The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

LEVYING Value-Added Tax (VAT) on duty-free merchandise was yesterday described as “counter-productive” to boosting tourist spending, with retailers calling on the Government to lower the existing tax burden on such goods.

The Bahamas Federation of Retailers, which represents more 100 retailers iopposing the implementation of VAT, urged the Government to find ways to lower the taxes on goods rather than increase them.

“Our country depends upon tourism to sustain and grow the economy. One of the attractions for tourists that come to the Bahamas is tax free or duty free shopping,” the Federation said.

“Adding VAT is counter-productive to increasing tourism and tourist spending. The Bahamas should be the place people want to go to shop, not a place Bahamians and residents alike leave in order to shop.

“This can only be achieved if the Government finds ways to reduce the taxes on goods, which have always been taxed at a very high rate, not increase them. The average rate of duty on goods is 35 per cent.

“Businesses want to find ways to deliver more competitive prices, but existing government duties make that very difficult to do if the cost of goods sold is already 35 per cent higher, on average, compared to the United States.”

John Rolle, financial secretary in the Ministry of Finance, told Tribune Business last week that the Ministry was in talks with duty free retailers over a system that would refund tourists their 15 per cent VAT payment.

He said the Government was looking to avoid revenue leakage while also preserving the duty-free retail, and tourism, industries’ competitiveness.

The Retail Federation, though, said the only way to boost employment in “a big way” was to increase the competitiveness of Bahamian businesses, especially retailers, by lowering the tax burden that already exists on goods.

“Adding taxes that will increase the cost of living in the Bahamas is not the answer. Finding ways to boost overall domestic consumption by lowering prices to the consumer will increase overall tax revenues to the Government,” the Federation said.

It added that the Government’s aim should be to grow the volume of business in the country, as this was a better way to improve its own revenues rather than increasing the percentage rate of taxation.

“This will boost the domestic consumption of Bahamians, residents and tourists alike, while boosting employment and tax revenues at the same time. Reducing unemployment in the private sector must be a central goal of any planned tax or fiscal reform, as this is the only tried and tested course for a sustainable economic recovery,” the Federation said.