After social media giant Facebook announced that it will begin collecting value-added tax (VAT) on ads run on its platform from The Bahamas, Minister of Finance Peter Turnquest said yesterday that other countries should not be allowed to earn tax revenue from activities taking place in The Bahamas while this country gets nothing.
The revelation that Facebook will begin charging VAT on November 1 for Bahamas-based businesses resulted in queries on social media over whether VAT would be added to digital services and products such as Amazon, eBay and Netflix.
Turnquest said that “most of the vulnerable are not using Amazon or have Netflix so it will not be them”.
“The VAT is charged on these imports just as it is charged on domestic providers,” he said.
“…There is no separate VAT on the customs, freight, and foreign price. There is VAT on the landed cost of a good or service available for sale or consumption in The Bahamas.”
Turnquest said VAT is charged on the value of goods or services consumed and delivered in The Bahamas.
“For instance, Cable Bahamas delivers advertising content in The Bahamas,” he said.
“Cable Bahamas pays business licenses based on that revenue and they charge you VAT on your bill, which they pay over to the government.
“Facebook does not have a presence in The Bahamas and thus no business license to pay. Facebook bills you for advertising or boosting from a foreign state, which you pay via credit card to a foreign state. You do not pay VAT.
“Why should a foreign state earn tax revenue on activities taking place in The Bahamas and we get nothing?”
He said that Cable Bahamas would be at a “competitive disadvantage” in comparison to Facebook, which pays no taxes or license fees for its service in The Bahamas.
“To make matters worse, Facebook pays taxes in a foreign state on services delivered and consumed in The Bahamas, where the tax should belong as the activity is originating and being consumed in The Bahamas,” Turnquest said.
“Countries around the world have been grappling with this digital and shared economy and trying to set global rules as to who should have taxing rights over services and goods ordered from one country and delivered to another country.
“The generally agreed position is that the tax is due to the state in which the good or service is consumed. So, in Facebook’s case, and other digital providers, they are required by law to collect the VAT and remit it to the government.”
The notice of the taxation was found on Facebook’s “Facebook for Business” page.
“Beginning on November 1, 2020, Facebook ads in The Bahamas will be subject to a value-added tax at the applicable local tax rate,” the notice reads.
“This applies to advertisers whose ‘sold to’ country on their business or personal address is set to The Bahamas. Add your tax identification number (TIN) in the ad accounts settings of ads manager. You don’t have to enter a TIN. However, if you’re registered for VAT and provide your TIN, your TIN will show up on your ads receipts. This may help you recover any VAT that you paid to Bahamian tax authorities if you’re a VAT-registered business in The Bahamas.”