IMF Welcomes Impact Of Bahamas's VAT Regime
by Mike Godfrey, Lowtax.net, Washington
17 December, 2015
The International Monetary Fund has said the introduction of a broad-based value-added tax in the Bahamas has contributed to fiscal consolidation and there are "encouraging" signs that it has been a success.
The comments were from an IMF mission that was in the Bahamas to review economic developments in advance of discussions for the 2016 Article IV consultations.
Jarkko Turunen, the IMF economist who led the mission, said "the January 2015 introduction of a broad-based VAT, with a low standard rate and few exemptions, has contributed to fiscal consolidation. Reports of VAT implementation thus far are encouraging, with revenue exceeding expectations."
"Continued fiscal consolidation, through steadfast implementation of the VAT with few exemptions and expenditure rationalization, together with public enterprise reform, remains critical to sustaining macroeconomic stability."
The new VAT regime was introduced, with a 7.5 percent headline rate, on January 1, 2015. The measure is one of a number taken in recent years to support the Bahamas's objective of becoming a member of the World Trade Organization.
In December, the territory's Central Bank said that the Bahamas's budget deficit fell by more than 60 percent in the first three months of the fiscal year, which began on July 1. Statistics from the Central Bank show that the deficit for the three-month period fell by BSD91.6m (USD91.6m) to BSD60.3m, after tax revenues increased by BSD120.6m. VAT was cited as a key factor for the improvement, with VAT receipts of BSD165m being received during the period.
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