The Nassau Guardian
Accountant urges lottery over VAT
Chartered accountant Michael Hepburn yesterday urged the government to create a national lottery instead of its proposed value-added tax (VAT) system.
In a presentation made during a Rotary Club luncheon, Hepburn, of Michael Hepburn & Co., said his research has found that a lottery system could earn the government $231 million in its first five years, with $35 million provided in the first year.
Hepburn argued that it would cost the government less money to set up a lottery, less than $10 million, than to institute VAT. He said this amount would be repaid to the government in “less than six months”.
“A national lottery would operate at a cost less than $3 million per year,” Hepburn said.
“Our forecasts have a payout of $88 million in the first year. The economic impact of that in the economy at a multiplier of five is $440 million in circulation throughout the entire economy. Imagine the goods and services it will produce.”
Hepburn estimates that there is a market of 335,000 people for a Bahamian lottery, including a labor force of 195,000; an estimated 30,000 undocumented workers; 100,000 tourists who visit the country each week and 10,000 Bahamians and friends living abroad.
The government plans to implement VAT at a rate of 15 percent on July 1, 2014. The government has said the new tax will reduce the gap between revenue and expenditure and offset rising public debt.
At the start of the next fiscal year, government debt is projected to be $4.9 billion. This year, the government estimates that it will have to pay $230 million to service its debt.
Many in the business community have criticized the new tax.
Hepburn said his company’s review has found that the system would hurt the economy instead of helping it.
“Our review also notes that businesses have already put on hold their plans of expansion because they are not sure how VAT will affect them,” he said.
“We propose to the government [to] delay the implementation of VAT until sometime in the future to give businesses an opportunity to study it more carefully.”
Hepburn said the country’s economic growth will “stagnate, if not decline, if VAT is adopted” and added that many countries who implemented VAT later increased their rates after its introduction.
“The Bahamas is currently faced with a swelling budget deficit, a lackluster economy and high unemployment,” he said. “VAT will not help but will hurt the current economy, burden the private sector and force the Bahamian economy into further decline.”
VAT is expected to add an additional $200 million in revenue in the first year of implementation, officials estimate.
Hepburn said he was driven to make the recommendations after Prime Minister Perry Christie challenged the business community earlier this month to find an alternative to VAT.
The government held a referendum in January asking voters if they supported the regulation and taxation of web shops and the creation of a national lottery.
The majority of people who voted said no to both questions.
However, less than 50 percent of registered voters showed up to the polls.
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