The Tribune

By NATARIO MCKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

THE Government has not provided any “empirical analysis” to-date that would dismiss alternative forms of taxation being proposed by the private sector, a Tax Coalition co-chair adding that Value-Added Tax (VAT) “should not be sold as a perfect system”.

Gowon Bowe, during a recent presentation to the Rotary Club of East Nassau, described the evidence supporting the dismissal of VAT alternatives as “anecdotal at best”.

“From day one, the Coalition’s focus has always been on that empirical analysis. Up to this point it appears that a lot of the analysis that they have given has been focused on VAT, so the question is: What has been done to dismiss the others?” Mr Bowe asked.

“If you could have demonstrated that I think you would have been a lot further in the process. In the absence of having that, we have gone about doing it ourselves, so that when we come back to the Government we can say: ‘Well, this is why we believe that some alternative would be better suited because it will help you grow the economy, and it will allow you to better collect the taxes.

“We know in reality there has to be Customs duty replacement,” Mr Bowe added. “The question is whether it will have to be now, or can alternatives be put in place while you formulate the tax strategy for the next 20 years.”

Prime Minister Perry Christie said recently that the Government had retained an American consultancy firm, which was preparing a final report of its own on VAT’s liklely social and economic impacts.

The Government is expecting to raise an extra $200 million in annual revenues from VAT, and $500 million gross, with the $300 million balance replacing foregone Customs duties.

The Government, though, has recently started to dimiss the Coalition for Responsible Taxation’s proposed 5 per cent payroll tax, which the latter has suggested would generate $190 million in extra annual revenues.

John Rolle, the Ministry of Finance’s financial secretary, last week said a 20-25 per cent payroll tax rate would be needed to generate the $500 million projected from VAT.

Mr Bowe, meanwhile, said that while there have been studies ranking various tax systems, the Government had presented no evidence that VAT was the superior system with respect to the Bahamas.

“There have been a number of studies that have ranked the various systems,” he added. “You rank them, but those are things in industrialised countries, by and large, where that analysis was done.

“You have to look at whether the outcome would be similar here. You have to look at the collection system. VAT has one or two layers. Is the checks and balance system that would exists in a five or six-chain process the same, because if I don’t have a person who can really identify the seller, who is claiming the inputs from the importer, then it’s still going to be a difficult task to do the checks and balances. The information will be there but you don’t have time to build it up.”

Mr Bowe added: “It’s [VAT] not a perfect system, and should not be sold as a perfect system. It just has inherent checks and balances, but it’s only as strong as the people who administer it.”

The tax Coalition has contracted Oxford Economics, a leading economic forecasting consultancy, to conduct a VAT and alternative taxes study on its behalf. The final report, which the coalition will present to the Government, is expected by late April Mr Bowe said.