Above: Bahamas Prime Minister Perry Christie
By the Caribbean Journal staff
The Bahamas is planning to introduce a new 7.5 percent value added tax, the government announced this week.
The tax will be a single VAT rate across the board, although that is lower than an initially proposed 15 percent tax.
The country’s Ministry of Finance said the lower rate would also mean fewer exemptions.
The ultimate plan is for the tax to come into effect on Jan. 1, 2015, after what the government said would be an “in-depth public education campaign and private sector preparation.”
The Ministry of Finance also said it was proposing VAT locked in pricing rather than VAT exclusive, with the aim to “simplify price comparisons by consumers, especially when navigating between VAT registrants and non-registrants.”
“The price consumers see will always be the price they pay,”
The move will also mean that the hotel occupancy tax will be eliminated.
Government estimates predicted that the new VAT along with a basket of other fiscal provisions would increase the revenue yield of the Bahamas’ revenue system to 19.8 percent of GDP, up from 17.1 percent in the current fiscal year.
Christie said the goal with the mix of fiscal measures was to eliminate the “untenable structural imbalance between recurrent expenditure and revenue” by the 2015/2016 fiscal year, sharply reduce the GFS deficit by 2016/2017 and “arrest the growth in the government debt burden and move it onto a steady downward path to more sustainable levels.”
“I want to emphasize, at this point, that we are in no way engaged in unrealistic, pie-in-the-sky, wishful thinking on the score of fiscal redress,” Christie said. “With a keen eye on the state of our economy and mindful of the need to maintain and support its upward, forward momentum, we are embarked on a mutually-reinforcing plan of national development and fiscal consolidation that is balanced and measured. As such, our aim is set on gradual, though assured, progress on the fiscal front.”
The Bahamas would be the latest in a line of Caribbean countries to introduce a VAT; St Lucia was the most recent country to do so.
A value-added tax proposal by the United Kingdom government in Turks and Caicos was shelved last year after opposition from businesses.