NASSAU, BAHAMAS — Prime Minister Philip Davis said yesterday that despite the improvement in Value-Added Tax (VAT) collection, he believes the VAT yield has “not reached its full potential.”
While kicking-off debt on the mid-year budget, Davis told Parliament that his administration can further increase the yield with more compliance efforts.
He noted that for the first six months of the fiscal year, value-added tax totaled $598.8 million, and grew by $54.2 million compared to the prior year.
“To date, VAT accounts for 42.4 percent of the budget forecast,” said Davis.
“The value-added tax collections continue to improve despite the reduction in the nominal VAT rate from 12 percent to 10 percent, which meant that VAT was reduced across a very broad range of goods and services. Despite the period-over-period improvement in the VAT collection, the VAT yield has not reached its full potential. In fact, I believe that this administration can further increase the VAT yield with more compliance efforts.”
Davis said analyzing historical VAT collections in comparison to the forecast, for the first six months of the fiscal year, revealed that in the fiscal year 2021/2022 VAT equated to 58.8 percent of the budget forecast; in the fiscal year 2020/2021 VAT equated 43.0 percent of the forecast; and in the fiscal year 2019/2020 VAT equated 52.9 percent of the forecast.
“Thus, although VAT collections to date increased over the prior year, the collection rate in comparison to the budget, for the first half of this fiscal year, is lower than in the last three fiscal years,” he said.
“This same kind of trend was also seen with business license fee collections during the period, in which the actuals underperformed in comparison to the budget forecast. However, this administration continues to tighten the approach of tax collection via targeted compliance efforts that fall under the Government’s overall revenue strategy to enhance revenue collections, as stated it the FSR 2022,” said Davis.
