In The End of Prosperity: How Higher Taxes Will Doom The Economy – If We Let It Happen, authors, Arthur B. Laffer, Stephen Moore, and Peter Tanous assert that;
"Excessive taxation is detrimental to labor and capital, poor and rich, men and women, old and young. Excessive taxation is an equal opportunity tormentor. While the world is dynamic and many of its ups and downs are beyond the control of government, there are a number of criteria for judging the efficacy of a tax system.
"These were summarized well by nineteenth-century American economist Henry George:
1. That it bear as lightly as possible upon production.
2. That it be easily and cheaply collected.
3. That it be certain – so as to give the least opportunity for tyranny or corruption on the part of officials, and the least temptation to lawbreaking and evasion on the part of the taxpayers.
4. That it bear equally – so as to give no citizen an advantage or put any at a disadvantage, as compared with others.
Yet, our government, encouraged by the IDB, IMF and other international agencies are pushing us down the road to the more complicated Value Added Tax (VAT) System.
They tell us things like it provides more flexibility and bouyancy, among other politically correct language that means, the government can continue to extract money from Bahamians even when times are tough. It also means we can incrementally increase taxation whenever we choose and the increases will seem smaller than an increase in duty rates.
They go on to state the problems associated with not taxing services in the country, and how government cannot maximise revenue within the current framework, but offer no guarantees on limiting government spending.
Back in 2004 The Nassau Institute observed, the "implementation of a Value-Added Tax will increase the tax burden on all Bahamians," providing a chart showing the deleterious effects. Read it here…
The article also suggested,
1. It is estimated that a VAT rate of at least 22% will be required to maintain existing revenue levels.
2. Retaining the current tax structure (based on tariffs on imported goods) helps to control government spending by limiting the level of taxation to what consumers require.
3. Unless the VAT rate is set constitutionally, there will be no corresponding limit on the level of taxation that the government may impose.
"In other words, when the economy takes a downward spiral, revenues from duties decrease, so theoretically the government is forced to cut back on spending just as the population has to. With a VAT charged on both goods and services, government revenue will probably not be impacted as dramatically in a downturn, so public spending can, and undoubtedly will, continue unabated."
Is there any wonder the government and bureaucrats are pushing so hard for VAT?
Our national deficit is like a patient with stage four cancer.. Surgery is immediately required, but the patient is given an aspirin and told to go home..
VAT is like aspirin and will have no means of curing the huge deficit crisis that confronts the Bahamian economy.. Unfortunately in this case, VAT is no better than aspirin and will over the long-run have a negative and detrimental impact upon the Bahamian economy.. It is the driver for increased poverty as many struggling Bahamians in the lower middle class will fall into poverty pit.. As the over all cost of living rapidly increases, Bahamian consumers will learn to buy only what they absolutely need and NOT what they want.. Dreams will be broken and hope goes wanting.. As business costs continue to rise and profits become losses, business will be forced to close down and the cruel economics of scarcity will come into play.. Inflation, poverty and private sector demise are the economic results of Excess Burden resulting from VAT.. AS the government panics by increasing deficit spending, the Bahamian economy will than likely self-destruct as it approaches the point of no return..
The Nassau Institute has been a beacon of wisdom warning the Bahamian people that our country has been heading on a course towards economic and financial self-destruction.. Frightening as it may be, the Nassau Institute has been correct in its thinking.. The warning signs are there and now we must confront the economic evils that are being forced upon the Bahamian people.. We are the victims of our own short comings, and we are about to confront the financial pains of these economic failures.. Hopefully there is an economic surgeon in the house, as VAT aspirin in no remedy for our economic chaos.. We may be at the point where only God’s Grace can save our homeland from ultimate chaos and our ongoing imprudent doings..