Bahamas Praised For Successful VAT Regime
by Jason Gorringe, Lowtax.net, London
13 June, 2016
The International Monetary Fund (IMF) has reported that the introduction of value-added tax in the Bahamas has led to a significant increase in tax revenues.
The IMF said that VAT revenue over the first 12 months of the regime, since January 1, 2015, amounted to six percent of gross domestic product, exceeding expectations.
The IMF said: "Smooth VAT introduction has contributed to fiscal consolidation. VAT revenue over the first 12 months, at BSD536m (USD536m) [ ] has exceeded expectations. As a result, the FY2014/15 (ending in June 2015) deficit is estimated to have declined to 4.4 percent of GDP (down from revised 5.6 percent in FY2013/14)."
"Available data for the first seven months of FY2015/16 suggest a further decline in the deficit, by about one percentage point, compared to the same period a year ago."
In its recommendations, the IMF noted that its directors had commended the authorities for "a successful VAT introduction which has contributed to fiscal consolidation. They encouraged the authorities to resist pressures to introduce exemptions and to ensure continued strong implementation. Directors called for continued consolidation to reduce the public debt to GDP ratio and ensure sustainability."
Directors welcomed recent progress in financial sector reforms, including in addressing gaps in the AML/CFT regulation and implementation of the new Basel II/III regime. They encouraged the authorities to enhance their crisis management framework. Directors called for greater emphasis on risk-based financial sector supervision and regulation, given global "de-risking" trends, and strong efforts to ensure compliance and close communication across stakeholders. Directors called for renewed efforts to resolve the overhang of non-performing loans to spur credit growth.
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