This paper assesses the evolution of Eastern Caribbean Currency Union (ECCU) real exchange rates over time, and examines whether the region has lost competitiveness. The main finding is that there is little evidence of overvaluation of the Eastern Caribbean (EC) dollar. The relationship summarized above permits the calculation of equilibrium current account balances or norms. The financing of ECCU current account imbalances appears stable. This paper also provides evidence on the distinctive impact that tourism plays in the determination of the real exchange rate in tourism-driven economies.
This paper focuses on tax reforms for increased buoyancy in The Bahamas. The Bahamas has a low tax effort owing to limited tax handles and underutilization of available ones. Real property tax collections as percent of GDP have doubled within a decade. In addition to the real property taxes, a graduated stamp duty on the conveyance of immovable property is imposed at fairly steep rates. As a requirement to World Trade Organization membership, the tariff rates will be lowered from their current levels. It is expected that revenue losses from tariff reduction will be compensated by value-added tax revenues.
Motivated by the concern that corporate income tax (CIT) competition may have eroded the tax base, this paper calculates average effective tax rates to measure the impact of CIT competition, including the widespread use of tax holidays, on the tax base for 15 countries in the Caribbean. The results not only confirm erosion of the tax base, but also show that CIT holidays must be removed for recent tax policy initiatives (such as accelerated depreciation, loss carry forward provisions, and tax harmonization) to be effective. These findings suggest that the authorities should either avoid granting CIT holidays or rely more on other taxes (including consumption taxes such as the value-added tax) in order to broaden the tax base.