Bahamas Must Run Sales & VAT Tax With Duties

Based on the Government's hints, as well as IMF and Moody's reports, it appears the Bahamas is already leaning towards adoption of a VAT tax. The advantage here is that it would capture value at every stage of the production process, and also reel in contributions from the less heavily taxed services sector. The downside is that VAT might be more difficult to administer, and more onerous to collect.

"At some point, you're going to have to run both of them," Mr Rolle told Tribune Business, indicating that a sales/VAT tax would have to be brought in alongside import duties until the full transition was made.

"When you look at it, for the most part service industries are not taxed," the Chamber chief added. "But there are examples we can learn from."

Extensive studies had documented potential tax reform, and how it might work, in other Caribbean countries such as Jamaica and Guyana, and Mr Rolle told Tribune Business: "It's not as if we're going into uncharted waters here.

"We have enough experience from around the region to draw from, and learn from their successes and mistakes, so that it will be as least traumatic as possible.

"We can't wait until we are forced to do it, because our backs will be up against the wall, and we will do it in a rushed, hasty manner, not paying attention to detail."

Mr Rolle warned that the Bahamas required a long lead-in time to introduce a new tax structure, given that "a number of government institutions would have to change to facilitate this".

For instance, with the bulk of taxes no longer being collected at Bahamian borders, consideration would have to be given as to whether to change Customs into the equivalent of a US Internal Revenue Service (IRS), or leave it as a border protection agency and create a new revenue/tax authority.

"We need to start having these discussions right now, so things can be put in place for the future," the Chamber chairman added.

As for the Bahamas' present fiscal situation, Mr Rolle said that with an impending general election, addressing the increased national debt and fiscal deficits - together with the rate of their increase - was likely to be left until after May 2012.

He acknowledged, though, that it was likely to be a policy priority for the incoming government, and officials were all too aware of what needed to be done.

"Right now, we're not going to see any significant changes in that regard with an election coming up, but based on things said by government officials, they're very aware of the debt situation and want to do things to mitigate that," Mr Rolle said.