The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The implementation of Value Added Tax (VAT) will not have the impact on Bahamian manufacturers that was initially feared, an industry leader yesterday saying businesses were failing to see the “two sides of the coin”.

Kevin Simmons, head of the Bahamas Light Industries Development Council, told Tribune Business that the centrepiece of the Government’s tax reform proposals would have an effect ion manufacturers that was “far from” previous suggestions.

Mr Simmons, who heads Simmons Manufacturing Company, a shoe maker, disclosed that he met Michael Halkitis, minister of state for finance, to discuss VAT on Monday.

While declining to reveal details until he discussed them with his members, Mr Simmons said he was happy with the replies received from the Minister over the Government’s tax plans, and their potential impact on Bahamian manufacturers.

The Council president indicated that businesses were too focused on the 15 per cent VAT rate they might have to add to customer bills, plus pay on supplies, raw materials and equipment, to realise they could ‘net off’ the two in terms of what they paid to government.

In other words, Bahamian companies that have to pay VAT will deduct the VAT they pay on their ‘input costs’ from the 15 per cent levy they remit to government on their sales.

“There appears to have been a lot of misinformation circulating with regard to how VAT will affect us,” Mr Simmons told Tribune Business.

“I was satisfied with the answers we got [from Mr Halkitis]. It won’t have the kind of impact of manufacturing that had been circulating - far from it.

“There’s two sides of the coin; everyone is looking at the debit side, instead of the credit side. Most people are not focusing on the credit side.”

Mr Simmons also hinted that “some peculiarities” with regard to manufacturing in the Bahamas had been brought to the Government’s attention, noting, for example, the different inventory turn cycles between toilet paper (immediate) and shoes (his business, where product sometimes took a couple of months to move.

As a result, VAT-related carrying costs and payment schedules would vary between businesses.

Meanwhile, Mr Simmons said that while many “get panicky” over the thought of trade liberalisation and accession to full membership in the World Trade Organisation (WTO), the reality was that Bahamian manufacturers were already competing with foreign rivals.

“There were concerns, there are concerns and there will continue to be concerns,” he said of the manufacturing sector’s position on the WTO and trade liberalisation in general.

The Council, and industry’s, priority was to ensure that “a clear position” was always articulated to the Ministry of Financial Services, so negotiators could secure its interests in accession talks.

“We are seeking to have certain sectors reserved for Bahamian-owned manufacturers, but we have to determine exactly what the maximum period of time is that we can reserve them for,” Mr Simmons told Tribune Business.

“We have competition now. People often think that we don’t have competition, but we do. Every manufacturer is competing now with South Florida.”

With one South Florida county having more people than the entire Bahamas, Mr Simmons said manufacturers based there were able to enjoy economies of scale advantages over their Bahamian counterparts.

Electricity rates in South Florida are between 25 per cent to one-third of what is levied in the Bahamas, but Mr Simmons urged his colleagues to brace for extra competition coming from trade liberalisation.

“We can stand on the shore, but can’t hold back the tide,” he told Tribune Business.

“Competition brings out the best in us, and our athletes have proven for 20 years that we can win the gold. Just to be a manufacturer in the Bahamas says something. We are very resilient.”