The Minister of State for Finance Responds

First Published: 2004-02-22

This week's feature is The Hon. James Smith's reply to the Institute's article comparing the VAT with Import Duty. It is reprinted here with Mr. Smith's permission.

We thank Minister Smith for clarification of a few of the issues.

Observations by the Institute are not those of "tax experts". The purpose of the dialogue is to encourage interest in what will prove to be the single most important decision made by a Bahamian government in the past fifty years.

If it encourages the general public to express their views publicly, then we will have done our work.

Please scroll down to read Minister Smith's response to – "Value Added Tax versus Import Duty".

Dear Sir:

I write with reference to the article by The Nassau Institute under the heading, "Value Added Tax Versus Import Duty."

I am pleased that the issue is being debated in public however, the article appears to have prejudged the issue in an attempt to support a point of view, submitted a comparative table of VAT vs. import duty and concluded that more taxes would be paid under the VAT system.

The rates used in the table do not reflect the following assumptions which I outlined in my address to the Chamber of Commerce:

1. The VAT rate would likely be 15 per cent;

2. The VAT would replace both import duty and stamp tax on imports;

3. VAT would lower costs to consumers, businesses and the government because it would be applied at a lower rate across a wider range of goods and services.

Using the assumptions above, the full impact of the tax using The Nassau Institute's example in the table would be in the region of $375 and not $817.19 nor any of the other figures cited in the article.

Indeed the $375 is much lower than the current import duty of $630 also cited in the article.


James H. Smith.

Minister of State for Finance.

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