IDB suggests revisions to govt’s revenue collection policy

The Inter-American Development Bank (IDB) in its Caribbean Quarterly Bulletin suggests that The Bahamas carry out revisions to its revenue collection policy and administration, as well as to the organizational structure of the Department of Inland Revenue (DIR), in order to generate greater revenue collection in the years ahead. The bulletin further notes that this country has historically underperformed in revenue collection when compared to the rest of the Caribbean region.

According to the bulletin, The Bahamas’ revenue has averaged 15 percent of the country’s gross domestic product (GDP); the regional average is 24 percent.

The IDB notes that the country’s tax authorities have paved a path to greater revenue collection through the introduction of value-added tax and changes in customs revenue collection, but more can be done. 

“Tax administration could be enhanced through greater documentation, as most of the core processes are not documented or standardized, posing a risk for business continuity,” the bulletin states.

“The Bahamas should also consider establishing a special organizational unit devoted to preparing economic studies that can analyze tax collection trends, monitor the hidden economy, examine revenue yields from audits, understand taxpayer behavior and provide input to government budgeting processes.”

In its latest Fiscal Strategy Report, the government highlighted its commitment to the development of a more equitable tax system and the pursuit of progressive changes in the collection of taxes. The government also committed to strengthening tax compliance, improving tax administration and the updating of the tax incentives regime given to investment projects.

The IDB points out in its bulletin that The Bahamas’ macroeconomic and fiscal position has been in free fall for several years and worsened as a result of the external shocks of Hurricane Dorian and the COVID-19 pandemic.

“Nearly a decade of sizeable fiscal deficits has caused a rise in the level of government debt,” the IDB states.

“The Bahamas’ primary fiscal deficit averaged 1.3 percent of GDP between FY (fiscal year) 2009/2010 and FY2019/2020, which contributed to increasing the debt level from 35.1 percent of GDP in FY2009/2010 to 69.2 percent of GDP in FY2019/2020.

“Macroeconomic and fiscal indicators have also worsened as a consequence of recurring external shocks. The Bahamas has been hit by six hurricanes over the past decade and is still facing severe challenges due to COVID-19,” notes the IDB bulletin.

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source https://thenassauguardian.com/idb-suggests-revisions-to-govts-revenue-collection-policy/