The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

The Bahamas Federation of Retailers (BFR) yesterday hit back at a New Zealand consultant’s assertion that concerns surrounding Value-Added Tax’s (VAT) implementation date and associated costs, plus the ‘inclusive pricing’, were being overplayed.

The Federation told Tribune Business it was an “absolute mystery” why the Government did not want VAT exclusive pricing, while taking exception to comments by Dr Don Brash that the issue was not a big deal.

It said: “With all due respect to Dr Brash, our proximity to the largest market on the planet, the United States, which is a mere 30 minute flight away and has a massive on-line shopping industry that we are forced to compete with directly, does not make this a ‘one-off cost’ and this is a very big deal indeed. As a person trained in economics, he will readily understand this fact once presented with the proper context.”

The Federation added: “Bahamian businesses are being told that they have to include the VAT in the price at 7.5 per cent, but in Florida and the wider US market and Canada (our primary tourist markets), the sales tax or GST, respectively, are not built into the prices, so the shelf prices appear to be lower to the consumer as a result, and this impacts the decision to either make a purchase or not in the moment.

“If the top complaint of tourists is that the Bahamas is a high-priced destination, and if Bahamians are already crying out about high prices in the country as well, why is the Government forcing retailers to have higher shelf prices” retailers said.

“Why not keep us competitive by going with VAT exclusive pricing? More sales happening with local retailers means more VAT revenue to the Government. It’s a clear ‘win-win’, but our message just falls on deaf ears, it seems.

“VAT exclusive pricing will also help prevent inflation with VAT, for if businesses only have to charge 7.5 per cent then that is what they do, but if you ask them to reprice everything then inflation will be higher than 7.5 per cent. There are so many good reasons to go with exclusive pricing that it is an absolute mystery why the Government just doesn’t do it. It was their original position after all. The retailers want it, the grocers want it, the car dealers want it.”

The Federation added that VAT ‘inclusive’ pricing hides the Government’s tax, and its impact on prices, from the consumers.

It argued, though, that ‘exclusive pricing’ makes it transparent as to how much of a transaction is tax, and how much is just the cost of the item itself.

“This allows for better and more accurate price comparisons between online shopping and Bahamian shelf prices, which VAT inclusive pricing prevents. Exclusive pricing will also allow for easy variation of the VAT should the rate change in the future when duties are lowered even further. It is, by far, the most intelligent and simple solution to the issue of pricing,” said the Federation.

It added that if the Government was in the business of creating revenue for itself, and ensuring that the country has high employment levels, then it should listen to retailers.

The Federation said that if Dr Brash understood how much money this country is losing to Florida because of “a poorly thought-through tax policy”, he would “not be so glib about VAT being a ‘one off cost’.

“If he understands economics, which he seems to understand, then he should fully appreciate this reality once presented with the facts,” the Federation said.

“It isn’t just retailers that are losing money because of this uncompetitive approach to taxation; it’s the Bahamian government as well. The Bahamian government loses revenue when consumers opt to buy in Florida, in other parts of the United States, or on-line instead of shopping locally.

“It is far easier for the Government to collect revenue on a container of goods brought in by a business than it is for them to collect revenue from an individual’s personal suitcase. The inability of government to comprehend this simple reality is really quite shocking, and the Bahamas Federation of Retailers will not stop trying to bring this important and obvious truth to the wider public so that they, too, can ask for exclusive pricing,” the Federation added.

“VAT exclusive pricing will keep the country more competitive and will boost government revenue in the end. We are desperate for them to see the light. If retail is strengthened, then domestic consumption will expand. Bahamians will shop more locally. Tourists will spend more locally. The Government will collect more revenue.”