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Tax Coalition: Phase Vat In Over Three Years

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government should examine “phasing in” Value-Added Tax (VAT) over a three-year period, a co-chair of the private sector’s Coalition for Responsible Taxation warning: “You can’t implement taxes to the peril of the economy.”

Robert Myers, speaking to Tribune Business as the Coalition released its VAT ‘Queries and Recommendations’ submitted to the Government on October 28, reiterated that the “fear” in the private sector about the consequences of tax reform stemmed from the Government’s failure to-date to prove adequate information and consultation time.

Agreeing that the Government could be “100 per cent right” over the direction it was taking with tax reform, Mr Myers said it needed to show this was so by “sharing” all the studies and specifics it possessed.

“This is a fundamental change in this country’s way of doing business,” he told this newspaper. “This is a fundamental change in the way everyone lives and does business.

“Let’s get all the facts on the table and hash it out. There’s no need top throw rocks at each other. We all benefit from the right solution. Let’s make the right decision as a nation.”

The Coalition identified 12 areas of ‘macroeconomic concern’ in its latest missive to the Government over VAT, and Mr Myers told Tribune Business: “First and foremost, you cannot implement taxes to the peril of the economy.

“That is the primary objective. There are just too many examples, in Barbados, Grenada, where their economy was troubled. They tried to resolve it by introducing new taxes, and that sent the economy backwards.”

Mr Myers said Grenada, for example, was now reducing VAT on construction materials and providing incentives to encourage contractors after the tax’s implementation “killed” the sector there.

While there was no evidence to suggest something similar would happen in the Bahamas, he added: “It’s just to say that if this is happening elsewhere, maybe we should take a look at it.”

In the ‘Queries and Recommendations’ sent to the Government, the Coalition reiterated that VAT’s implementation was “a seismic change to the system” that meant both the Government and private sector needed adequate time to prepare.

Restating its previous call for VAT implementation to be delayed for at least 12 months after the relevant legislation, regulations and Tariff Schedule had been released, the Coalition added: “Consideration should be given to phasing in VAT over a reasonable period, for example, three years, to minimise the potential negative impacts of inflation.”

Government minister and Ministry of Finance officials, particularly those working on VAT’s implementation, have suggested that the Bahamian business community’s fears are “unwarranted” and, in some instances, amount to ‘scaremongering’.

But Mr Myers and the Coalition have both pointed out that this has resulted directly from the ‘information vacuum’ created by the Government’s failure to publish the specifics on VAT, including studies on its likely impact that have been done - or are being done - by the likes of the International Monetary Fund (IMF) and Inter-American Development Bank (IDB).

Acknowledging that this had sometimes resulted in “hysteria and one-sided debate”, the Coalition added: “The lack of such information to date has contributed to the paranoia and apprehension of the business community and consumers.”

Mr Myers told Tribune Business: “There is this perception, fear in the marketplace, and you are having the result of not providing adequate time and information.

“Maybe you [the Government] know what we don’t know, but share it. Maybe you’re 100 per cent right. We don’t know, but share it. It’s so frustrating.

“You can already see certain businessmen, the fact that they’re now backtracking themselves on certain projects, is not good for the economy. That creates uneasiness.”

The Coalition, meanwhile, told the Government that VAT’s inflationary impacts, which has admitted itself, could have “consequences” for the Bahamas’ economic recovery.

Calling on the Christie administration to collaborate with the Bahamian private sector “to obtain the greatest possible buy-in by registered businesses and consumers”, the Coalition warned: “The majority of businesses have been experiencing an inability to increases prices in the past few years.

“Gross profit and net profit margins have been reduced following the recession, with no evidence of an ability of consumers to withstand price increases.

“Low net profits or net losses threaten the viability of small and medium-sized businesses.”

Mr Myers praised the Government for containing inefficiency, waste and shrinkage in its spending, and agreed that it needed more revenue to tackle its chronic deficit/debt problems, and the imbalances in the public finances.

But he warned: “To make a mistake and it backfires.... Do you want growth to slip by 2 per cent, 4 per cent, slip into negative growth? I don’t think that’s the desired result.

“Maybe take longer to get into this. No one says you don’t need more revenue, but let’s be measured.”

And the Coalition co-chair added: “We’ve got to make sure this is right for us, and not just right for the business community or right for the Government.

“It’s got to be right for the consumer, right for the private sector and right for the Government. Right in the broadest sense of the word. It’s just not been done. That kind of inclusiveness is not there.”

Comments

watcher 6 years, 3 months ago

One can hear the desperation in Mr Myers voice as he pleads with government to share what data they have on VAT, but the simple fact is - Government has nothing, and is only being guided by its mysterious international masters.

As time passes I become more and more skeptical that anyone in government actually knows what is going on. Were we not promised the discussion papers "within two weeks" about three weeks ago ???

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B_I_D___ 6 years, 3 months ago

More like June or July of this year. How about that campaign promise of not increasing any taxes or duties? Seems like that is all they are doing...increasing fees and driving the cost of living sky high.

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john33xyz 6 years, 3 months ago

Never a truer word spoken. I believe this is one of the main reasons why discussions in Cabinet are forbidden to be spoken (against the Law) - because only there do you find out (after you've "won power") that you don't have any power at all (except maybe to put up a traffic sign).

Over the past 40 years we have borrowed hundreds of millions of dollars from international agencies to pay for baby food and diapers - and now it is time to pay the piper.

We owe the masters, and are mere slaves pretending to live in an "independent" country. Every July 10th we put on a good show - but the rest of the year we live the true reality.

Bahamians need to get ready to eat more corned beef and grits, johnny-cake, rice, and other cheap sustenance foods. Our costs for food and survival in general will go up. The illegal aliens, however, will not pay a dime more. Their items and services will be exempt from the VAT because "we don't want to hurt the poor".

The philosophy of Bahamian and USA governments is "Don't hurt the poor; Let the poor make more (poor)."

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concernedcitizen 6 years, 3 months ago

we have been borrowing since the late 70,s to absorb our prolific baby making w/ public service jobs , no economy is substianable when 1 in 4 people work for the government .Now the bill has come due .With out a drastic shift in our additude and mores about sexual habits ,which there won,t be ,there will be ever increasing crime and poverty .In our normal arrogant way we will blame it on everything thing else ,foreigners the government etc ,instead of looking at ourselves ,,It really is that simple ,you can look at our neighbors in the region that make children faster then any GDP growth can absorb and see the outcome ,,crime and poverty ,,

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John 6 years, 3 months ago

If government doesn't do something real soon to get this economy moving there will not be anything to VATEmphasiscome July 2014. Do you know how many businesses are just a light bill or a payroll away from closing down? And so many have all * hopes and prayers that the Christmas season will save them. But unfortunately many doors will close come January. And February March and April (and May) will not have the referendum money to prop up the economy like it did this year. ANd make things look better than it actually is. In fact more money is being sucked out of this ailing economy than ever before as more and more web shops open across these islands and suck out every dollar that is needed to keep the economy afloat. The cash for gold*stores came in and carted off millions and millions of dollars in gold and jewelry, some by the book and some by the crook, for mere pennies on the dollar, and now even jewelry stores cannot sell their merchandise because everyone is afraid to wear anything that even looks valuable. And you know what the scary thing about Nassau/New Providence is? Just drive around and look. Everyone's income is dependent on someone else. If the tourist don't come then thousands don't get nothing to eat, If the school children don't go to school teachers don't eat and so on with the taxi drivers and the policemen and the fast food workers..Did someone mention food? How much food is produced on this island? How much of anything is produced on this island? If you go to the far south of the island you see that farms that use to produce some crops are now being bulldozed to make way for housing projects or shopping centers or some other addition to this concrete jungle we call Nassau. And guess what..Soon a lot of us gonna be trying to kick our ownselves in our own backsides and asking..How ould we build a city unto itself like this and not plan for anything to eat..or not even plan to make anything to get something to eat..! There was this guy in college who would knock on your door during the night. He would usually be holding a bag of bread and would say "I got some bread, you gat anything to go with it. At least he had some bread and in hard times, bread can be half ways to a sandwich or even a meal of its own.. nuff said.

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Cornel 6 years, 3 months ago

Phase it in over three years. For the first two businesses can collect the VAT and then in the third year they can pay the Government what ever cash they have left.

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ohdrap4 6 years, 3 months ago

Very few people are concerned with VAT. Many do not know it's coming, others do not understand that costs will go up.

The failure of the Government to reveal the content of legislation is abismal and, even the tribune blogger warriors have resorted to sarcastic comments (I included).

A number of radio ads have been released. I was astounded that one of them said something like:

"If your business is not subject to VAT registration, you cannot apply for refunds, however, you are entiltled to mark up the products to make your percentage profit"

Sounds like a recipe for inflation to me.

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