The Tribune

“VALUE added tax (VAT) is viable in the Bahamas,” according to Kendrick Christie, president of the Bahamas chapter of the Association of Certified Fraud Examiners.

As for Michael Halkitis, minister of state for finance, he too was hopeful. He anticipated that job creation from such projects as Baha Mar, Albany and the Sunwing investment in Freeport would spark an economic boost that would offset any negative fall-out from VAT.

According to Kendrick Christie, since its introduction VAT has been the most successful fiscal tool worldwide for revenue generation. He claimed that no other taxation system has been adopted more rapidly than VAT, which has since become the mainstay of national finances for developed and developing countries.

It is true that VAT is a revenue generator, but, as Robert Myers, co-chairman of the Coalition for Responsible Taxation, put it, Bahamians must also understand that VAT is a consumer tax, more than it is a business tax, and as such it is the consumer who is the one who will feel the pinch in his pocket.

Among mainstream Bahamians, the picture was not so bright.

Although draft legislation was presented to parliament late in November, there are still too many unanswered questions. According to many who have attended government’s educational seminars, it would appear that neither the government nor Financial Secretary John Rolle was prepared for the wide-ranging technical questions being asked by the business community. Many have come from some of these sessions with such comments as the government is out of its depth, it just does not know what it is doing — and with its late start, VAT’s July 1 implementation date is just not practical.

“VAT is not killing us,” said an angry young businessman over the weekend. “It’s the fear and uncertainty of VAT that is killing us — all business plans are either on hold, or drastic cutbacks have already started. No one has any confidence that government knows what it is doing.”

He said that his company had been engaged to do a million dollar project, only to be told recently that all plans had been cancelled — “the future is too uncertain” was the explanation.

The brain drain has also started. The young business person said that it was sad that so many Bahamians have lost confidence and have either started to leave the Bahamas, or are planning to leave.

“These are the people with the talent that is needed in this country,” he remarked.

Several successful business persons have vowed that “if push comes to shove” they will close their long-established businesses and retire. If some of the persons whose names were called are serious about their threats, then this country should prepare itself for a shock and lengthening unemployment lines.

“It is no secret,” said a businessman in a position to know, “that the political life of most governments that have introduced VAT have been shortened at the next election.”

What he was saying was that VAT would be the nail in the Christie government’s coffin come 2017.

Owen Arthur, former Barbados prime minister, who introduced VAT to Barbados in the nineties, visited the Bahamas in July last year to give his opinion on how best to introduce VAT, which he described as a “complex tax to design and to administer”. He said that the “success of the new tax will depend on the strength and sensitivity surrounding the planning and administration of its introduction”. He advised that to meet this challenge, government had to have significant consultation on legislation “to encourage strong stakeholder sense of ownership of the new tax”. The Bahamas government has completely failed in this department.

“A systematic effort also has to be made,” he said, “to deal with the registration of those liable to pay the tax, and to iron out the transitional problems which are sure to arise as one tax regime is replaced by another. One major transitional issue is sure to concern the procedures that are put in to be in place to enable businesses to manage inventories as one tax regime is replaced by another.”

This obviously has not been done as government and the Coalition for Responsible Taxation lock horns over government’s bonded warehouse plan.

Robert Myers, the Coalition’s co-chairman, has complained that government is increasingly taking a “very dictatorial position”. Contrary to Mr Owens’ advice, the Bahamas government has not made the business community feel that “sense of ownership of the new tax”.

The difficulty is obvious: Government with no idea of business is trying to barge into a territory for which it has no expertise.

Mr Myers says that government’s insistence on certain technical aspects for VAT implementation is making his job of trying to build consensus between government and the private sector even harder. He said government was “inciting and infuriating” his constituents.

“Bonded warehouses are just not practical. Separate warehouses are not possible, not practical,” he told Tribune Business. “They (the Government) have no understanding of industry or business.

“It’s not up for discussion. It’s a standstill. What are they (the Government) going to do? We’re not going to do it. We’re at a Mexican stand-off.”

This would indeed by a tragedy.

Bahamians understand that the public debt has to be paid off —but they do not believe that VAT is the answer. It is now up to government to be open to suggestions and compromise.