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To Be Or Not To Be - Bahamians Want Answers On Vat

BAHAMIAN businessmen are becoming more agitated as the date for the implementation of VAT nears with only reassurances from legislators that draft legislation as to what it will mean to them is on its way.

Gowon Bowe, a Tax Coalition co-chair, has urged that the proposed legislation be brought to parliament before it takes its summer recess.

“If we don’t do a lot in the next six to eight weeks,” he said, “we would be right back in the same situation we were facing when we were looking at July 1 as the implementation date, with the business community again saying that they don’t have enough time.”

Mr Bowe said that the business community has still not had “the critical elements. There is no legislation, no regulations on what will be exempt, or what is ultimately going to happen. We need to urge the Government to be proactive.

“There is a concern,” said Mr Bowe, “that time isn’t on our side in that regard. We understand that there was a lot going on in the Budget, but now that is out of the way, this is the most critical time in terms of our fiscal course of action. We have had some casual conversations with the Financial Secretary and he had indicated that they were just waiting on Cabinet now.”

John Rolle, the Ministry of Finance’s financial secretary, recently confirmed to Tribune Business that VAT preparation/readiness efforts were being delayed because they were waiting for “final directions” from the Government.

Government brought two tax experts from New Zealand — one of the few countries that has a good word to say for VAT – to advise legislators on its merits and how to implement it.

Dr Don Brash and Mr John Shewan, both closely involved in the implementation of New Zealand’s Value Added tax in 1985-86, could not emphasise enough the importance of an extensive education programme, both for business and the general public. It was this programme that was the secret of New Zealand’s success. Such a programme would be even more important for the Bahamas, a country, unlike New Zealand, that has no income tax, but relies solely on indirect taxation and trade tariffs. In other words, Bahamians in general are not tax savvy.

“The reason our education campaign was so successful,” said Professor Shewan, “was because there was a commitment to an 18-month educational programme, six months of which was prior to the implementation date, but the most important things happened 12 months after the implementation because there were a series of detailed explanation programmes targeted at all kinds of groups.”

Government, which had planned to implement the tax on July 1 —13 days ago — was forced to delay it to January 1 next year — six months away – because, not only was legislation not ready, but there was not enough time to discuss it with the business community or to educate the public. Soon, if government continues its thumb-twiddling, another delay for implementation will have to be announced.

In their report, the New Zealanders expressed concern “at the widespread lack of understanding of how a VAT would operate in the Bahamas”. They were also “concerned at the complexity of the VAT proposal as currently envisaged (obviously government’s first draft on their arrival). This complexity would lead to high compliance costs and potentially extensive abuse of the system,” they predicted. Hopefully, this complexity has since been simplified. The state of business in the country today can certainly not absorb high compliance costs.

It was explained that VAT was urgently needed, not only to expand government’s tax base, but also for the country to be eligible to join the World Trade Organisation (WTO). Having had to reduce its original 15 per cent tax proposal to 7.5 per cent, the government maintains that it cannot afford to also reduce Customs duties. If joining the WTO is its objective, then Bahamians can count on the VAT rate being increased so that the Bahamas – a non producing country — can qualify for WTO membership. Qualification means that all Customs duties have to be abolished. Government, while explaining VAT, should also explain in detail the advantages of the Bahamas having WTO membership.

Several months ago, Social Services Minister Melanie Griffin outlined how our sluggish economy has hurt those in the lower income brackets – the group with the potential of being the most affected by VAT. With the September opening of schools, Mrs Griffin said, there was a substantial increase in demand on Social Services to feed and equip children for school. At the time, she was being interviewed she said that 1,606 out of just over 3,500 children had requested uniform assistance.

There was also more demand for food stamps, a relief system that is growing, she said.

Mrs Griffin appealed to corporate Bahamas and private citizens to partner with government to assist children in need. Recently the 58-year-old Ranfurly Home for Children appealed for financial aid. Mrs Griffin said government would assist to make certain that the Home, which has cared for so many children sent by Social Services, would not have to close. She also said that her Ministry will have to step into the breach to assist those who might be severely affected by the implementation of VAT.

A few days ago, we were discussing VAT with a businessman who said that what his company had traditionally set aside as donations for the various charitable organisations and student scholarships would now go to VAT. This shift in donations will put an even heavier strain on Mrs Griffin’s Ministry. In other words VAT will force the public sector to curb its generosity.

No matter how we look at it, VAT is going to create a vicious circle, and regardless of how it is introduced, Bahamians will not be satisfied until the government demonstrates that it too is making substantial cuts in its unnecessary spending. Bahamians are not going to pay taxes to give government a licence to spend foolishly.

Comments

ohdrap4 6 years, 2 months ago

before they reveal anything, they are sending feelers out the head of the christian council is on the guardian saying vat may increase suffering it is the beginning of the announcement that vat will be canceled, as predicted here first by the mad hatter

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sheeprunner12 6 years, 2 months ago

VAT in The Bahamas is a JOKE......................... income tax is the way to go. 30% for millionnaires, 20% for over $250,000 and 10% over $50,000, 5% over $20,000. No tax under $20,000 personal income. And collect the taxes that are on the book. Get rid of customs duty. Set up a three year tax amnesty regime for deliquents and for God's sake no more political free-bees................ then maybe ten years down the road we may begin to see some results.

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birdiestrachan 6 years, 2 months ago

The Government is in need of the money to pay Civil servants retired civil servants. Schools , roads. and hospitals, Where is the money to come from. Perhaps the Editors of the Tribune and the Editor of the other paper who can find faults and the FNM;s can tell us and do not say collect the taxes owed/ that will just be dumb, because it has been many years since those taxes were due in the good times they were not paid, Shall we have some solutions and not just criticize.

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proudloudandfnm 6 years, 2 months ago

Oops too late. We do not have enough time. It's too late for education too! AT this point CRA should be up and running. Staff should be in place. Procedures should be in place. Forms should be ready to go. Offices need to be opened on every island. Businesses should have been educated a year ago.There is no way all of this can happen by January. No way....

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Bunni 6 years, 2 months ago

Let me see, wholesalers has their mark up on goods then they resell to retailers whom has their mark up on goods (because they are in the business to make money) then on top of it we have to add 7.5% on the total. So freight and good costs from where ever wholesalers purchase them from does not increase eh?. That means that cost on goods can go up even more cause you know the cost is always trickle down to the consumer.

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proudloudandfnm 6 years, 2 months ago

Income tax. In a country where civil servants make $11,000.00 per year? Where a huge part of our people make $200.00 a week?

Income tax?

Don't think so. The rich would have no problem. The poor can't pay period. So who will get stuck with the meat? Middle guys, that's who.....

Stick with duty or start a flat sales tax....

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Bunni 6 years, 2 months ago

Never will agree with Income Tax. Why?, we have a huge Illegal population in the country that works and does not pay any contribution into NIB. So, since I work and contribution goes to NIB you will only stick (income tax) deduction to me. Not a fare tax there!.

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killemwitdakno 6 years, 2 months ago

income tax should aid in keeping tabs on them since their employers would be expected to have payment in the system.

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Bunni 6 years, 2 months ago

Example, those that hire Illegal persons to do gardening/yard work pays them in cash and nothing goes into NIB. Hands out hands in and the majority send out the country. Persons that hires these individual does not document them thru NIB nor ask for status in the country.

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killemwitdakno 6 years, 2 months ago

LBT proposed that those making less than $600 a week not be taxed. https://www.facebook.com/l.php?u=http...">https://www.facebook.com/l.php?u=http...

Of the number of multi billionaires who have money in our banks or their own banks here, doesn't that qualify as income? It's time for all those who've become rich from this land to contribute. Risks are they would leave. Other issue is we don't have demographics to determine. The other group to consider are the many Hatian-American-Bahamians and other away Bahamians who's income fit the bracket. After nationality at birth is made equal for women's children, that could cover a broader population as well.

But we should rightly force government to clarify the budget, what needs to be borrowed , the economic outlook and growth rate, and the main projects in one fiscal debate. Overlooked funds should be located first.

For example: HBSC was fined 1.9 BILLION in the states for something that probably offended us also. They are leaving here this month. http://www.bloomberg.com/news/2013-07...">http://www.bloomberg.com/news/2013-07...

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digimagination 6 years, 2 months ago

Income Tax - a good option... Sales Tax - very doable... VAT - a complete disaster! Let's assume that a turnover of $100,1000.00 is what is required to register for VAT. OK, so far so good. BUT I wonder how many businesses with a turnover of less than that figure will go ahead and charge VAT even though it would be illegal to do so. As for cash transaction, well keep guessing!

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