1. THE BAHAMAS for Caribbean Organization of Tax Administrators Belize 21 st – 24 th July 2008

2. “Impact of Trade Liberalization on a Modern Tax System” The Bahamas Perspective by Ehurd Cunningham F.C.C.A.

3. Strategic Plan on Trade  Five principles that guide the strategic plan on trade  Designed to enhance the preparedness of the economy for success in an increasingly competitive international environment

4. Principles that Guide the Strategic Plan  Ensure increased transparency in economic and government systems  Form strategic international partnerships with nations within the Caribbean Community and the Association of Caribbean States  Negotiate membership in the World Trade Organization to create new markets for Bahamian products  Ensuring that investments and trade arrangements agreed and entered into serve the best interest of Bahamians  Eliminate to the extent possible, bureaucratic requirements that reduce transparency, contribute to delay and increase costs

5. Safeguards  Injury to domestic industry producing like or directly competitive products  Disturbances in a sector of the economy particularly where the disturbance produces social problems  Raise enough revenue to finance essential expenditure without recourse to excessive public sector borrowing

6. Fiscal Summary 2008 /9 $ Million

7. Policy decisions that have Implications for Trade policy Trade in Goods:  Amalgamation of customs tariff and stamp tax  Simplification of tariffs (reduction in numbers of rates)  Eliminate multi-rates for similar items  Simplification of documentation, automating processes and use of scanners

8. (Continued)  Trade in Services: – Creation of a one-stop investment agency

9. Intra-Regional Trade  Anticipated benefits to be gained  Bahamas trade with the region is miniscule (hardly exceeds one-half of 1% of total imports)  Participation CSME may provide more regional export opportunities not currently available

10. Trade with the United States  80 per cent of imports come from the US  Negotiations with the US must take into account period to liberalise on the goods side of trade, Tariff and Excise Tax regime

11. Administrative co-operation  Essential for the implementation and control of preferential treatments  Necessary to avoid irregularities and fraud

12. Customs and Legislative Procedures  Need to protect and facilitate trade through enforcement of and compliance with legislative requirements  Need to ensure that requirements for economic operators are reasonable  Need to apply single administrative document or electronic equivalent  Need to apply modern customs techniques, including risk assessment, and simplified procedures at imports and exports  Need for transparency

13. Implications for Revenue Consider:  Sources of revenue  Ranking of the revenue source  Elasticity of the revenue source

14. Impact on Government Revenue  Average rate of Customs duty was 35% but now 42%  Reduction in revenue would have to be replaced from alternative source

15. Action Plan  Determine the levels of imports and exports  Determine which items will be placed in the list of Excluded, Zero (no duty) and Phased Items  Availability of reliable statistical data

16. Action Plan (Cont’d)  Amalgamate stamp duty with Customs tariff  Introduce new Excise Act (apply equally to both imports and domestic production)  Review of duty free items  Enhancement of revenue compliance

17. Enhancement of Revenue  Engagement of Revenue Compliance Officers  Use of information technology to block leakages in revenue  Improved customer service (Awareness of revenue implications)

18. Alternative Revenue Sources  Trade policy will bring about the need to address other issues: – Political acceptability – Revenue adequacy and stability – Revenue diversification – Economic neutrality – Administrative machinery

19. Possible Alternatives to Customs Duty  Areas being discussed in the public domain  Sales Tax  Value Added Tax

20. Conclusion  Policy on trade is a sensitive matter  Every effort should be taken to develop a modern and efficient tax system (avoid too many small tax systems)  Policy is often the art of the possible, rather than the pursuit of the optimal