Acting Prime Minister and Minister of Finance Peter Turnquest said yesterday that the country’s current flat tax system, value-added tax (VAT), is adequate and meets the needs of the country.
Speaking to reporters yesterday following a concrete pour ceremony at Hurricane Hole, Turnquest said countries all over the world are “looking at a flat tax system”, which he said is what the country currently employs in VAT.
“Which is different from what is being suggested by the IMF (International Monetary Fund),” Turnquest said.
“We need to look at our overall tax system with respect to the modern requirements and needs of our country. However, we are also very mindful of the fact that we have to be reasonable with respect to the ability of the Bahamian people to bear these taxes.
“We have a simplified flat rate tax at the moment, so any suggestion that we have to move towards a personal income tax is certainly not eagerly embraced. We are satisfied that our current tax system is adequate and meets the needs of the country.”
According to Turnquest, the Ministry of Finance is carrying out modeling to decide what kind of tax system could benefit The Bahamas, should the need arise to revamp the system, but he explained that for now his ministry is focused on improving revenue collection and tax compliance.
“We are undertaking some projects where we look at and do research on different tax systems and what the modeling may mean in terms of the effect on the overall economy,” he said.
“But those are again just responsible research activities we are undertaking to ensure that we can respond to any eventuality or change in global conditions that causes us to have to re-evaluate the tax system. At the moment we are satisfied that the current level of taxation and the current system itself, meets the needs of The Bahamas.”
Turnquest continued: “We are looking at different mechanisms to drive compliance rates, to ensure that everybody is paying his or her fair share, and that no class or group of citizens is bearing the brunt of the tax, as opposed to others that might find creative ways to get around the taxation. So we are tightening up, we are relaunching our revenue enhancement unit, we are looking at the real property tax system and modernizing it.”
He said the government is not interested in raising taxes, but is focused on improving how it collects the taxes that are already statutorily owed to it.
The IMF in its Article IV Consultation on The Bahamas, which was released on Monday, explained that this country could better achieve its public policy objectives if changes in tax policy are made.
“Global trends in taxation present an opportunity for a comprehensive approach to reform the tax system, with a view to increasing its efficiency and enhancing progressivity,” the IMF document states.
“For the medium term, income taxation can help achieve more equitable income distribution, reduce distortions arising from a tiered business license fee system (especially if applied in the context of the VAT) and contain the increasing non-residents’ profit repatriation.
“The Bahamas does not levy taxes on income, capital gains or inheritance. Instead, the VAT and business license fees are the main tax policy tools, with property taxation playing a small role. The government is removing the preferential tax treatment of offshore entities by unifying the business fee licensing framework. The Bahamas is also seeking membership in the World Trade Organization (WTO) by 2020, a process which is expected to reduce revenue from trade.”
Education: Florida International University, BS in Journalism
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