Download - 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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How VAT affects the different
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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How VAT affects the different
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
225-7280 (toll free)
Thank You for your attention!!!!!
mailto:[email protected]:[email protected]