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Tie Web Shop Taxes To Vat Rate Increases

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Chamber of Commerce’s (BCCEC) chairman yesterday called for web shop taxes to be bound to the Value-Added Tax (VAT) rate, so that they increased whenver the latter did.

Robert Myers told Tribune Business that this would ensure the newly-legalised web shop industry paid its fair share of taxes, and that any increased VAT burden would not solely fall on other economic sectors.

Mr Myers agreed that the proposed web shop taxation structure seemed “reasonable and, combined with the sector’s legalisation/regulation, eliminated concerns that it would in effect receive ‘a free ride’ while others suffered under VAT.

“It certainly seems like they’d be paying their fair share of taxes against the rest of industry,” the BCCEC chairman told Tribune Business. “I think that seems reasonable based on what it is.

“Let’s get them [the web shops] compliant. Hopefully, that money will go into the banking sector. It’s a regulated business, so there are other upsides as well.

“It also seems to me to be more than favourable to the Government. It’s a high margin business. These taxes would kill most businesses, but theirs is very different as we know.”

Via the Gaming Bill, the Government is proposing to tax successful bidders for gaming house operator licenses at a rate equivalent to either 11 per cent of taxable revenue or 25 per cent of earnings before interest, taxes, depreciation and amortisation (EBITDA) are deducted, depending on which is higher. They will also have to pay Business Licence fees.

Prime Minister Perry Christie told the House of Assembly this week that the Government was expecting to earn around $25 million up front from legalised web shop operators, via back Business Licence fees, application fees and penalties.

While the sector’s ongoing taxation structure may be subject to change, depending on the completed audit of legalised web shops’ financials, Mr Christie projected the sector would generate between $22-$29 million for the Government annually, depending on which method was employed.

However, Mr Myers said that with the Government planning to make all forms of gaming VAT ‘exempt’, meaning that the 7.5 per cent rate would not be levied on web shop patrons, there needed to be some link to increases in the latter rate.

“Those [web shop] taxes should be benchmarked, linked somehow so if VAT does go up, gaming taxes also go up,” Mr Myers told Tribune Business. “They need to be linked, not separate from the economy, so if the rest of the economy is paying more taxes, they need to pay more taxes proportionately.”

Whether the Government and web shop industry would contemplate such linkage is another matter. It also remains to be seen whether web shops would be placed on an equal footing with hotel casinos, if the latter succeeded in persuading the Government to make it ‘zero rated’ - a status that would see it levy no VAT on customers, while also being able to reclaim its ‘input’ costs.

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