The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian fraud expert yesterday backed calls for the Government to revert to Value-Added Tax (VAT) ‘exclusive pricing’, arguing that it would boost transparency and “business accountability”.

Kendrick Christie, president of the Association of Fraud Examiners’ (ACFE) Bahamas chapter, told Tribune Business that showing product prices without the VAT included would let local consumers know their exact landed cost post-January 1.

This, he suggested, would provide Bahamians with some safeguards against any “unscrupulous businesses” looking to exploit VAT for ‘price gouging’ purposes, saying: “Consumer protection is paramount.”

Mr Christie warned that “lumping everything in together”, as the Government’s VAT legislation and regulations now propose to do via ‘inclusive pricing’, could ‘camouflage’ unethical practices and allow the business to blame it on the new tax.

Mr Christie, a Grant Thornton (Bahamas) partner, instead called for store shelf prices not to include VAT.

He recommended that retailers and other providers of physical goods instead display prominent signage informing consumers that products were subject to a 7.5 per cent levy, and also indicate which were ‘exempt’ and attracted no tax.

The well-known accountant called for the due VAT to instead be broken out, as a separate line item, on the customer’s receipt or invoice when they went to the cash till/payment point.

Besides consumers, Mr Christie said switching back to VAT ‘exclusive pricing’ would also benefit the private sector, saving retailers the time and expense associated with re-pricing thousands of goods in their Point of Sale (PoS) system.

He also expressed concern about the potential harm VAT ‘inclusive pricing’ could do to the tourism/restaurant industry’s competitiveness, warning that it could further fuel visitor perceptions that this nation was an overly-expensive destination.

“It’s good for the consumer to see the price as is, and do the calculation to get the VAT,” Mr Christie told Tribune Business.

“We feel that, for the most part, consumers are educated and if they go into a store and see an item is for sale at $10, they know they will have to pay 7.5 per cent on that price.

“It holds the business accountable. The consumer comes to the counter, and it’ll be shown as a line item. The VAT will be shown as a separate line item on the invoice or the receipt,” Mr Christie added.

“I think it will be much better to have it [the VAT amount] separate, leave the price as is, and have a notice on the shelf that these items are subject to 7.5 per cent VAT.”

He added that VAT ‘inclusive’ pricing, where the amount of tax was not broken out, could facilitate “doubling up”, where unscrupulous businesses charged it again on either the receipt or invoice.

Mr Christie’s position is thus in line with that adopted by Tax Coalition co-chair, Robert Myers, who told this newspaper on Wednesday that the organisation wanted to go back to VAT ‘exclusive’ as opposed to ‘inclusive’ pricing.

The ‘exclusive’ approach, Mr Myers added, would foster greater transparency and accountability on the part of both the Government and businesses, forcing price (cost) and tax to be broken down into line items.

Mr Christie, meanwhile acknowledged that VAT ‘inclusive’ pricing might make shopping easier for some consumers, as they would know the total sum to pay and now have to work out the due tax.

While St Kitts, St Lucia and Antigua had all adopted VAT ‘inclusive pricing’, Mr Christie said the ACFE chapter was sticking to its position that ‘exclusive’ pricing was the preferred method for the Bahamas, as consumers would then know a good’s true landed (CIF) cost.

“Just because other countries have it doesn’t mean we have to,” he added, referring to VAT ‘inclusive’ pricing.

“We want to put it on notice that it is more transparent to have it [the VAT] separate. It ensures consumers are protected, and aware of ways they could be defrauded. Consumer protection is paramount.”

The Government’s original VAT legislation, released in November 2013, had opted for ‘exclusive pricing’ where the product price and amount of due tax were shown separately on the label sticker.

It reversed this position in the legislation that passed through the House of Assembly, but Tribune Business knows of several businesses that plan to break out the VAT as a separate line item on consumer bills.

Sitting in the ‘drive through’ line at Kentucky Fried Chicken’s (KFC) Mackey Street branch, this newspaper saw that the computer screen at the ordering microphone had already been prepared for VAT - showing both the price and tax payable on the order.

Mr Christie, meanwhile, also expressed concern about the impact VAT ‘inclusive pricing’ requirements would have on the restaurant industry and wider tourism sector.

Apart from the expense and inconvenience associated with having to alter restaurant menu pricing, Mr Christie said visitors would blame the business for the increase - not the Government.

This, he warned, would exacerbate perceptions that the Bahamas was a high-priced destination, and could cost it market share and visitor numbers. Destinations such as the Cable Beach strip and Arawak Cay Fish Fry would feel the brunt of this.

“Tourists coming into restaurants will not be aware of the VAT, and we’re already viewed as an expensive location,” Mr Christie told Tribune Business.

“They’re looking at pricing that’s VAT inclusive, and it could send a negative message. It’s better to show the VAT separate, like the gratuity.

“Tourists can then understand this is the Government, this is a way of collecting tax. They will not go away saying this is an over-priced destination. We certainly know we price ourselves a lot higher than other jurisdictions, and don’t want to be known as over-priced.”