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Bahamas may set VAT implementation precedent
Published on January 20, 2014 Email To Friend    Print Version

By Alison Lowe
Nassau Guardian Business Editor

NASSAU, Bahamas -- In the event the government pushes ahead with plans to implement value-added tax (VAT) on July 1, The Bahamas would set a precedent as the only country in the Caribbean with no already existing domestic tax system to implement the tax with less than six months between the passage of the legislation and the tax taking effect, according to a government VAT consultant.

Pauline Peters, former head of Grenada’s inland revenue department, who oversaw that country’s transition to a VAT system, on Friday described this reality as likely to pose a “challenge”.

“There are a few countries that have done it with less than six months to go between the passage of the legislation and the tax taking effect. St Kitts did it, St Lucia, Dominica... but the difference in those countries is that they had a system of indirect tax already, so the culture of paying taxes was already there.

“With the businesses and the changeover they’d have to make with the move over from a sales tax to VAT, it would’ve taken a bit because their systems would have to change, but there were persons with knowledge of taxation; what those countries did was draw from their current domestic tax system, so you have a good blend of people with knowledge of the tax system.

“Without having a domestic tax system in place already, I think that’s one of the major differences between The Bahamas and the other countries which have gone live. On both sides significant progress has been made, but everyone would appreciate the fact that with the legislation not yet approved and The Bahamas not coming from a situation with a domestic tax system in place, that could be a challenge for the most effective implementation that we could have,” said Peters, who pointed out that Grenada allowed for nine months between the passage of the VAT legislation and the implementation of the tax.

Meanwhile, Peters recognized that with the legislation not having been passed, it is all the more difficult to convince businesses to begin investing in software and training related to VAT implementation, even as the intended deadline for the tax to come into effect draws near.

The Ministry of Finance is continuing to finalize the VAT legislation, with Financial Secretary John Rolle having indicated that it hopes to have a final version available for Cabinet, based on input from various sectors in which it has been in consultation by the end of the month.

Peters said that the Ministry is in the process of compiling a document with all of the recommendations from various industries on VAT which will form the basis of a presentation to Cabinet.

This will allow Cabinet to make the final decision about what changes are implemented in the legislation.

“I think that process should be a pretty smooth one given level of involvement our minister of state (Michael Halkitis) has in the process with technical team and the ministry of finance... so when it goes to the cabinet there won’t be much to comment,” said Peters.

Meanwhile, the VAT consultant said that on the ministry side, “good progress” is being made towards implementation, with officials receiving assistance from a variety of sources in preparing for the launch of VAT.

“Now on the other side we have to have businesses on our side,” added Peters, who encouraged the private sector to continue to review the draft legislation and guidelines, and “see what effort it will take to program their system to accommodate” VAT.

“So you can get costings and quotations from providers so when things are finalized you can move swiftly ahead.”

She added that the VAT hotline has been “ringing off the hook” with queries from the private sector and general public about the proposed new tax, a sign she takes as a positive one.

“Only recently we have put additional resources in place to field the questions as they come in, so that has been pretty busy, and officers have been dealing with that.

“Before Christmas we had a series of questions and comments and those we’ve responded to and those continue to come in; so there’s a fair amount of traffic there as it relates to people seeking clarity – not just businesses, but regular persons in society have been asking very pertinent questions on cost of living, what type of preparations, should I buy now, what should I do. At least the measure is out there and people are becoming aware they need to start preparing.”

Peters encouraged more people to submit questions and call the hotline should they have questions.

Republished with permission of the Nassau Guardian
Reads: 6429

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