By RASHAD ROLLE
Tribune Staff Reporter
rrolle@tribunemedia.net
THE government tabled the anticipated value added tax (VAT) bill in the House of Assembly yesterday while releasing a list of proposed changes to tariff and excise duty rates and disclosing a “pared down” list of VAT exempt services that does not include electricity.
Beginning January 1, 2015, proposed decreases in duty rates for numerous items will come into effect. Items like watches, suitcases and articles of jewellery will be duty free while various items ranging from food to clothing items would see duty reductions ranging from five to 25 per cent.
The government will introduce VAT at a rate of 7.5 per cent instead of the initially proposed 15 per cent, therefore across-the-board reductions in tariffs and duty rates will not accompany the tax’s implementation.
Acting on recommendations of New Zealand VAT experts, Minister of State for Finance Michael Halkitis explained why the government will not exempt electricity or bread basket items from VAT.
Mr Halkitis said this does not mean electricity costs will increase by the VAT rate of 7.5 per cent, nor will the tax wreak havoc on the poor since the government will establish mechanisms to mitigate this.
“We don’t expect (electricity) to go up by the amount of the VAT,” he told reporters outside the House. “As it stands now it might increase a bit, it might stay the same; but definitely if it were exempted then BEC would not have the power to get VAT credits back, so we think bringing it into the net allows them to get their credits and reduce their cost. Our experts told us that being exempt is actually a disadvantage for a lot of services because they don’t have the opportunity to get credit back for VAT that they pay on.”
By not exempting bread basket items, the Christie administration is also heeding the advice of experts who believe that a VAT regime with few exemptions is crucial to its successful implementation, especially when the tax exists at a “low” rate like 7.5 per cent.
Mr Halkitis added that his government remains committed to counteracting the likely negative impact the tax will have on low income people by pursuing social assistance reform and introducing a cash transfer system.
“We believe that the best way to do it is to make the items VAT-able and then if you need to bring some relief to those at the lower income levels, there is a mechanism to do that and we are working along with the Department of Social Services to modernise their relief delivery in the form of a conditional cash transfer.”
“Our advice is that if you are to exempt it, it would not be as efficient as giving relief directly to lower income households so that is what we decided to do and it makes it less complex for the business people and less complex in terms of compliance for the government.”
Mr Halkitis said the government will soon restart its VAT public education campaign which will be headed by a task force of private sector representatives.
The government has allocated about $3.5 million for VAT implementation, including the creation of the task force and VAT education.
Several services will be exempted from VAT. They include financial services such as lending and savings products issued by banks, insurance companies and other financial institutions. Education services, including tuition-funded courses at schools and programmes leading to graduate and undergraduate degrees will also be exempt.
The sale or rental of a dwelling and vacant land sales will be exempt, as will a lease of land that is used for the accommodation of a dwelling.
Day-care business services, charitable services by charity organisations, religious services by religious institutions and services provided by facilities treating the “aged, indigent, infirm, handicapped and disabled” also will be exempt.
Finally, health care services specifically for services provided to “public patients” receiving free care at public facilities will be exempted from VAT.
In a move made to concentrate tax administration resources on a manageable number of large businesses, the universal VAT registration threshold for businesses will be $100,000, with group registration possible for “related groups of companies.”
Mr Halkitis added that there will be three filing periods for VAT.
“Business with annual taxable sales exceeding $5 million will file monthly,” he said. “Business below that threshold and with taxable sales exceeding $400,000 will be allowed to file quarterly. Other registrants would be allowed to file on a semi-annual basis and use more simplified cash accounting methods when compiling their VAT returns. This cash rather than accrual basis of accounting among small registrants would also eliminate working capital concerns over the treatment of bad debts.”
Penalties for failing to comply with VAT regulations could include imprisonment or paying tens of thousands of dollars in fines.
Mr Halkitis said he expects the VAT Bill to be debated in Parliament within the next two weeks before it is passed.
He said he hopes businesses will begin registering for VAT by September 1 and that the registration process would wrap up by the end of October.
Comments
asiseeit 9 years, 9 months ago
F#@& you and your 7.5%, I have steam coming out of my head you people have made me so mad. This is because the supposed leaders have wasted, stolen, mismanaged, the people's money, and now the people must pay. Watch yinna step, mind me now, watch yinna step!
MartGM 9 years, 9 months ago
SMT! Hol the hell up! VAT won't only be added to our utility bills but also BREAD BASKET ITEMS! You have got to be kidding me. Where the hell is Ashton, because this country is being punked! SMT...I can't deal with these people! I seriously can not deal with them! When and where is this revolt taking place?
ohdrap4 9 years, 9 months ago
according to the govt ad on page 9 o today's tribune:
Trunks, suitcases will be vat-exempt, we can pack up and leave.
mangogirl01 9 years, 9 months ago
This VAT bill will be the downfall of the PLP govt.! How the hell will I pay thousands of dollars in fines if my business ain making it!! Too, imprisonment, that's laughable!! You damn Politicians are the ones who need to be in prison for bringing more suffering on our people through an oppressive tax that has not benefitted any of the Caribbean countries that are using it!!
proudloudandfnm 9 years, 9 months ago
Ishmael still working for the government? Lady P made GG after 14 years of not paying taxes. Miller owes BEC, Jones owes NIB and BEC.
Ya'll better build a new jail cause I aint paying shit!
sheeprunner12 9 years, 9 months ago
VAT, webshops, referendums................... at go to hell!!!!!!!!!!
digimagination 9 years, 9 months ago
So far the government has done absolutely nothing as far as I can see to educate the public with regard to VAT. It would be a VERY good start if a (truthful) list is published stating EXACTLY what is taxable (VAT) and what is not. (A gallon of gas a couple of days ago was $5.58 with 7.5% VAT that would have been $5.998 - call it $6.00). I could go on but what's the point... Oh, and how about collecting outstanding Real Property Taxes and other outstanding bills BEFORE implementing ANY new taxes. Too difficult?
PKMShack 9 years, 9 months ago
Yinna get what you voted for. Die hard PLP and DNA thanks again. Who get swing? Asx Holes. And TAL if you make one dumb ass post about HAI he sure did not screw us like this. But hey we rushing this weekend so who cares. Da PLP who scared Now.
Purcell 9 years, 9 months ago
People need to start shooting politicians.Nothing else will send a message.
ChaosObserver 9 years, 9 months ago
I'm surprised there hasn't already been shooting of politicians! Time to bring some justice to this country of thieving politicians!
Regardless 9 years, 9 months ago
The real concern is this additional revenue will probably not go to bringing down the debt but a coffer builder for the government in power to fight the next election with. The revenue from this tax should be restricted as a sinking fund to reduce the nation's debt.
sheeprunner12 9 years, 9 months ago
Leslie says that BEC has $180 million in accounts receivables ................ 75% of that are homes ......................and he doesnt want to cut off homes (5000 off now) ........ but we hear he owes six figures, Jones owes six figures and on and on ......... I dont believe him. When VAT is added to the high rates we paying ................. there will be more accounts in default. This is a LOSE/LOSE proposal
Well_mudda_take_sic 9 years, 9 months ago
I would rather go back to being the slave of a white master than become the slave of a ruthless class of corrupt black politicians and their business cronies who clearly don't give a flying you know what about the struggling downtrodden black people in our nation today as evidenced by this VAT nightmare about to be inflicted on us. Just put us all in Fox Hill Prison as there is simply no blood to be had from a stone that has been bled dry by the alternating equally corrupt governments of the PLP and FNM. I have many members of my extended family who are no longer able to afford to make mortgage and other loan repayments, cannot pay the school fees for their young children, have no electricity because they cannot pay their light bill, can no longer afford gas for their car much less pay for car insurance, are unable to buy the food necessary to properly nourish their children who now frequently must try go to sleep at night hungry, who cannot afford much needed medications, and on and on. MY GOD, WHAT AN EVIL MONSTER YOU AND YOUR EQUALLY EVIL CABINET MINISTERS AND BUSINESS CRONIES ARE MR. CHRISTIE! MAY ALL YOUR SOULS REST IN HELL!!
birdiestrachan 9 years, 9 months ago
Truth I do not want to pay VAT, But I understand the Government needs the money, Tax payers, Us have to pay for the Children to go to School, Go around the hospitals and no one has any money, I may be wrong but I believe illegal immigration is a serious burden on the Bahamas. And I do not know if they need so many Civil servants. and when they stop working they receive half of their salaries. That is why so many people would like to be civil servants, I do think they have to do a better job of explaining the necessity for VAT..In Florida now the sales tax is 7%, and they pay income tax and property tax. Do not pay attention to the DNA or the FNM They will not repeal that tax....It will remain in place............................
sheeprunner12 9 years, 9 months ago
Did you see the post that stated that our BEC rates are 400% that of Florida????????, gas is 200% that of Florida????????? etc
PKMShack 9 years, 9 months ago
@birdiestrachan sales tax in the USA has been at 7% for many years. One or two states pay more some pay less, and some pay 0% sales tax,. What the hell are you talking about? Just like the PLP will not take back BTC, that to will remain in place. So what are you talking about? Is VAT a sales tax? NO it is NOT, if it was it would be applied to everyone item sold.
lionfish 9 years, 9 months ago
Sales tax and VAT are not the same. You do not pay sales tax on bank transactions, rent, utility bills, etc. Also VAT is collected at every level so it is cumulative. Two very different things, Birdie
observer2 9 years, 9 months ago
The crux of the matter is that electricity is too expensive and out of reach for the average Bahamian. Now with VAT being added onto BEC bills more Bahamian will fall into the category of being unable to keep the light on.
This is one of the hottest summers on record and with global warming and a flawed and convoluted energy vision for the Bahamas, you can expect BEC costs to continue to climb.
I've compared BEC rates to Florida Power and Light (FPL) for a residential property and noted that BEC is 209% more than FPL for electricity and 641% more for the fuel surcharges. Overall BEC charges 382% more than FPL for electricity.
For a residential property burning over 800 Kwh BEC charges 0.1495 per Kwh and fuel of 0.252873 per Kwh for a total charge of 0.4024 per Kwh.
For a residential property burning over 1,000 Kwh FPL charges 0.07159 per Kwh and fuel of 0.03947 per Kwh for a total charge of 0.11106 per Kwh.
A comprehensive energy vision for the Bahamas would include selling 100% of BEC to Bahamian private enterprises and the general public through an IPO (get government out of the electricity business like all developed nations have done), splintering BEC into stand alone 'baby' BECs by island, introduction of solar energy, introduction of waste to energy processing, recycling, introduction of competition (eg. Cable voice v. BTC voice services), allow citizens to sell energy back to the grid and hive off the electrical grid to a separate to serve all electrical companies.
Through the Freedom of Information Act we could have determined why the fuel surcharges are 641% more expensive than Florida. However I can only guess that it is the difference in cost of diesel v. gas, plant efficiency/age, freight, lack of competition in the supply of diesel to BEC, mark ups by government and private concerns (cartel like behavior) on the purchase of diesel. I can't tell but it feels like someone is getting rich off of us.
Emac 9 years, 9 months ago
Boy politics sure gat this man lookin old now. Then again that could be his deeds.
mostsickandtired 9 years, 9 months ago
my first time commenting on a newspaper article, but I had to respond. I am so angry, frustrated and perplexed over the PLP's implementation of VAT. How can they tax the poor people who cannot afford their light, phone, food, gas, rent bills now? The social services system is a sad joke. If they know that it will disadvantage the poor so they want to implement 'mechanisms' to counteract it, then shouldn't that indicate to them that VAT is a stupid idea? Why seek to put in a tax system that you KNOW will disadvantage the people? If you know where the money is, go after those with the money, dumb idiots! But of course they are not, because how can you exempt watches and jewelry and not exempt bread basket items? who is benefitting from that exemption? the Bay Street Boys of course! this is unbelievable... and then they sign a $600M agreement for WASTE? that's why they need these tax dollars to WASTE it!
sheeprunner12 9 years, 9 months ago
Welcome MST ................ make your views seen and read......... don't hide under the bushel like many others VAT must be boycotted by private sector and citizens to teach this PLP government (Cabinet) that the people have the power. This cannot continue!!!!!!!!!
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