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Former Bahamas Minister for Finance Zhivargo Laing has urged authorities to reconsider the implementation of value-added tax (VAT) from July 1, 2014, and instead develop revenue-generating measures that better fit the unique make-up of the local economy.
Speaking at a recent public meeting, Laing cautioned that the roll out of value-added tax would severely impact the islands' economy. He noted that the Government had factored in the burden on the hotel sector when drafting the VAT regime, granting a concessionary rate of 10 percent, equal to that under the current hotel occupancy tax, but said the Government appears to have overlooked the impact on the financial services and tourism industry, which together account for more than half of economic output.
Describing the VAT as "undoable," he recalled that the value-added tax had been proposed to consolidate the territory's deficit, but pointed out that the Government's debt-reduction forecasts are framed around achieving higher levels of economic growth, which he contested may be unachievable with the added burden of VAT on the islands' key economic sectors.
"Tourism and financial services, along with their ancillary supportive services, account for more than 60 per cent of our economy. Applying a VAT to these internationally competitive sectors with their major impact on our economy must be approached with caution. It is not clear whether the proposal on the table has carefully analyzed this situation and therefore has accounted for the implications of the VAT to them and the economy as a whole," he was quoted by local media as saying.
Laing called on the Government to defer the implementation of value-added tax to allow time for alternative proposals to be drafted that would be better designed to support the economy's fundamental sectors.
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