VAT in the Bahamas

The Bahamas are contemplating introduction of a Value Added Tax. I think that makes a lot of sense, particularly given the jurisdiction’s reliance on tourism-related income.

It will be interesting to see whether the government would exempt financial services from VAT (and how they would deal with blocked input tax), or that financial services would be zero-rated. That latter alternative – no VAT on output and a full recovery of VAT on input) would be beneficial from a business perspective, but may create a serious dent in the potential VAT revenue.

In a country such as The Bahamas, that has historically boasted of its distaste for imposing direct taxes on income, the VAT has a certain amount of appeal in the sense that it has the potential to increase the tax yield to government without having to concede its historical adherence to no tax on income.

See the editorial linked below.

The Freeport News – Looking at tax reform.

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