The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government’s planned Value-Added Tax (VAT) and other reforms are being driven by international trade treaties, a well-known attorney said yesterday, warning the private sector: “We must act like first world businesses.”

Going so far as to suggest that the imminent VAT legislation and regulations were largely being drafted by foreigners, Carey Leonard said external forces such as the World Trade Organisation (WTO) and International Monetary Fund (IMF) - rather than the Bahamian government - were driving the fast-paced reform agenda.

Suggesting that the Bahamas had effectively ceded much economic sovereignty in signing up to rules-based trading regimes, the Callenders & Co attorney urged the private sector to wake-up and become more proactive in shaping the business environment set to shortly descend upon them.

Addressing Freeport’s Rotary Club, Mr Leonard said VAT, together with the new Customs Management Act, and impending intellectual property and sanitary/phytosanitary regime legislation, were also designed to meet the requirements of the Economic Partnership Agreement (EPA) and full World Trade Organisation (WTO) membership.

Mr Leonard, the Grand Bahama Port Authority’s (GBPA) former in-house counsel, said: “We can’t stop them. Masses of new legislation and regulations are on the way.

“These new laws and regulations are not being driven by a political party with a political agenda, but are treaty driven...... Our laws and regulations must be made to conform with the WTO rules that all the other countries in North America, Central America and South America have already agreed to, as have the other 100-plus countries who are also members. The Bahamas is not negotiating any of the rules; only how we are going to fit in to the existing rules.”

This, Mr Leonard argued, also applied to VAT, which the Government has also billed as the centrepiece of the tax reform necessary to address its fiscal woes.

“VAT is treaty driven,” he said. “It is a requirement of the EPA, which the Bahamas negotiated between 2002 to end of 2007, and signed in April 2008.

“VAT is also a requirement of WTO. Also, the rating agencies are watching. These agencies want to see the Bahamas have a VAT system. I understand that the IMF would also like to see the Bahamas introduce VAT.

“This is not a matter of choice; it is compulsory. Indeed, I understand that our Government, the Bahamas Government, the Government of a sovereign nation was told, or should I say advised, as to who should draft the VAT legislation. This, and indeed much of the new legislation, is being drafted by foreigners.”

Mr Leonard said the Bahamas had “no choice” on any of this, and the private sector had to “be ready” for the changes, rather than complain when they arrived.

“This is first world legislation, and we must act like first world businesses,” Mr Leonard warned. “Are we getting ready for it? How will we deal with the new regulatory regimes? What part are we, The Business sector, playing in the negotiating process?

“The WTO process expects that the business sector will play its part, give its input. There have already been visit by the Bahamas Negotiating team to Freeport. Who of us attended? As far as the rest of the world is concerned, we are being consulted, and if we have made no comments must, by our silence, be happy with what is being negotiated by the Bahamas Working Team.”

Mr Leonard added: “We will not be able to change the timing of the introduction of various aspects of WTO after it is signed.

“The Bahamas is going to have to amend much of its legislation, and much of the discretion in many matters, currently enjoyed by ministers of government, is going to be taken from them so we won’t be able to go running to our MP or Minister to have something changed.

“We must make our wishes known now. After the agreement is signed, the die will have been cast. We must get together or divided we will fall.”

Noting that many of the nationality-based protections, such as the National Investment Policy reserving certain industries for 100 per cent Bahamian ownership only, would disappear under the WTO and EPA, Mr Leonard questioned how local companies would respond to the increased competition.

“As The Bahamas transverses into the WTO, and protection of businesses on the grounds of nationality disappears, many locally, closely-held companies will find that they need to raise extra capital to survive or may wish to go public or sell out, and corporate governance is going to be critical,”Mr Leonard warned.