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Saturday, October 25, 2014

More on tax reform, please!

I guess the entire world knows by now that The Bahamas is looking forward to implementing Value Added Tax in January, 2015. Everyone except the former Chairman of the Bahamas Chamber of Commerce, Robert Myers, who also stood as the Chairman of the Coalition for Tax Reform- the once anti-VAT campaign lobby. Well, to be fair, they did morph into the "fair tax" and "sensible taxation reform" lobby. For what it's worth.

Mr. Meyers has been caught out, so to speak. As it stands, he got nabbed in an importation scandal with the Customs Department. Reportedly, he was found to have undervalued a vehicle that he wanted to bring into the country.

Bahamas Customs charge you duty on the purchase and value of all vehicles. So, if you bought a car for $1,000 and landed value works out to $1,100, you are expected to pay the duty on the $1,100.

However, Mr. Myers presented to customs a document that stated that the car he bought in the USA was less than what he actually paid for it, and thus presented false information to Customs on the actual value of the car to attract a lower duty.

In addition to this, it was also found that in the back trunk of the vehicle in question, which was a Porsche Hybrid, were groceries and other items valued at over $4,000 dollars that he also had not declared.

Yea, it is an understatement that Mr. Myers messed up. It looks like he was set up, too. Whether he did something like this before isn't something we should get into. But, it is more than curious to see the staunchest anti-government proponent for taxation reform, being taken down by a scandal that involved tax fraud at a time when the country is on the precipice of a new form of taxation. A reform that he was vehemently against from the onset.

Mr. Myers has now resigned as the Chairman of the Coalition for Taxation Reform and as the Chairman of the Bahamas Chamber of Commerce, and has been replaced with accountant Gowan Bowe. This was the right thing to do. The second most right thing to do is to just be quiet about it. Honestly, pay your dues, back away, ask for forgiveness for your sins and move on.

With all of that taking place, without a doubt there is now a void with regard to a very strong voice and pillar on overall taxation reform. Don't get me wrong, whether we feel Mr. Myers was genuine or not in his concerns about VAT, he did hit some key notes with regard to the sincerity of this entire initiative.

In fact, as odd as it sounds, I found myself agreeing with him to a great degree with his overall concern. And I'm a proponent of taxation reform and VAT, in particular.

The Coalition for Tax Reform made the case that the initial date was just undoable, unrealistic and too aggressive. It showed persons trying to put VAT together from the government's aspect were either unaware or didn't care about what it takes for large, and not so large businesses to adjust to a new way of doing things.

Of course policy makers were a little embarrassed by the pooh-poohing of the initial date because they were so cock-sure that it was a slam dunk. But after this set-back they kept plugging at it in earnest. Which is what we need: diligence on a very sensitive and now critical initiative.

While this new date of January, 2015 instead a more favourable date of July, 2015, with the month of July coinciding with the yearly national budget process, sounds a little iffy. January is what they believe and it is not unlikely for the government to present a mid-term budget: a time when spending is supposed to be re-assessed to ascertain if the government is on the right path. A mid term budget may bring clarity to the process in January.

A second issue that I now find myself agreeing with the Coalition for Taxation Reform is that VAT will just work out to another tax heaped on the Bahamian public, with no true reform. While it is found that Mr. Myers may not, and will not, be the main man to continue to hammer this portion of the reform message. This is very important to ensure that everyone gets a fair deal in all of this.

Why it alarms this author so much is that the proposed Central Revenue Agency, the fundamental pillar in this entire taxation nexus, was not a part of the VAT Bill tabled and passed in the House of Assembly. This is critical, as the Central Revenue Agency was seen to be the agency with the potential to tie the hands of meddling persons from subverting the tax-collection process.

Another issue with VAT evolving into another tax to be heaped on the public, is the various professional organisations and related lobby groups are working feverishly to get the concessions and areas of their particular sectors ironed out. No doubt self-preservation is key, but at the end of the day it still makes absolutely no sense to get your concessions and the over-arching system still be in the same position as it once was, with a new tax put on the backs of Bahamians.

Without a doubt however, the omission of the agency from the VAT Bill raises concerns. Because the agency that is now supposed to monitor revenue collection and be new eyes and ears in the revenue collection process, has now been side-lined and the process is now, and we hope for a short time, in the hands of the persons within the same system that we wish to move away from.

We should take the controls of the revenue generating agencies out of the current system that has been compromised for so long. If you want to change the system, then change the system. Don't half do it. Change it!

We shouldn't act as if there aren't, or have not ever been, other abuses, like the situation we had with Customs and Mr. Myers. Many persons feel that this was a mere drop in the bucket with regard to what some may have gotten away with in the past, and what people may be getting away with doing right now. Especially when we take into consideration that less than 50% of Customs revenue makes it to the public treasury.

This doesn't absolve Mr. Myers or anyone else that has made serious errors in judgement, but the fact remains that true and systematic reform (something that was promised on the campaign trail by the current government) needs to be continually addressed.

I think the public also sees this new wave of crack downs in import fraud from the Customs Department, coupled with a renewed vigour for work in the auditor general's office, as persons within the system, wanting to look like they're working diligently, to ensure that a new layer of government in that of the Central Revenue Agency is not seen as desperately needed. Well, at least that's what I see. Blame it on me.

How all of this plays out remains to be seen, but I believe The Bahamas would much rather have full reform over half reform, with half reform leaving the Central Revenue Agency out of this initial push. If left undone, as time lingers on, it will most likely be left undone or done half-way. And then we all pay dearly for it in the end.
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