The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The think-tank behind a controversial study on the new Value-Added Tax (VAT) yesterday urged the Government to “put the cards on the table and be more transparent” over its tax reform plans, suggesting it was itself unsure about the impact on the wider economy.

Rick Lowe, a senior executive with the Nassau Institute, said it was “incumbent on the Government to prove the case” for why VAT was the best tax reform option, arguing that it was “not a reasonable response” to call on the International Monetary Fund (IMF) to back it.

Noting that neither the Government nor any other private sector organisation had released a study on VAT’s likely impact on government finances, the consumer and wider economy, Mr Lowe called on critics to provide “specifics” when challenging its findings.

Responding to criticism by both the Ministry of Finance and CFAL analyst, Kevin Burrows, Mr Lowe urged them to “come with a purpose that refines the position; don’t come with a response that’s hyperbola”.

Questioning whether, based on the nature of its responses, the Government was more concerned about the Bahamas’ future or its image, Mr Lowe told Tribune Business: “We’re trying to help the country out of a dilemma not created by the taxpayer.....

“We’ve already heard businesses saying they’re having to look cutting out different parts of their business, laying off people because they cannot afford the computer systems and doing things to comply in a difficult economic climate.”

Acknowledging that the Nassau Institute study was “not perfect, but nothing’s perfect”, Mr Lowe said it had provided Bahamians with useful information on VAT and its potential implications.

The study, revealed last week, suggested VAT’s implementation come July 1, 2014, would see the Government suffer a net $165 million per annum drop in revenues, while private sector compliance costs would run to $103 million.

It was also projected that Bahamian GDP would decline by between $322 million to $483 million as a result of the Government’s tax reform centrepiece.

“The Government can use the study to help put the country back on a sound financial footing,” Mr Lowe argued yesterday. “It’s an independent study worthy of consideration.

“It’s important that the Government be transparent in any of their activities. This is a critical turning point in our country’s development, and it’s in our best interests for them to be transparent. But they don’t want to.

“I think what is happening is that they’re not sure how this impacts businesses and consumers. As comments and questions come up, they’re changing, as with VAT on electricity bills,” Mr Lowe added.

“They’re stumbling through like the rest of us, and don’t want to admit that. We all have to come out and go put those cards on the table.”

“The Bahamas is currently faced with a swelling budget deficit, a moribund economy and elevated unemployment,” the Nassau Institute paper said.

“This paper has shown that, if enacted, VAT adoption will not only adversely affect GDP growth, domestic consumption and domestic employment; it is also unlikely to achieve government revenue targets, all the while burdening the private sector with substantial compliance costs.

“The negative effects of VAT adoption, in the current economic climate, may force the Bahamian economy into further decline,” it added.

“VAT adoption, rather than restoring the economic foundation of the Bahamas through deficit and debt reduction, would only raise additional economic concerns.”