The Tribune

THE Bahamas will face severe economic consequences if the Government fails to quickly get its fiscal house in order, the Ministry of Finance’s financial secretary has warned.

And, as the clock ticks down, John Rolle told the Rotary Club of West Nassau that none of the suggested alternatives to Value-Added Tax (VAT) has measured up in terms of revenue generation.

He said the complexities of the Bahamian business environment are such that the alternatives, whether income or payroll taxes, would operate on a narrower base with fewer taxpayers than under a consumption tax.

He added that those paying under the alternatives would have to pay higher rates. “For the average wage earner, the payroll tax is the income tax, because it is all that they earn,” Mr Rolle said. Yet more fortunate Bahamians earn dividend, rent aland other income that would not count as wages.

“We do not have the luxury of time,” Mr Rolle said. “Trust me, there needs to be action now.

“The bottom line is that we have to make a serious dent in our level of debt. In the next three years or so, the Government needs to be in a position where on a yearly basis, its revenue is at least $500 million improved over where it is today.”

If not, he warned, the Bahamas could be subjected to credit rating downgrades, a severe reduction or total loss of its ability to borrow internationally, and even be on a path towards eventual devaluation of the Bahamian dollar.

Mr Rolle said opponents of VAT have urged the Government to improve collection of existing taxes before moving to impose new ones.

He said that while the Ministry of Finance is working diligently to reduce lost Customs revenue, and is acting to significantly improve on the collection of real property taxes, this will not be enough.

“A very generous estimate is that the Government is owed $500 million in real property tax, but even if we collected all of that, that’s just a one-time shot. Where are you going to get the $500 million every year after that?” the Financial Secretary asked.

“We are already doing a better job in collecting what we are owed, whether in terms of Customs or improving real property tax administration, but it is simply not enough.

“The point is that the revenue system needs to be strengthened, irrespective of whether we implement VAT.”

Meanwhile, despite the fact that Prime Minister Perry Christie announced VAT implementation will likely be pushed back from July 1 to a date yet to be announced, Mr Rolle said the urgency of the situation means his team is continuing to forge ahead with its plans.

“We have not slowed down in terms of our preparations. We are working steadfastly, even as we continue to hold conversations with consumers and the business community” he added.