The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A senior Grand Bahama Chamber of Commerce executive has warned that the target Value-Added Tax (VAT) implementation deadline is “just not on”, while its introduction will increase employment in a”fragile economy”.

Kevin D. Seymour, chairman of the Chamber’s ethics and legislation committee, also called for the Government to put greater focus on collecting its existing taxes before introducing new ones, questioning how effective VAT will be given leakages from the current system.

And he also urged the Government to pass “companion legislation” that would impose fiscal discipline and spending restraint, while ensuring extra revenues from VAT did not merely go on more public expenditure.

Speaking after the Grand Bahama Chamber submitted its formal feedback and recommendations on VAT to Prime Minister Perry Christie, Mr Seymour, a former PricewaterhouseCoopers (PwC) Bahamas partner, indicated it had expressed concerns that the new tax could push the Bahamas back into recession.

“We believe at this fragile point in the recovery, if the Government insists on forging ahead with VAT on July 1, given the level of unemployment we’re suffering right now, it’s going to make it worse,” he told Tribune Business.

“We feel instead that an austerity position should be taken in cutting back on expenditure, but at the same time encourage growth.”

Any reversal of existing employment trends would be especially bad news for Grand Bahama. The Department of Statistics survey for the period October 28 to November 3, 2013, found the island’s unemployment rate dropped to a still-high 16.8 per cent, but down from the 19.5 per cent in May 2013.

Speaking to VAT specifically, Mr Seymour said: “When we considered all of the pros and cons, we certainly felt there isn’t sufficient time for the Government and business community, at this stage of the game, to prepare for implementation by July 1.

“That’s just not on. There’s not enough preparation time. Businesses have to fully understand the implications. We don’t think it should be implemented on July 1. We need more time.”

Mr Seymour added that the Grand Bahama Chamber had also expressed concern about VAT increasing the general level of prices throughout the Bahamas, and the regressive nature of the tax.

“Some people have jumped to the other side and agreed with Government needing these additional revenues, but we’d like to have greater transparency on what the Government is collecting currently from the revenues it is authorised to collect,” Mr Seymour added.

“We don’t believe the most efficient job is being done in that area, and if that is the case, how can they efficiently collect VAT, which is a lot more challenging by way of reporting.”

Businesses will be collecting tax for the Government under VAT, and Mr Seymour said: “Before we get to the point where we say another tax is warranted, we’d like to see the Government take specific steps in the current collection effort, as well as look at the civil service in its entirety and see if any efficiencies can be achieved - see if it’s over-burdened, and we can use more IT instead of manpower.”

A standing committee was set up under the Chamber’s ethics and legislation committee to specifically examine VAT, and Mr Seymour said its recommendations had focused on government spending as well as its revenues.

He told Tribune Business: “If the Government is minded to forge ahead with taxation, VAT, payroll or another form of tax, the Government should pass a companion piece of legislation that speaks to debt reduction and curbing their expenditure.

“Even if a new tax can be successfully levied and implemented, unless we display a level of discipline, these taxes will go to new programmes, and this whole question of debt might be something we’re still tackling 20 years down the road.”

While it may not be achievable instantly, Mr Seymour said the Government had to “strive towards a balanced Budget”.

He explained that the Chamber’s standing committee had adopted a methodical approach to its analysis, with its members drawn mainly from the private sector.

VAT was examined from both a Bahamian and global perspective, and in terms of its impact on Freeport and Grand Bahama under the Hawksbill Creek Agreement.

While lacking the “war chest” for a scientific analysis of VAT, Mr Seymour said the committee gauged the opinion of both consumers and businesses via focus groups. Many, he added, were seeking information on tax and fiscal reform.