By NATARIO McKENZIE
Tribune Business Reporter
nmckenzie@ tribunemedia.net
PRIME Minister Perry Christie yesterday hit back at critics of the Government’s proposed Value-Added Tax (VAT), accusing them of “distortion” and urging the International Monetary Fund (IMF) to publicly back his administration’s plans.
“All over the region and the world VAT has been implemented. The IMF has described it as one of the most efficient forms of taxation,” Mr Christie said.
“Both governments, FNM and PLP, committed to VAT, and it was only a question of when it would be implemented. We came in and indicated that we would implement it.
“We are putting together all of the teams and everything to do with having people educated, and having them participate in discussion on it, so people will become aware of the intention behind it and the effect of it, and how it will be used to better the Bahamas.”
His comments came after the Nassau Institute think tank this week released a study entitled ‘The Economic Consequences of the Value-Added Tax for the Bahamas’. The study was produced by David Godsell, a third year PhD student at Queen’s University in Ontario, and a former Canadian Revenue Agency tax auditor.
It estimated that VAT’s implementation would result in a net $165 million decline in the Government’s total annual revenues, while the private sector would incur a collective $103 million annually in compliance costs.
In addition, the Bahamian economy would see a reduction in per annum GDP of between $322 million and $483 million. The report said studies had shown a tax increase equivalent to 1 per cent of GDP resulted in a GDP decrease of between 2-3 per cent.
Hitting back at the report, Mr Christie said: “When I read of the study commissioned by the Nassau Institute, I was not surprised. They have always taken positions that they say are protective of the economy, but in this case we thought the study was predicated on incorrect premises.
“One of the things that I know we must put in place is the capacity to answer quickly, through informed persons, who are not politicians, these issues about VAT.
“The call I made today is for the IMF, which comes into the Bahamas, and other countries around the world, to indicate whether you are on course with your economy or are managing your economy in the right way, that they have a vested interest to protect the debate and ensure that factual inaccuracies and political distortions do not violate the integrity of what we are trying to do.”
Mr Christie added: “There are lots of people who, for their own reasons, will distort the truth of VAT and use misinformation to cause people to say: ‘I don’t want it’, and we think that it has a disastrous outcome for a country that is following on really with unanimity in policy, where both governments - past and present - are in agreement with the implementation of a new form of taxation.
“For the last five years this has been an issue for us, and now that we have begun the process of implementation we want to ensure that there is honest commentary and that people have an opportunity to hear what it is all about without it being distorted. People have jumped the gun on it, and you have a lot of distortions on what VAT is and what it is intended to do.”
Comments
Reality_Check 11 years, 2 months ago
I hate sounding like a broken record, but this guy Christie has been in government far too long. He is now the farthest thing from a visionary decisive country leader with the national interest of the Bahamas in mind and the closest thing to a plebe bureaucrat who represents foreign interests seeking to destabilize the way of life in the Bahamas for their own benefit at the expense of Bahamians. The more the Bahamas tourism industry goes down hill, the more the U.S. tourist economy goes up hill, especially in places like Florida....it's really as simple as that! The value of all of our imports from the U.S. is a mere drop in the bucket compared to the tourist and investment dollars that the U.S. is anxious to keep on shore in their own economy. Not to mention that the poorer the Bahamas becomes, the better able the U.S. becomes in its ability to "manage" the Bahamas from the stand point of U.S. national security interests.
As a US citizen who has resided in the Bahamas for many years, I can only simply laugh at how foolish Bahamian voters are. It is well known that the IMF, WTO, World Bank, IDB, OECD, etc. are all agencies in the main of US foreign policy tasked with destabilizing other countries whenever it is considered to be in the best economic or security interest of the US. The destabilization is typically accomplished by getting the country hooked on more foreign debt than it can possibly ever service. It is also often accomplished by forcing a country to replace its more cost efficient and more easily monitored/enforced taxation systems (like import duties in the case of the Bahamas) with other taxation systems that are not suitable for the country due to their revenue raising ineffectiveness, excessive costliness to administer (for both the government and taxpayers alike) and inability to be cost effectively enforced. It is really all too easy in countries like the Bahamas with a largely poorly educated voting citizenry to get dimwitted greedy influence peddling politicians and their crony supporters (whether they be on the PLP or FNM side of the table) to "sell out" their country by sucking on the "borrowing tit" placed at their lips by self-interested foreign interests.
ohdrap4 11 years, 2 months ago
Why does the IMF has to back you? Did anyone vote for the IMF last year?
I find it astounding that he will not come clean and say he is sorry that he is so late explaining VAT.
But I did see the picture of some IMF dude speaking in bromides in yesterday Tribune.
sadly he said VAT works with income tax, which these lawyers don't want because most of us would be exempt and they have to pay income tax.
Shame on PGC.
ThisIsOurs 11 years, 2 months ago
So right ohdrap4! Be the leader PGC!
njburrows 11 years, 2 months ago
Some political ignorance right here...
"When I read of the study commissioned by the Nassau Institute, I was not surprised. They have always taken positions that they say are protective of the economy, but in this case we thought the study was predicated on incorrect premises."
So basically what you are saying is that this trusted organization published an article about why your proposal is going to fail and NOW you want to say that their opinion is distorted? That's real messed up man. You fail to realize that the Bahamas isn't like all those other countries that can successfully implement a tax policy like this.
I'm so tired of hearing our polititions comparing the Bahamas to the U.S. and the U.K.. We are not the same and should never strive to be in any way. Something like this VAT system should only be implemented as a last resort, and we are not even close to needing an economic last resort. How about spending more money on education for once so our people can get motivated to learn and work for once. God man..
B_I_D___ 11 years, 2 months ago
We love to throw around the term first world country...actually, when you look at the TRUE meaning behind first second and third world countries, it is always taken way out of context...BUT...for the purpose of this discussion and the more generally adopted use of the terms...we are WAY DEEP into third world territory...only a fool would believe otherwise.
concernedcitizen 11 years, 2 months ago
What people fail to realize today you have to comply w/ IMF ,WTO and sign treaties if you want the other countries clearing banks to clear your drafts /checks.. ie i f you got a bank draft from central bank for school fees or goods and the clearing banks in NY won,t accept it what good is it or if a foriegner has accounts and companies here but can,t wire funds through the clearing banks who is going to invest .I,m not a PGC or PLP fan but i do realize they have to do certain things about our taxation etc for us to be involved in the financial services .
JohnDoe 11 years, 2 months ago
Mr. Prime Minister, the appropriate response is not to berate those who have raised legitimate concerns but rather validate your fiscal policy decision with superior arguments and studies, based on what you deem to be correct premises. When did the IMF become responsible for fiscal policy in the Bahamas? It would seem to me that your government has taken the IMF spiel lock, stock and barrel without any critical analysis and now that legitimate concerns are being raised you wail and lament like a little child crying to their parent for protection. The issue is not with those who are raising the concerns Mr. PM, they love this country just like you. The issue is that you and your government deserves a "F minus" for the manner in which you have dealt with the VAT issue.
4renbahamian 11 years, 2 months ago
Can someone please put the VAT system in a simple form for all the people to understand.
B_I_D___ 11 years, 2 months ago
The government is not going to put anything in a SIMPLE form...not even a gambling referendum...if they keep it as foggy and complex as possible, they can spin what they 'need' to say to sway people's opinions how they want them...if they turn around and say, hey...VAT will impact EVERYONE, not just certain businesses, and that the cost of living will be increasing significantly, they will get ousted!! You think the $100 million + that they say they are going to raise is only going to come from 'certain businesses'...heck no...major food importers will be paying even more fees, have to carry more debt to make the system work...what do you think they will be doing...passing on the costs by increasing the cost of FOOD...on one hand they say it will be a zero impact tax, yet out the other side of their mouth they say they are going to see gains of 100M+. That 100M+ will come out of the paychecks of al the people struggling to survive on minimium wage.
The_Oracle 11 years, 2 months ago
Small businesses grossing less than $100k may be exempt, but the small man will pay at retail and services just like everyone else. Also there will be a "jump" in the number of small businesses next year, people trying to "get under" the threshold, just as right now there is a record number of "Foreign owned" businesses applying to "expatriate" $$$$$$" profits and excess cash before they are hit with the additional 5% tax on same. (Story, Trib, Friday) Typically, Just Like Cool PC, The Central bank explained that away as being for other reasons. Not sure if I should be glad they know the real reason and are lying, or to be worried that they could be so clueless! BTW, they expatriate US dollars, not "B" dollars, so our foreign reserves may be hit hard. We, the Bahamian people, are Damned if we do, Damned if we don't. Our Government administrations have been coached by these extra-national entities for decades, and have accepted loans, grants whenever offered. There is no such thing as free money, period. Nor free Government goods and services. The bill is due.
Reality_Check 11 years, 2 months ago
Politicians (whether PLP or FNM) have created a failed educational system where most Bahamians can't even cope with basic mathematics and now they want to put in place a complicated VAT system that very few will be capable of understanding and complying with! Come on!! Not only that, but these same politicians will choose the winners and losers in business under a VAT system by deciding who pays how much VAT, if any, based on the businesses operated by their cronies and those who line their pockets, especially with funding come election time! PLP and FNM governments can't run the business license system in a fair, efficient and cost effective way and they now expect to implement, administer and enforce a fair VAT system.....PLEASE....SAY IT AIN'T SO!!!!!!!!
banker 11 years, 2 months ago
I can do that. John sells Joe a coconut for one dollar. He charges $1.15 because VAT is a goods and services tax. At the end of the the month, or every three months he remits the VAT monies to the government.
Joe takes the coconut and sells the coconut water as a drink. He charges $2.00 for the drink, but he must add $0.30 for the VAT. Then he takes the coconut shell, and carves it into a bird feeder like they do in Jamaica, and sells it to a tourist for $5.00. He must add $0.75 for the VAT.
Now Joe is in a position to owe $1.05 to the government for VAT ($0.30 for the drink and $0.75 for the bird feeder from the coconut shell). However since he paid $0.15 in VAT when he bought the coconut, he is allowed to deduct the VAT that he paid when he bought the coconut. So in regards to this transaction, he remits $0.90 to the government ( $1.05 minus the $0.15 VAT that he paid).
So the government has collected $0.15 from John when he sold the coconut to Joe, and they get $0.90 in VAT from John. That is how it becomes a Value Added Tax. Value is added for both goods and services.
When you go to a lawyer, you are getting his services. He charges you $1000, and you must pay 15% VAT on that, so you must now pay $1150 for $1000 worth of services. The lawyer must remit the $150 to the government, less the VAT that he paid to run his business (VAT on supplies, utility bills, etc).
Now what the government is supposed to do, is reduce the duty on stuff, so that when it is sold and VAT is collected, the new lower duty plus the VAT equals the old duty alone. However, since the government needs the money, there is no guarantee that they will lower the old duty to be exactly equal and tax neutral.
VAT will end up increasing the cost of living because now Bahamians will pay VAT on services whereas they did not before the introduction on it. These services includes, doctors, lawyers, accountants, architects, plumbers, electricians -- essentially anyone who provides a service to the public.
VAT is supposed to be a fairer tax if the government chooses to make it so. Many countries who have implemented VAT have very small or no duty or tariffs on a goods, and they make up the revenue in VAT on services so that it is a fair tax. However, in the Bahamas, it is highly unlikely that VAT will be tax neutral. Bahamians will pay more. The cost of living will go up, and VAT will hit the poor the hardest.
ohdrap4 11 years, 1 month ago
VAT is the gift that keeps on giving. If Joe had imported the coconut and paid 45 cents duty that would be it, And he would be making any profit he wished from the products he created. As is in this example, he paid the Gov. ninety cents.
In a way he is paying the government to work. Maybe he should drink the coconut water and be done with it.
4renbahamian 11 years, 1 month ago
So now I see , it cheaper not to open a business because the government will suck the money out of you. That is a lot of book keeping.
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