vat presentation to the general public

7/27/2019 VAT Presentation to the General Public

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VAT PRESENTATION

toTHE GENERAL PUBLIC

Presented by

VAT IMPLEMENTATION TEAM

Date: October 2013


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Outline of Presentation

Scope of VAT

How VAT Affects the different stakeholders

Consumer, Registered Business, Un-registered Business

Why VAT VAT and Tax Reform

What is VAT

Design of VAT Administration of VAT

Public Education

Benefits of VAT


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SCOPE OF VAT

SCOPE OF VAT

CONSUMERS BUSINESSES (19,000)

Registered Businesses(approx. 4000 - $100K plus)

Un Registered Businesses(approx. 15,000less than$100K)


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How VAT affects the different

stakeholders

VAT & The Consumer

Everyone will pay

To be paid when items are imported into thecountry as is done now under the customs duty

Claim annual allowance

To be paid when goods & services are boughtlocally from VAT registered retailer

No filing requirement to the Government


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stakeholders Contd

VAT & The Registered Business

Will pay VAT on imports (as is done with Customs Duty)

Will pay VAT on local purchases of goods and services from

other registered business Will charge VAT on sales

Will deduct VAT paid from VAT collected and remit thedifference to Government

Will keep records of all purchases and all sales Will be required to display a VAT registration Certificate

prominently at place of business

Will be required to issue sales receipts and tax invoices


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stakeholders Contd

VAT & The Un-Registered Business

Will pay VAT on imports (as is done with Customs Duty)

Will pay VAT on local purchases of goods and services fromother registered business

Cannot charge VAT on their sales

Have no filing obligations with Government

Sales receipts issued cannot state VAT


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Governments Fiscal Position projected as

at 30 June, 2014

Why VAT in The Bahamas


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2007/08 2008/09 2009/10 2010/11 2011/12 2012/13

Projected

2013/14 TOTAL

1. Recurrent

Expenditure 1421 1499 1529 1642 1632 1659 17372. Recurrent

Revenue 1445 1331 1292 1452 1432 1380 1503

Source:: Budget

Communication 2013/14

3. Recurrent Deficit

(2-1) 24 -168 -237 -190 -200 -279 -234 -1284

4. Capital

Expenditure -231 -262 -251 -263 -395 -350 -295 -2047

5. Capital Revenue 10 0 0 210 87 0 0 307

6. Capital Deficit (5-

4) -221 -262 -251 -53 -308 -350 -295 -1740

7 TOTAL DEFICIT

(3+6) -197 -430 -488 -243 -508 -629 -529 -3024

8. Debt Redemption 62 67 89 77 63 121 86 565

9. GFS Deficit (7-8) -135 -363 -399 -166 -445 -508 -443 -2459

Govt Debt

( 1 July 2007) -2398

Government Debt(30 June) 2679 3085 3401 3553 3906 4414 4857 -4857


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Governments Fiscal Position

Fiscal deficit for 7 years, except 2007/08

Recurrent deficit financing - $1.3b

Capital deficit for 7 year period - $1.7b

Capital revenue of $307m (BTC, Cecil Wallace-

Whitfield Centre, NAD shares)

Government Debt as at June 30, 2014 is projected to

be $4.9b, compared to $2.4b as at July 2007


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The cost of In-Action

Unchecked rise in debt

Less capacity to borrow for emergencies Increased vulnerability to shocks like hurricanes and

sudden contractions in foreign economies on which wedepend for tourists

Credit downgrade and eventual loss of

access to credit marketsOUTCOME: much higher tax increase, largerreductions in spending and possible reduction inpublic sector employment


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Why VAT in The Bahamas Contd

Part of Government Economic Reform

Programme

To secure an adequate revenue base in support of moderngovernance;

To establish a tax structure that promotes economic efficiencyand stronger economic growth; and

To compensate for reduction in Customs Duties and ExciseTax


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VAT and Tax Reform

Implementation Date : July 1, 2014

Will be administered by the Central

Revenue Agency (CRA)

Replacement for The Hotel Occupancy Tax

Rebalancing of revenuereduction of

custom duties, excise tax


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Rebalancing of Revenue

Revenue Items Revenue

Foregone

($m)

Revenue

Gains

($m)

Projected VAT yield 525

Projected Revenue Foregone

Customs Duties -208

Excise Tax -45

Hotel Occupancy Tax -44

Projected Total Revenue

Foregone

-297

Expected Revenue Gains 228


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What is VAT?

VAT is a broad-based tax onconsumption VAT is charged on:

imports; and

the value-added by Bahamian businesses supplyinggoods and services to other businesses or to finalconsumers

Charged at each point in production anddistribution chain

Everyone pays VAT - borne ultimately by the

final consumer


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VAT EFFECTS ON PRICES, REVENUE - CONSUMERS,

BUSINESSES & GOVERNMENT

Pre-VATRegime VAT Regime

Govt.Revenues

Govt.Revenues

$ $ $ $ $

CIF Value for

Customs 100.00 100.00

Customs Duty 40.00 20.00 20.00 20.00

Landed Cost 140.00 120.00

VAT @15% NIL 18.00 18.00 18.00

Selling Price 280.00 240.00 300.00

VAT @15% NIL 36.00 18.00 45.00 27.00Price to consumer 280.00 276.00 345.00

Supplier's Gross

profit (100%) 140.00 120.00 180.00

Government

Revenue 40.00 56.00 56.00 65.00 65.00


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Design of VAT

The VAT is designed to improve administrativeefficiency, increase compliance and improve revenuegeneration

Standard rate (15%)

Hotel Accommodation & Food and Beverages (10%)

Zero-rate (0%) (e.g. Exports)

Exemptions (e.g. educational services, residential rent )

Supported by Reduction in Customs Duties & ExciseTax


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Design of VAT Contd

The following supplies are proposed to be exempt

from VAT:-

Educational Services

Medical & Dental Services

Certain Bread basket food items (list to beconfirmed)

Some Financial Services

Sale and rental of residential homes

Domestic transport


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VAT ADMINISTRATIONPROPOSED ORGANIZATIONAL STRUCTURE

CENTRAL REVENUE AGENCY/ VALUE ADDED TAX

CentralRevenue

Agency

BusinessLicense

Audit &Refund

Processing

Compliance,Collection

Enforcement

Real PropertyTax

Registration &TaxpayerService

Objections

& Appeals

ReturnsProcessing &Accounting

Value Added

Tax


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25/10/2013 VAT Implementation - July 1 2014 19

Registration Compulsory for businesses whose turnover exceeds the approved

threshold per annum

Voluntary for businesses under the threshold

Must be able to keep good accounting records and meet certain corerequirements of VAT

Monthly filing of Returns and Payment of VAT

Excess Credit & Refunds (carry-forward or immediate)

Compliance & Audit

Collections and Recovery

Objections and Appeals

Penalties

VAT ADMINISTRATION Contd


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VAT ADMINISTRATION CONTD

The integrity of VAT is based on the paper trail and

record keeping

AVAT-registered person is required to:

issueVAT invoices for taxable supplies to other

registered persons

issue sales receipts showing VAT paid on taxable

supplies to unregistered persons

quote prices VAT-Exclusive

display VAT registration certificate at places of

business


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Public Education

National Launch of VAT

Nationwide presentations and discussions on VAT Consultation on VAT Legislation

Training of Staff

General education of all businesses & consumers

Advisory Visits to businesses


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WHAT DO YOU NEED TO KNOW

The Consumer

Be aware of the following:- Supplier is a VAT registrant or not;

VAT Registration Certificate is visible;

Prices displayed show VAT exclusive amounts;

MUST receive sales receipt when purchases are madefrom VAT Registrants

Will pay VAT on imports and receive annual allowance Know which goods/services are VAT exempt and which

ones are taxable

Unregistered businesses cannot charge VAT

Report any suspicions of dishonesty or fraud to CRA


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What you need to know - The

Registered Business Will Pay VAT on all domestic purchases of goods & services that are not

exempt or zero-rated

Will pay VAT on all imports (except zero rated or exempt)

Will charge and collect VAT on the sale of all supplies (except zero rated or

exempt) Will claim VAT paid (local purchases & imports) as input VAT

Input VAT paidis not a cost to the business and should not be included inthe price of supplies

Will report VAT collected as output VAT

Must file monthly returns and report net VAT/Excess Credit to theGovernment

Must issue Sales Receipt and VAT Invoices showing how much VAT is collectedon the sale

Must keep good accounting records including all sales and purchases


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What you need to know - The Un-

registered Business

Will pay VAT on all domestic purchases of goods & services that arenot exempt or zero-rated

Will pay VAT on all imports (except zero rated or exempt)

VAT paidbecomes a cost to the business and may be included in theprice of supplies

Cannot charge nor collect VATon sales

Sales Receipts issued cannot show VAT

Has no reporting obligation to the Government

Is encouraged to keep records of all sales and purchases

Monitor sales to determine if VAT Registration threshold is reached


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BENEFITS OF VAT

Broader Base For Government Revenue Tax Imposed On Goods And Services -

Equality

Imposes Greater Discipline On Businesses Incentive To Business On Capital Expenditure -

Therefore Encourage Investments

Audit Trail-Promotes Greater Efficiency In The

Collection Of Taxes Stronger Penalties Encourage Compliance

Allows consumers to manage consumption


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ULTIMATELY

Collection of taxes allow Government toprovide essential public goods and

services Improved physical infrastructure (roads,

bridges, schools etc.)

Improved health care Improved educational services

Increase and enhanced social safety netprogrammes

IMPORTANCE OF TAXATION


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QUESTIONS?????

Contact information for CRA/VAT unit

[email protected]

225-7280 (toll free)

Thank You for your attention!!!!!
mailto:[email protected]:[email protected]

vat presentation to the general public

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