The Tribune

The Government needs a central point for revenue collection to rationalise 30 existing intakes, a key Ministry of Finance official adding that some $200 million worth of tax concessions were granted annually.

Ehurd Cunningham, financial secretary in the Ministry of Finance, during a recent roundtable discussion on tax reform, said that while considering this issue a centralised revenue agency must also be created.

“When we consider tax reform, also bring about a central revenue agency. That is something that we would need policy decision on, and part of this is to be able to better administer the various forms and sources of taxation we have, so that we can remove a lot of the leakage from the system,” Mr Cunningham said.

“Right now we collect taxes and revenues from roughly 30 different agencies or points in the Government system. We want to centralise that so that we can have approved administration in the revenue collection process.”

Mr Cunningham added that in the case of the Bahamas, the issue of tax concessions must also be factored into the discussions. “The element of expenditure is critically important in looking at tax reform,” he said. “To what extent you need certain levels of revenue to deal with ongoing expenditure needs to be considered.

“In the Bahamian context there is an additional factor; that is the level of concessions being granted. Right now we grant concessionsd in excess of $200 million per year. When we look at reform, we need to look at expenditure, what are the expenditures of the Government; concessions, to what extent it is necessary to continue to grant concessions either at the level we are granting or less.”

Mr Cunningham said that without addressing compliance issues, any tax reform effort would be bound to fail. “There is also the critical area of compliance, and to what extent people are going to be willing to comply with whatever new rules and regulations are implemented,” he conceded.

“The public needs to buy into the fact that they need to comply with the laws or, any reforms will just absolutely fail......

“We have to control the level of our public debt and deficit. Our revenues are not growing anywhere near the level that will bring that about, so we must look at some other source other than Customs duty as our main source of revenue.”

Dr Gene Leon, IMf mission chief for the Bahamas, said the role of government in society was also important to the discussion of tax reform.

“The problem in the Caribbean, I think, is we have a sense of wanting to be what I call a nation of free riders,” he added. “Everyone wants the services and more of everything, but no one wants to pay for those services. In a sense we need to have a change in the psychology on the contribution of society, which is sort of the social contract issue and what is the role of government in society.

“If we cannot start that dialogue and debate, we will be going around and around for years trying to establish what is the appropriate tax system. I think, ultimately, you don’t want to have revenues for revenues sake. You have revenues because government has to provide certain core services, and revenue is a means of maintaining those services. The role of government is your first and foremost point of entry.”

Shawna Hansen, senior manager PrincewaterhouseCoopers, Vancouver, Canada office, while not advocating value added tax (VAT) as the best alternative, noted that it has been adopted by more nations.

“The way society is changing you do need to have that balance,” she said. “There are certain taxes that should go by the wayside, and there are certain taxes that should remain. I think what happens when you put in a value added tax, you are broadening the tax base. That’s what’s happening; you are bringing in more services and goods into the tax base, and you can actually get away with lowering the tax rate perhaps, and apply the tax to more goods and services in a jurisdiction.

“If you can raise the revenue by using a value added tax, then you can lower the rate perhaps on other indirect taxes. One day you may have a society where you may no longer have Customs duty and you have to replace it with something else.

“The value added tax, while I’m not saying it’s the best tax, I think it has been adopted by more global nations, which means you have consistency on a taxation model around the globe, excluding the United States, and you have that continuity. It may not be the best tax but it may come in to replace other taxes that fall by the wayside.”