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BICA president: Data suggests VAT exemptions do not benefit underprivileged

Gowon Bowe.

All reports regarding the introduction of value-added tax (VAT) in The Bahamas point to the introduction of VAT-exempt items being counterintuitive to the tax process, according to Gowon Bowe, president of the Bahamas Institute of Chartered Accountants (BICA), who asked whether government has updated its data on VAT implementation since coming into office 13 months ago.

Bowe said the empirical evidence pointing away from introducing VAT exemptions to help the underprivileged is “continuous”, while explaining that data points to other useful methods using VAT to assist those in need of social services help.

Government has proposed the removal of VAT on breadbasket items in order to assist the most marginalized in society.

“The IDB report that assessed the impact of VAT on the various income percentiles, along with the reports from Oxford Economics (commissioned by the Bahamas Chamber of Commerce and Employers’ Confederation) and Compass Lexecon all set out that exemptions complicate the system, decrease compliance and do not benefit the marginalized in society, as those with higher incomes benefit from the exemptions,” he said.

“The most efficient and effective approach is to maintain limited exemptions, and effect assistance to lower income earners through redistribution of the excess VAT revenues to those persons through social benefit programs. The debit card program of the Department of Social Services was an ideal method.”

Bowe explained that when politicians are elected they have to shift away from being partisan policymakers to being “responsible for running the country in a manner best for the country and its stakeholders”.

According to Bowe, alternative revenue generating methods outside of VAT have been presented to successive governments. He added that the present government was also supplied with alternatives to increasing VAT before the 2018/2019 budget was presented two weeks ago.

“The government must present what alternatives it has considered, and advise why it ignored the alternatives that had been presented by the private sector several years ago,” he said.

The Bahamas Chamber of Commerce and Employers’ Confederation has commissioned another report by Oxford Economics to determine the potential impact of the government’s proposed move from 7.5 percent to 12 percent VAT, and has asked that government hold off on the increase – scheduled to come into effect on July 1 – until the report is done.

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