An advisor to the government and a former minister of state for finance has said he doubts that there will be an increase in the rate of value-added tax (VAT) applied in its first year of implementation.
James Smith told Guardian Business that the government should allow time for the "systems to settle in" before moving to make any changes of this nature.
What ultimately happens will be dependent upon at which stage the government decides it will join the World Trade Organization (WTO) - an initiative which will require it to lower duty rates, which are presently at levels considered prohibitive to trade by the WTO.
Minister of Financial Services and Trade Ryan Pinder has stated this year that WTO accession negotiations were on track to conclude in 2015, putting The Bahamas in a position to join the trade body over a decade after it first initiated steps to do so.
At present, The Bahamas remains one of a small minority of countries which have not joined the organization, a fact which places it at a competitive disadvantage in attracting trade and investment, claim Pinder and others.
Smith, chairman of CFAL, said that The Bahamas may be easily able to put off joining the WTO in order to prioritize seeing how VAT plays out once implemented on January 1, 2014.
He said that, in his opinion, the "attitude for one world order in free trade has dampened" of late given the "sluggishness with which the world is emerging from global recession".
"So arguments for it have generally lost their thrust," he said, adding: "I think the external pressure that would've been coming from certain countries to join, I don't think that's going to intensify."
In an interview with The Tribune in June, John Rolle, the Ministry of Finance's financial secretary, acknowledged that the proposed 7.5 percent rate would have to rise to compensate for the customs/excise tax cuts that will be required for full World Trade Organization (WTO) membership.
Asked whether the VAT rate would soon have to be increased, the Financial Secretary said "the experience" with the tax in its initial six months would be a key determinant.
"It's difficult to put a timeline on when that will happen," Rolle said of a VAT rate increase. "There is expectation that it will happen in the not-too-distant future."
The Bahamas Chamber of Commerce and Employers Confederation via its Coalition for Responsible Taxation fought hard to have the government lower the rate of VAT from its initial level of 15 percent to 7.5 percent.

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