Caribbean Economies Must Examine Alternatives To Tariff Revenue

by Amanda Banks, Tax-News.com, London

30 July 2004

A Caribbean regional tax expert has warned that several jurisdictions in the region will face difficulties maintaining tax revenues once integrated into free trade agreements such as the FTAA, forcing them to abolish tariffs in favour of other taxes.

Paulo dos Santos, tax adviser to the Caribbean Regional Technical Assistance Centre (CARTAC) told the second day of the Caribbean Organization of Tax Administrators (COTA) conference that some states, including the Bahamas, Belize, Anguilla, Turks & Caicos and Haiti have become over reliant on tariffs to provide the bulk of their tax revenues.

By contrast, the CARTAC official noted that Barbados and Jamaica would be relatively well prepared for trade liberalisation with their reliance on import tariffs rated at less than 10%.

Recent data from the Bahamian Ministry of Finance put the country’s reliance on tariffs at 47.5%.

Mr Santos suggested that the Bahamas work towards the introduction of a Value Added Tax in order to remedy the situation. He also suggested that property taxes were a relatively under used source of revenue for governments in the region.

Addressing the same conference, Bahamian Finance Minister James Smith hinted that a consumption tax regime will be the likely solution should a government review of the tax system fail to offer a better alternative.

According to a survey by CARTAC, the Bahamas has one of the lowest tax burdens in the region at 17.2% of gross domestic product, second only to the Domincan Republic at 14.5%.

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