While the current government announced early on that it would not consider tax reform during this term, Prime Minister Hubert Ingraham has indicated the FNM - if re-elected - would adopt it as an issue. And the initial studies remain within government.