Reduction of the Middle Class and the Poor: VAT is a regressive tax. Regressive taxes tend to benefit the wealthy and punish the poor. Why? Compared to someone making $1 million a year, they may only spend 10% of their income, so only 10% is taxed. While, on the other hand, the impoverished citizen that earns up to $35,000 or less a year is being taxed on 100% of his income. Eventually, this forces domestic Bahamian citizens to purchase goods externally. As stated, “The total VAT sent to the Government will be exactly the amount of VAT paid by the consumer” (VAT, 7). This signifies that although the buyers and the retailers are being charge a “Purchasing VAT,” this still minuses the VAT that will be paid to the government that would allow the retailer to show as proof for his ‘tax return’. At the end of the day, it is then the consumer who pays the full amount of VAT that is owed to the government through its ‘Sales tax’ and if you put it all in perspective, the consumer is not only paying the buyer for supplying the goods, but also purchasing it. This kind of outlook can be detrimental to its citizens and establish a financial strain—which would diminish the middle class and suppress the poor and eventually forces the government to distribute more public funds to those incapable of paying VAT. This is why this will be a major disadvantage to its citizens. With the Bahamas being in close proximity of the US most of its citizens take advantage of shopping externally …show more content…
Compliance and Maintenance: Like every bill and new form of service that is introduced there is always a specialized team and budget that needs to be set in place to ensure that it is carried out to its full potential. In conjunction with ‘The Economic Consequences of the Value-Added Tax for The Bahamas’ this ignores the informal district and its administrative costs. “Government resources must be devoted to the education, assistance, and registration of over 8,000 prospective businesses that must use VAT” (Econ. Consequences…, 2013). As a result, this means that the government with have to dip into the country’s treasury that serves for more significant purposes like infrastructure and education to establish new departments, agencies and divisions in order to maintain VAT. Coherently, if you take a look at the Bahamian legal system it essentially lacks progression, therefore, by adding VAT and its compliances like, processing taxes and tax returns it would only slow down the judiciary process. What you must realize is that the Bahamas is a country that has very little background in tax resources, so managing additional taxes may prove to be overbearing. To elaborate, according to the Nassau Institute report, “Countries that are experienced, such as Canada, went over budget by 250%, according to the report, in administering VAT,” (Econ. Consequences, pg. 2). The Nassau Institute also goes on to mention the estimated total annum administrative cost of $65.7 million with