The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Super Value’s owner has lauded the Bahamas’ Value-Added Tax (VAT) as “the lowest and simplest in the world”, adding: “Children could put in the returns.”

Rupert Roberts told Tribune Business that it was “a great relief” for the private sector when the Government radically altered its original ‘15 per cent VAT’ proposal to a broad-based, few exemptions, model.

Arguing that the first VAT design would have been “impossible” to implement, Mr Roberts said the 7.5 per cent rate and model was the product of close collaboration between the Government, private sector and New Zealand consultants.

He added that most consumers now seemed to have adjusted to VAT, and realised they needed to pay if the Government was to provide the services and infrastructure society is demanding.

“We gave Government their VAT, and I sent our New Zealand friend, Dr Don Brash, a ‘Merry Christmas’ wish, thanking him for helping the Bahamas with the lowest and simplest VAT in the world,” Mr Roberts told Tribune Business.

“It was so confusing when it started out at 15 per cent on only selected items. It was really frightening. We’d never have been able to do it accounting wise. It just couldn’t be done. A 15 per cent VAT on half the items couldn’t be done. It was impossible.”

Food retailers such as Super Value would have been subject to particular duress under the Government’s initial VAT model, as it proposed treating between 50-75 per cent of their inventories as ‘exempt’.

Apart from creating an accounting nightmare, this would have meant supermarkets and neighbourhood food stores being unable to reclaim, or ‘net off’, between 50-75 per cent of their VAT input payments, imposing a massive cost increase upon them.

This, in turn, would have been exacerbated by the fact that many food products, especially so-called ‘breadbasket’ staples, are price controlled - meaning food retailers would be unable to increase many of their prices to compensate for the increased costs.

Now, with VAT’s first year behind the Bahamas, Mr Roberts told Tribune Business: “It was a great relief when it became all-inclusive and it started out at half of what they said it would - 7.5 per cent instead of 15 per cent.

“Really, children can do it now. It was the Government working with the New Zealanders and the Coalition for Responsible Taxation that achieved that outcome. Children could put in the returns.”

Despite the initial pain, and reduction in disposable income, Mr Roberts said he thought most Bahamian consumers had adjusted to - and accepted - VAT.

“I think the consumers have accepted they have to pay taxes,” he added.

“They can’t continue to receive services, have a police force, nice roads, garbage collection and all the things that the country needs without paying taxes.”

Mr Roberts’ views on VAT are not likely to be universally shared, especially among other Bahamian businesses, with many viewing the tax - and its impact on consumers - as a key factor in what is generally regarded as a slow Christmas shopping season.

Branville McCartney, the Democratic National Alliance’s (DNA) leader, told Tribune Business that VAT had caused “a 10 per cent slow down” in the businesses he and his family are invested in.

“VAT, and I’ve seen it in the businesses I’m invested in, has caused commerce to slow down,” Mr McCartney said. “If you speak to the average businessman, he would say business has got worse since VAT’s introduction.

“Business has dropped by 10 per cent. This Christmas was slow; business was down. It’s combination of VAT and a combination of unemployment; people not having jobs, and no money in their wallet.”

He added: “The Bahamas is not a good place at this time. The year 2015 was a terrible year for our country - from crime to the economy, and our environment and our people.

“The despair index our people have; look at their faces, and the despair on their faces. I see it every day. I pray every day that this changes, and we move forward. Something’s got to give. We can’t continue like this.

“Things have been sliding backwards since 2008. We haven’t caught ourselves, and people are struggling to put food on the table and keep roofs over their heads.”

While VAT has increased the Government’s revenue intake and narrowed its fiscal deficit, it has yet to prove a ‘panacea’ in terms of reducing the ever-increasing $6.5 billion national debt.

Despite collecting $229.5 million in VAT for the four months to end-October, the Government’s finances were still in deficit, although the ‘red ink’ had been reduced by $113.5 million or 57 per cent to $85.5 million.

And, although VAT accounted for almost 38 per cent of the Government’s revenues during the 2015-2016 fiscal year’s first quarter, the national debt still rose by $133.7 million or 2.1 per cent over that same period.

For the 12 months to end-September 2015, the national debt rose by almost $514 million to $6.511 billion - a surprise to those who believed the Government’s rationale for implementing VAT was to eliminate the fiscal deficit and lower the national debt.

The private sector, and many Bahamians, had accepted VAT’s implementation on the basis it would achieve these benefits despite the ‘wealth transfer’ to the public sector that it would cause.

John Rolle, the now-former financial secretary, previously told Tribune Business that the Government’s fiscal consolidation strategy was on track, and it had reduced both the fiscal deficit and rise in the debt-to-GDP ratio.

However, the resulting economic slowdown due to VAT’s impact on consumer spending has alarmed many businesses.

And they are increasingly concerned over whether the Government is instead using VAT revenues to finance projects such as National Health Insurance (NHI), as public spending continues to rise.

The Christie administration, as reported previously by Tribune Business, has also failed to deliver on promises and timelines regarding Fiscal Responsibility-type legislation.

This has left many wondering whether it even wants to begin discussing improved fiscal transparency and accountability.