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THE BAHAMAS for Caribbean Organization of Tax Administrators Belize 21 st – 24 th July 2008

THE BAHAMAS for Caribbean Organization of Tax Administrators Belize 21 st – 24 th 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

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THE BAHAMAS for Caribbean Organization of Tax Administrators Belize 21 st – 24 th July 2008

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  1. THE BAHAMASforCaribbean Organization of Tax AdministratorsBelize21st – 24th July 2008

  2. “Impact of Trade Liberalization on a Modern Tax System” The Bahamas Perspective by Ehurd Cunningham F.C.C.A.

  3. 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

  4. 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

  5. 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

  6. Fiscal Summary 2008 /9 $ Million

  7. 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

  8. (Continued) • Trade in Services: • Creation of a one-stop investment agency

  9. 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

  10. 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

  11. Administrative co-operation • Essential for the implementation and control of preferential treatments • Necessary to avoid irregularities and fraud

  12. 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

  13. Implications for Revenue Consider: • Sources of revenue • Ranking of the revenue source • Elasticity of the revenue source

  14. 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

  15. 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

  16. 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

  17. Enhancement of Revenue • Engagement of Revenue Compliance Officers • Use of information technology to block leakages in revenue • Improved customer service (Awareness of revenue implications)

  18. 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

  19. Possible Alternatives to Customs Duty • Areas being discussed in the public domain • Sales Tax • Value Added Tax

  20. 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

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