Wednesday, November 24, 2010
Wednesday, November 24, 2010
Since tariffs are viewed as an impediment to trade, The Bahamas’ bid to join the World Trade Organization (WTO) will likely result in the nation having to slash its 33 per cent average tariff rate, to fall more in line with the nine per cent levied by other WTO members.
“We have to go through a painful process of identifying which categories are going to be changed in order to accomplish a lower average in tariff,”?says WTO chief negotiator and chartered accountant Raymond Winder. He was speaking at a seminar hosted by the Bahamas Institute of Chartered Accountants last week.
In The Bahamas there is an absence of direct taxation. That is, there’s no income, capital gains, gift, wealth, or estate tax. Rather, the government collects taxes on imports, whether directly on imported goods, or indirectly in locally produced goods that use imported materials.
According to Winder, the reality is, opening the door to world trade partners means some industries (such as light manufacturing) are going to “die a slow death,” while others such as finance and tourism will thrive.
The Bahamas is the only country in the western hemisphere that’s not a part of the 153-member states of the WTO–the body that sets the ground rules for international trade. To become a member of the WTO, a country has to go through an accession process involving multilateral and bilateral negotiations. According to Winder, it is a “very intense” and “technical” process that involves every facet of life.
Accession terms depend on the legal institutional framework of the acceding government and are different for each applicant.
The Bahamas had its first working meeting with the WTO in September this year.
Although the country applied for membership in 2001, the government changed hands in 2002 and developments stalled for several years.
Winder says The Bahamas must join the WTO to protect existing and future market access into the US, Canada and other large markets for exports of Bahamian goods and services.
Currently, the only trade agreement The Bahamas has, is with the European Union and CARIFORUM countries in the form of the Economic Partnership Agreement (EPA), which was signed in 2008.
So far, The Bahamas has fielded more than 400 questions from the WTO.
According to the WTO: “The Bahamas appears to maintain an extreme list of duty exemptions and programmes of duty exemptions to facilitate investment. It appears that The Bahamas current tax structure is pursuing contradictory goals.” It is contradictory in the sense that government grants exemptions, while continuing to rely on duty as a means of raising revenue.
The WTO suggests,?“It may be necessary for The Bahamas to, over time, reduce taxes that target imports in order to foster economic development.”
Furthermore, the organization asks whether The Bahamas has considered alternative sources of government revenue such as sales, or excise tax.