By Krystel Rolle-Brown
Nassau Guardian Staff Reporter
NASSAU, Bahamas -- The government of The Bahamas will introduce value-added tax (VAT) at a rate of 7.5 percent “across the board” on January 1, 2015, Prime Minister Perry Christie announced on Wednesday.
However, Christie added that the lowered rate would also come with “few exemptions” and no duty reductions, which is a substantial change from the model the government was previously considering.
Prime Minister Perry Christie delivers the 2014/2015 budget presentation in the House of Assembly on Wednesday. Photo: Torrell Glinton
“Being able to streamline exemptions and position the VAT rate much lower than in the white paper, the government is not announcing any wide-scale reduction in import duties and excise taxes at this time,” said Christie while delivering the budget statement in the House of Assembly.
“Based on the revenue performance of VAT early next year, the government may be in a position to consider tariff and excise reductions at the time of the 2015/2016 budget.”
Government officials previously warned that the government would have to reconsider its proposed reductions on customs duties if the VAT rate is reduced.
The government previously announced plans to lower customs duties on a variety of goods once VAT is implemented.
Christie said yesterday the list of exemptions will be released “shortly”.
The tax was initially expected to be introduced on July 1 at a rate of 15 percent.
However, Christie said following advice from local and international experts the government has abandoned that plan.
He said the delayed date will allow a more in depth public education campaign and private sector preparation.
Christie also revealed that the government intends to establish an education task force.
“A three-person task force is being established to oversee this process, which will dovetail with the government's internal activities and provide timely feedback to the Ministry of Finance on the appropriate emphasis of public education,” he said.
“The task force will have a budget of $150,000 at its disposal. They will be tasked with the job of helping to explain the VAT to the business community and the wider public.”
Christie said the new VAT model proposed will be less cumbersome and complex.
He said the government’s VAT unit will also provide VAT training workshops.
In regards to what impact the new proposed model will have on the country’s finances, Christie said it is expected to significantly boost revenue.
“As such, on the basis of the detailed revenue modeling work that was performed by the team of IMF fiscal experts for our benefit, we estimate, again prudently and conservatively, that the VAT as proposed above will yield on the order of three percent of GDP on a full-year basis,” he said.
“Given the date of implementation, that will amount to some 1.5 per cent of GDP in 2014/2015.
All told, the measures that I have outlined above are expected to boost the revenue yield of our revenue system by 2.7 percent of GDP in 2014/2015.”
Republished with permission of the Nassau Guardian