NASSAU, BAHAMAS — Amid public furor over the application of value-added tax (VAT) on imported goods, Acting Financial Secretary Marlon Johnson said yesterday that while the issue has been raised in the public from time to time, the application of VAT on top of customs duty was appropriate and consistent with other jurisdictions where VAT exists.
In a Facebook post, Keshia Smith asked: “When is the government going to address applying a tax on a tax? There is no reason we should be paying VAT on customs. I’m sick of it, suck my teeth.”
The comment received 200 reactions and nearly 100 comments as of 4pm Friday.
The post attracted the attention of the acting financial secretary, who acknowledged that the question has been posed by the public “from time to time”.
“The simplest answer is that value-added tax is applied at the final landed value of a good inclusive of shipping, fees and all other applicable taxes,” he responded in the comments of the original post.
“This is how it is treated around the world in jurisdictions which have a VAT tax.”
He attached FedEx’s website and underscored that the company explains to its customers across the globe how to calculate the tax that a country may apply on a good shipped via FedEx.
His response received a flurry of comments, the majority of which bemoaned the practice, while others said the government promised to reduce duty to offset the existing taxation of imported goods.
Some accused the government official of sidestepping the question, and suggested the government was unfairly double-taxing its citizens.
Others called on the government to reign in on spending instead of continuing to tax its way out of the red at the expense of Bahamians’ quality of life.
But Johnson said while the tax system and level of government spending in the economy could be discussed and debated, “this post is about whether it is ‘right’ for the government to charge VAT on other taxes”.
“I am pointing out that the nature of a VAT tax is that it is applied on top of all other taxes, fees, etc. that contribute to the landed value of a product.”
Facebook user “Annie Boo” said how the tax is calculated does not make its application right or fair.
“I collected my packages…and over 70 percent of the bill was customs and VAT,” she wrote.
“So, I paid a tax to purchase it and a tax to bring it in.
“It’s robbery no matter where it’s done in the world.
“The explanation really doesn’t justify it; 45 percent [duty] plus VAT, really?
“If the government cares about its people, it wouldn’t be taxing them so heavily to generate revenue.
“Find other industries to grow and make money from and get off its citizens’ backs.”
To this, Johnson said the nature of the tax makes its application correct.
He used an example of purchasing an item from a store in Miami that was imported from China.
He said the import duty for importing the item is factored into the price.
“And you pay the sale tax on the price that includes their customs duties as well,” he said.
“This is how these taxes work.”
Gavin Knowles, another Facebook user, noted the government promised to reduce customs duties and claimed it had not.
The government has introduced a wide range of reductions in customs duties since 2017.
As he delivered the 2020/2021 budget communication, then Finance Minister Peter Turnquest announced the government will provide a back-to-school VAT holiday; a reduction of duty of fishing material — from 45 percent to 20 percent; farming equipment from 25 percent to 10 percent; and a wide range of building materials to 20 percent.
Duty was also reduced on items to encourage green technologies and plastic elimination.
These include a 35 percent reduction of duty on environmental sea trash cans and reusable metal water bottles, and a 65 percent reduction on motorcycles with an engine size of 125 cc or less and electric motorcycles.
The reductions in key areas were intended to incentivize economic activity and ease the burden on Bahamians — nearly two years after the Minnis administration increased VAT from 7.5 percent to 12 percent in July 2018, an increase of 60 percent.
