By NATARIO MCKENZIE
Tribune Business Reporter
The Government has confirmed it will protect the Bahamas’ duty-free retail sector from Value-Added Tax (VAT) via a ‘tax free goods scheme’, which will enable bona fide tourists to recover the tax at the point of sale.
Some Bay Street merchants set to benefit from the scheme told Tribune Business yesterday that they welcomed the move, but wanted to see all the details first.
“That would certainly be good for us but I haven’t seen anything yet, and there really has been so much talk back and forth for me to really say anything right now. There has been a lot of misinformation and rumor about this whole VAT thing,” one Bay Street merchant told Tribune Business.
Others directed this newspaper to the Bahamas Federation of Retailers for comment, as they were not privy to the details. Tara Morley, general merchandising manager at Cole’s of Nassau, and the Federation’s chairwoman, told Tribune Business that the organisation would examine the Ministry of Finance’s guidance notes in detail before issuing a comment.
The Federation, which purports to represent more than 100 Bahamian retailers, in a statement earlier this year had warned that levying VAT on duty-free merchandise would be “counter-productive” to boosting tourist spending, and called on the Government to lower the existing tax burden on such goods.
John Rolle, the Ministry of Finance’s financial secretary, first revealed to Tribune Business back in February, that the Government was in talks with duty-free retailers over a system that would refund tourists their VAT payment, then pegged at 15 per cent.
In its guidance notes for duty-free shopping, the Ministry’s of Finance’s VAT Department said a ‘tax free goods scheme’ would be made available to retailers in the Bahamas that primarily cater to tourists.
It said: “With an aim to ensure that the Bahamas remains an attractive and competitive destination for visitors, a scheme is available for retailers that have obtained permission from the Comptroller of VAT to import certain goods VAT and Duty Free. These establishments shall be designated Authorised Duty and VAT Free Retailers.
“Although VAT will apply to the sale of these goods, the authorised retailers will be able to provide visitors to the Bahamas an immediate, point of sale refund of the VAT, upon proof of foreign resident status and evidence that the items will be exported.
“All VAT refunds must be accounted for by the retailer and filed electronically with a Customs agent or their representative, as designated by the Comptroller. A small processing fee will be applied with each transaction, payable to the Customs agent or their representative.”
The main beneficiaries will be luxury goods retailers such as John Bull, Diamonds International, Colombian Emeralds and other Bay Street and hotel-based retailers., Some observers, though, have privately told Tribune Business that they view this as a preferential tax break for this sector at the expense of other industries.
The Ministry of Finance said only retailers that have been authorised by the Comptroller to use the scheme can provide point of sales refunds to visitors.
These refunds, in turn, can only be provided in respect of goods sold in specific stores covered by the retailer’s authorisation.
“For avoidance of doubt, it may be the case that a retailer has several stores in the Bahamas and that not all of these stores would be authorised, a decision that would be determined by the Comptroller in part based on the level of visitor traffic in the stores.,” the guidance notes said.
Goods eligible for a VAT refund include cosmetics, sunglasses, gems, jewellery including watches, leather goods, linen, fountain pens and refills.