The Tribune

By RASHAD ROLLE

Tribune Senior Reporter

rrolle@tribunemedia.net

THE Bahamas will not raise value added tax to 15 percent, Minister of Economic Affairs Michael Halkitis said yesterday.

His comment came after the International Monetary Fund urged the government to gradually increase VAT rates, bringing them closer to the regional average of 15 percent while reducing tax concessions and considering a corporate and personal income tax for large business and high earners.

“No plans to do that,” Mr Halkitis said in response to inquiries from this newspaper. “We think 10 percent along with a growing economy and continuing to improve collection in all areas will be adequate to achieve our objective of reaching revenue of 25 percent of GDP.”

Asked what conditions would need to exist for the government to consider raising VAT to 15 percent, he said: “We (are) not going to 15 percent.”

The IMF’s projections and recommendations were in its IMF Article IV mission statement published at the end of a recent visit to The Bahamas. The IMF projects the unemployment rate will fall to 13.9 percent this year.

Last year the body said the country’s VAT rate, which was 12 percent at the time, was the lowest in the Caribbean. The rate has since dropped to ten percent, though fewer items and services are exempt from the tax compared to the law under the Minnis administration.

Before VAT was implemented in 2015, the government planned to implement the tax at 15 percent but introduce numerous exemptions. However, on the advice of international experts, the Christie administration introduced the tax at 7.5 percent with very few exemptions.

The Minnis administration subsequently raised the tax to 12 percent and added several exemptions, including for breadbasket items.

In its report, the IMF said the government now lacks fiscal space to achieve its ambitious goals of increasing investment while imposing tax cuts to boost economic growth in the aftermath of the COVID-19 pandemic.