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IMF Recommends Bahamas Consumption Tax
The International Monetary Fund has published its Article IV consultation with the Bahamas, which contains recommendations for the government to introduce a broad-based consumption tax to aid debt reduction efforts amid a continued contraction in the islands' financial services and construction sectors.
Presenting recommendations after a weak recovery in 2010, the IMF said the key policy challenge is to ensure sustainable public finances. The Fund called on the government to improve tax collection and administration processes and reduce the cost of tax collection.
The IMF Executive Board noted that tax reform should focus on implementing a broad-based consumption tax, which it said would strengthen the territory's fiscal position. Retrenchment in government spending was also advised.
Although growth recovered to 1% of gross domestic product in 2010, the rebound was driven by trade, the hospitality, transport and government services sectors. The construction and offshore financial services sectors, which provide considerable revenue for the government, continued to contract.
On the financial services sector, the IMF commended authorities' measures to strengthen financial sector supervision, including through an enhanced Anti-Money Laundering/Combat the Financing of Terrorism legislative framework.
To further improve the sector's stability, the IMF called for the timely implementation of plans to establish a credit bureau and bring credit unions under the supervisory oversight of the central bank.
Noting the high level of non-performing loans and limited provisioning, the IMF Executive Board also called on the authorities to further intensify the monitoring of financial institutions.
Quelle: Investors Offshore.com
