Cooper: PLP VAT cut could net $200 mil. revenue increase

The Progressive Liberal Party’s plan to decrease value-added tax (VAT) to 10 percent could increase government revenue by $200 million should they win the next election, the party’s Deputy Leader Chester Cooper said yesterday, contending that the economic principles suggests that lowering costs will increase demand.

However, Cooper said the 10 percent VAT position would be evaluated after one year to see if it indeed had the revenue increasing effect Copper cited.

“The 12-month marker will give us enough time and enough empirical evidence to demonstrate whether that rate must continue to be 10,” he said.

In a statement released yesterday, Minister of State for Finance Kwasi Thompson insisted the PLP’s plan will cause a “dramatic” $100 million decrease in government revenue.  

“The Opposition’s plan would lead to a dramatic fall off in revenue likely in excess of $100 million during their proposed 12-month period, at a time when the country’s fiscal resources are under tremendous strain and the needs for government to support social and economic programs are even more pronounced,”
Thompson said.

Cooper, who made the $200 million revelation while as a guest on Morning Blend Business on Guardian Radio, said the PLP is satisfied with the results of their modeling that shows that government revenue can increase with a two percentage point slash in VAT.

“Our model indicates that revenue will in fact increase,” Cooper said. “We are comfortable that there will be no reduction in revenue; in fact, we believe there will be an increase in the overall revenue. We believe that number to be in the $200 million dollar range and you can take that to the bank.

“Basic economic principles say the lower the price the higher the demand. We want to drive economic activity, we want to increase demand in the economy.

“What we saw when the VAT rate increased, the chamber of commerce and business people across the country said they noticed a decline in sales. So, we always said the VAT hike was too fast too soon.” 

Part of the PLP’s plan calls for re-examining VAT exemptions put in place by the Free National Movement government that Cooper called “ill-conceived”.

He said the exemptions made VAT collections more complex and created avenues for revenue leakage and fraud. 

Cooper added that those exemptions also did more to cut costs to vendors, but not to the average Bahamian.

“We are satisfied based on all the advice in the reports that once we make the sensible adjustments, there will be a revenue-positive outcome,” he said. 

Cooper noted that the PLP’s economic plan is designed to bring immediate relief, stabilize public finances, kickstart the economy, revolutionize education and training, create opportunities for Bahamians, diversify the economy, drive reconstruction and modernize the digital infrastructure and the national development plan.

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