Transcript Document

THE BAHAMAS
for
Caribbean Organization of Tax
Administrators
Belize
21st – 24th July 2008
“Impact of Trade Liberalization
on a Modern Tax System”
The Bahamas Perspective
by
Ehurd Cunningham F.C.C.A.
Strategic Plan on Trade
 Five principles that guide the strategic plan
on trade
 Designed to enhance the preparedness of
the economy for success in an increasingly
competitive international environment
Principles that Guide the
Strategic Plan
 Ensure increased transparency in economic and government systems
 Form strategic international partnerships with nations within the Caribbean
Community and the Association of Caribbean States
 Negotiate membership in the World Trade Organization to create new markets
for Bahamian products
 Ensuring that investments and trade arrangements agreed and entered into
serve the best interest of Bahamians
 Eliminate to the extent possible, bureaucratic requirements that reduce
transparency, contribute to delay and increase costs
Safeguards
 Injury to domestic industry producing like or directly
competitive products
 Disturbances in a sector of the economy particularly
where the disturbance produces social problems
 Raise enough revenue to finance essential expenditure
without recourse to excessive public sector borrowing
Fiscal Summary 2008 /9
$ Million
1. Recurrent Expenditure
2. Recurrent Revenue
3. Recurrent Surplus (1 minus 2)
4. Capital Expenditure
5. Capital Revenue
6. Capital Deficit (4 minus 5)
7. Total Deficit (3 minus 6)
8. Debt Redemption
9. GFS Deficit (7 minus 8)
10. GDP (Current prices)
11. GFS Deficit as % of GDP
12. Government Debt as % of GDP
1,569
1,574
5
250
10
(240)
(235)
70
(165)
7,749
2.1
35.2
Policy decisions that have
Implications for Trade policy
Trade in Goods:
 Amalgamation of customs tariff and stamp tax
 Simplification of tariffs (reduction in numbers of rates)
 Eliminate multi-rates for similar items
 Simplification of documentation, automating processes and use of scanners
(Continued)
 Trade in Services:
– Creation of a one-stop investment agency
Intra-Regional Trade
 Anticipated benefits to be gained
 Bahamas trade with the region is miniscule
(hardly exceeds one-half of 1% of total
imports)
 Participation CSME may provide more
regional export opportunities not currently
available
Trade with the United States
 80 per cent of imports come from the US
 Negotiations with the US must take into
account period to liberalise on the goods side of
trade, Tariff and Excise Tax regime
Administrative co-operation
 Essential for the implementation and
control of preferential treatments
 Necessary to avoid irregularities and fraud
Customs and Legislative Procedures
 Need
to protect and facilitate trade through
enforcement of and compliance with legislative
requirements
 Need to ensure that requirements for economic
operators are reasonable
 Need to apply single administrative document or
electronic equivalent
 Need to apply modern customs techniques,
including risk assessment, and simplified
procedures at imports and exports
 Need for transparency
Implications for Revenue
Consider:
 Sources of revenue
 Ranking of the revenue source
 Elasticity of the revenue source
Impact on Government Revenue
 Average rate of Customs duty was 35% but
now 42%
 Reduction in revenue would have to be
replaced from alternative source
Action Plan
 Determine the levels of imports and
exports
 Determine which items will be placed in
the list of Excluded, Zero (no duty) and
Phased Items
 Availability of reliable statistical data
Action Plan (Cont’d)
 Amalgamate stamp duty with Customs
tariff
 Introduce new Excise Act (apply equally to
both imports and domestic production)
 Review of duty free items
 Enhancement of revenue compliance
Enhancement of Revenue
 Engagement of Revenue Compliance
Officers
 Use of information technology to block
leakages in revenue
 Improved customer service (Awareness of
revenue implications)
Alternative Revenue Sources
 Trade policy will bring about the need to
address other issues:
– Political acceptability
– Revenue adequacy and stability
– Revenue diversification
– Economic neutrality
– Administrative machinery
Possible Alternatives to Customs
Duty
 Areas being discussed in the public
domain
 Sales Tax
 Value Added Tax
Conclusion
 Policy on trade is a sensitive matter
 Every effort should be taken to develop a
modern and efficient tax system (avoid too
many small tax systems)
 Policy is often the art of the possible,
rather than the pursuit of the optimal