Macroeconomic Effect of VAT on the
Macroeconomic Effect of VAT on the Bahamas
Teresa Taylor
Omega College
Macroeconomics – ECON233
Mr. C. Lunn
November 26th, 2014
TABLE OF CONTENTS
Introduction………………………………………………………………………………………..3
Value-Added Tax in the Caribbean………………………………………………………………………………………….4
Value Added Tax in the Bahamas: Reasons for Implementation…………………………………4
Debate over the Implementation of Value-Added Tax in the Bahamas…………………………..7
Suggested Alternatives to Value Added Taxation……………………………………………….13
Ensuring Maximum Yield of Value-Added Taxation…………………………………………...13
Conclusion……………………………………………………………………………………….16
References ………………………………………………………………………………………18
Introduction
The value added tax is a kind of multiphase tax, which is calculated and collected according a percentage of value added of the goods and services produced and supplied in the process of production and distribution cycle. This tax in fact, is a kind of tax on multiphase sales, which exempts the purchase of intermediate goods and services from tax payment. Put differently, Value Added Tax is a form of consumption tax which is placed on the amount by which the value of an article has been increased at each stage of its production or distribution. This tax is intended to generate revenue for the government of a country. A VAT tax is similar to a sales tax in that only the end consumer is taxed. From the buyer’s perspective, it is a tax on the purchase price and from the seller’s perspective it is a tax on the value added to a product, material or service by this phase in its manufacture or distribution. Below, is a table giving an example of how the Value Added taxation operates taken from the “White Paper on Tax Reform to Secure Adequate Revenue for the Future” published by the Bahamas Ministry of Finance.
Price
VAT Paid at 15%
VAT Remitted to Government
A farmer cuts down trees and sells them to a lumber mill for $20.00, charging 15% VAT of $3.00 which he remits to the government
$20.00
$3.00
$3.00
The
Teresa Taylor
Omega College
Macroeconomics – ECON233
Mr. C. Lunn
November 26th, 2014
TABLE OF CONTENTS
Introduction………………………………………………………………………………………..3
Value-Added Tax in the Caribbean………………………………………………………………………………………….4
Value Added Tax in the Bahamas: Reasons for Implementation…………………………………4
Debate over the Implementation of Value-Added Tax in the Bahamas…………………………..7
Suggested Alternatives to Value Added Taxation……………………………………………….13
Ensuring Maximum Yield of Value-Added Taxation…………………………………………...13
Conclusion……………………………………………………………………………………….16
References ………………………………………………………………………………………18
Introduction
The value added tax is a kind of multiphase tax, which is calculated and collected according a percentage of value added of the goods and services produced and supplied in the process of production and distribution cycle. This tax in fact, is a kind of tax on multiphase sales, which exempts the purchase of intermediate goods and services from tax payment. Put differently, Value Added Tax is a form of consumption tax which is placed on the amount by which the value of an article has been increased at each stage of its production or distribution. This tax is intended to generate revenue for the government of a country. A VAT tax is similar to a sales tax in that only the end consumer is taxed. From the buyer’s perspective, it is a tax on the purchase price and from the seller’s perspective it is a tax on the value added to a product, material or service by this phase in its manufacture or distribution. Below, is a table giving an example of how the Value Added taxation operates taken from the “White Paper on Tax Reform to Secure Adequate Revenue for the Future” published by the Bahamas Ministry of Finance.
Price
VAT Paid at 15%
VAT Remitted to Government
A farmer cuts down trees and sells them to a lumber mill for $20.00, charging 15% VAT of $3.00 which he remits to the government
$20.00
$3.00
$3.00
The