The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

Bahamian small and medium-sized enterprises (SMEs) want “fair play” and a “consistent” three year Value-Added Tax (VAT) implementation strategy, a leading consultant said yesterday, citing a potential fall-off in consumer spending as a primary concern.

Mark Turnquest, of Mark A. Turnquest Consulting, told Tribune Business that while many small businesses would likely pass on any cost increases, there was less certainty over how consumers would respond.

“I spoke to some of my small business clients who are over that $100,000 per year threshold, and they say that VAT is going to impact them in terms of customers. They can pass on the costs but they do not know if the customers are going to be willing to pay the higher price. That is a concern. You can’t predict how the consumers are going to respond. Higher prices are not reflective of higher profits,” said Mr Turnquest.

Citing additional concerns, Mr Turnquest adde: “They are also concerned about the fact that Customs duty is not going to change right away. They are also concerned over their profit margins relative to VAT.

“The Government must clearly identify by July next year what the incremental increase in VAT will be going forward. A lot of small businesses, like janitorial companies, plumbing companies and landscaping companies, have fixed contracts and they are worried about the VAT rate going up while they are locked into fixed contracts, in some instances for four years.

“What they want is a consistent strategy of how VAT is going to be applied over the next three years, and how Customs duty will be decreased. They want fair play,” Mr Turnquest said.

“VAT right now is a necessary evil. We’re at a critical stage with respect to our national debt. The Government also has the fiscal responsibility to spend in a prudent manner. The Government has to collect on the taxes that presently exist.”

Mr Turnquest said VAT education for SMEs should be be sector specific. “The service industry, merchandising and manufacturing need to be separated. Their business model is different. It has to be geared toward how VAT accounting systema should be applied to those various industries. They must make the training simple,” he said.

Mr Turnquest added that following VAT implementation, the Small and Medium sized Enterprise Development Bill and the SMEDA agency should be next on the Government’s agenda.

“I think we really need the Small Business Development Act to come into force because many persons looking to get into business are still saying it’s too tedious to go around to these various agencies to start a business,” Mr Turnquest said.

“There needs to be a one-stop shop. We don’t want VAT to overshadow that legislation. After VAT has come on stream, the number one business priority needs to be the Small Business Development Act and the Small Business Development Agency. That is the priority after VAT. We need to close on the agency.”