By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
Less than 3 per cent of Bahamians would be prepared to pay Value-Added Tax (VAT) at its initially proposed 15 per cent rate it if was introduced on July 1, a survey of New Providence residents has found.
The survey of 2,000 persons, conducted by Bahamian market researcher, Silver Lining Enterprises (SLE), found that almost two-thirds of respondents - some 65 per cent - were against VAT in any form, something that the poll’s backer described as “striking”.
Dr Duane Sands, the former FNM Senator who commissioned and financed the survey findings he shared yesterday with Tribune Business, warned of “huge political fallout” should the Government proceed to implement its VAT proposal as is.
Prime Minister Perry Christie finally conceded to the House of Assembly last night what many businessmen have predicted to Tribune Business, namely that the Government will introduce VAT at a lower rate than the first-proposed 15 per cent (see other story on Page 1B).
But Dr Sands’, whose survey appears to be the first assessment of Bahamian consumer and public opinion of the Government’s fiscal reform centrepiece, told Tribune Business that the findings showed VAT was “an extremely unpopular proposal”.
“I think the political fallout if you go ahead and impose this tax as is is going to be huge,” Dr Sands told Tribune Business.
“The main message is that it is an extremely unpopular proposal, that the Bahamian people believe there are alternative ways of closing the gap between spending and revenue that are not being considered, and that Bahamians are not well informed on the issue.”
The Dr Sands-financed survey asked eight basic questions of Bahamians from all New Providence constituencies. Asked whether the Government should introduce VAT, just 6.8 per cent responded ‘yes’, with 27.75 per cent saying they were unsure and the overwhelming majority, 65.45 per cent, giving a resounding ‘no’.
When it came to the proposed 15 per cent VAT rate, some 94 per cent or 1,888 persons said this figure was “too high”, with just 6 per cent considering it ‘about right’.
Asked what rate they would be willing to pay if VAT was brought in on July 1, the Select Enterprises research found that just 2.25 per cent of respondents would accept the 15 per cent. Not surprisingly, most interviewees (79 per cent) said they would prefer the lowest rate suggested by the surveyors, 5 per cent.
While the Government can ‘brush off’ concerns raised by the business community, it will have greater difficulty in doing so when it comes to consumer/public concerns over VAT and other fiscal reforms.
One key factor that will not be lost on the Christie administration, and always makes MPs go ‘weak at the knees’, is that the Sands-funded survey focuses on the views of the voters that will have to re-elect them come 2017. It make well make them reconsider their tax reform plans.
“The price we’re going to pay economically is going to be huge,” Dr Sands warned of VAT. “This is a revenue negative, regressive tax, and the people who will pay the biggest price from this will be the most vulnerable, and will push many people below the poverty level.
“The supposed social safety net is tokenism, and they’re going to destroy some businesses in the process.”
Dr Sands described the Government’s VAT proposal, based on the survey findings, as “wildly unpopular”. The survey findings showed that 71.15 per cent of respondents felt they had “not been adequately informed” on the new tax.
And, when asked whether the Government should delay VAT’s implementation until 2015, some 69.25 per cent of Bahamians said the tax “should not be introduced at all”.
Another 24.6 per cent, or just under a quarter of those interviewed, agreed that VAT implementation should be pushed back until 2015, and just 6.15 per cent said the Government should stick to its original July 1 timetable.
The Bahamians surveyed for the report also expressed a preference for the Government to better enforce the existing tax system, plus cut down on spending and “curb unnecessary” expenditure.
When it was pointed out that the Government was owed more than $500 million in outstanding real property taxes, some 21 per cent of respondents said it should “aggressively pursue the collection of taxes” as a means to reduce the national debt.
Another 28.65 per cent called for the Government to cut spending, while 22 per cent backed the curbing of ‘unnecessary spending’. And 28.45 per cent were in favour of a combination of all these measures.
Bahamians, though, were divided on an alternative new tax they would wish to pay if it was not VAT. The largest share, 49.35 per cent, “preferred no new form of taxation being introduced”.
An income tax was favoured by 19.25 per cent of Bahamians responding to the survey, with 18.4 per cent backing a sales tax, and some 12.9 per cent the private sector’s favoured option, a payroll tax.
Analysing its findings, Select Enterprises said: “Bahamians view VAT as further entrenching the disparities between the rich and the poor, deepening the socioeconomic inequalities that presently set a widening gap between the haves and the have not.
“Generally, assessors claim that Bahamians polled expressed a view that VAT would be another tax where the poorer, lower wage earning class - largely end consumers - shoulder most of the tax burden.
Many of those polled, the survey added, felt VAT “would put a strain on the Bahamian people, particularly since salaries - in their opinions - ‘aren’t going up in these day’.
“Interviewees generally felt that VAT would increase the price of goods and services whilst their wages/salaries remained stagnant.
“Most persons interviewed were not sold on the idea of VAT being the best reformist approach to attaining tax reform and broadening the Bahamas’ revenue earnings. A number of respondents held the view that consecutive governments have failed to effectively maximise the revenue collection of existing taxes, from customs duties to business-related taxes to road tax to real property tax and so on.”
As for the private sector, Select Enterprises said: “Those business persons interviewed told surveyors of their distress at the thought of the increasing overheads associated with training staff and purchasing additional software that would bring their businesses in line with what they presume to be new VAT protocols, as seen in other jurisdictions.
“One concern expressed by those interviewees with a basic understanding of the proposed new tax is that although there would be certain exemptions for certain sectors, there’s a fear that retailers would still hike up their prices out of sheer dishonesty.
“Whilst more larger business operators expressed to SLE a concern that smaller businesses that are exempt from VAT would have a price advantage and be more attractive to the average consumer, there was also the concern among those more knowledgeable about the intricacies of the proposed tax that there would be a free-for-all where smaller businesses operate under the exemptions but still charge exorbitant prices.”
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