The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian businesses are “on their own” in preparing for Value-Added Tax (VAT), the head of a BISX-listed retail group yesterday suggesting there was no appreciation for the massive overnight re-pricing challenge facing his sector.

Gavin Watchorn, AML Foods’ president and chief executive, added his voice to those suggesting that the switch to VAT ‘inclusive’ pricing was “not necessary”, and that the Government was failing to heed the retail sector’s concerns over this.

Pointing out that AML’s Solomon’s SuperCentre format carried 30,000 stock keeping units (SKUs) alone, Mr Watchorn gave an insight into why it was impossible for major retailers to re-price all their inventory for VAT overnight on New Year’s Eve.

Assuming that there were 250 items per SKU, which Mr Watchorn admitted was a low amount, this would require 7.5 million items to be re-priced overnight at just one store.

And, spread across AML’s seven different stores, this translated into 52.5 million items that needed to be re-priced to comply with the Government’s demand for ‘VAT inclusive’ pricing.

The seven stores are spread across AML’s Solomon’s SuperCentre, Cost Right and Solomon’s Fresh Market formats, and Mr Watchorn said it would be far simpler and less costly for retailers to show the VAT paid on the customer’s receipt.

And, with most Bahamians familiar with seeing Florida’s sales tax on their receipts during US shopping expeditions, Mr Watchorn said it was a “red herring” to suggest local consumers would not be used to a ‘tax break-out’.

“I think businesses are going to have to do what they need to do themselves,” Mr Watchorn said of VAT readiness and complying with the law.

“Ultimately, businesses are on their own and have to do what they need to do. And that’s the approach a lot of businesses have taken.”

The AML Foods chief executive said the group’s software system was now VAT ready, but there was “little appreciation” for the challenges the retail industry faced in transitioning to the new tax.

The Ministry of Finance is proposing ‘virtual warehouses’ as a solution to the inventory challenge, relieving them of the burden of paying import duties at the border.

Inventory imported during November and December will effectively be ‘bonded’, with businesses only paying due import duties when they sell a product.

This is designed to eliminate ‘double taxation’, and companies paying duty at the old, higher rate on items sold post-January 1 where the Government has slashed the import tariff rate.

Mr Watchorn gave a guarded welcome to the ‘virtual warehouse’ concept, telling Tribune Business: “It’s better than what was originally proposed. I think it will be somewhat beneficial.”

He was less enthusiastic, though, on the Government’s decision to switch from VAT ‘exclusive’ pricing to ‘inclusive pricing’.

“There is going to be a pretty big cost to us to switch out all our pricing,” Mr Watchorn said. “I suspect we will be spending a good $20,000-$30,000 on labour alone just to make these changes.

“That is not going to happen overnight. There has been little appreciation for that; there’s just no appreciation for what we have to do.

“We have our plan, we know what we need to do, and are just going to get on and do it. To be honest, and I don’t want to sound defeatist, but we’re not going to get any relief,” the AML Foods chief executive added.

“It’s just a waste of time to talk about it. We have to get on with it. It doesn’t have to be this way. Price exclusive of VAT and add it to the register. All retailers can do that in a matter of minutes with a software change.”

Mr Watchorn said VAT ‘exclusive pricing’, where the sum paid was shown on the customer’s receipt, would create no problems for Bahamian consumers.

“Bahamians are well used to going to the US shopping, and seeing the sales tax added to the cost,” he added. “I really don’t think it’s [exclusive pricing] necessary. It’s been mandated, and no one’s listening to the challenges it brings.

“Concerns about consumers not being used to it is a red herring.”

Both Robert Myers, the Tax Coalition’s co-chair, and Kendrick Christie, the president of the Bahamas Association of Certified Fraud Examiners chapter, have previously called for the Government to revert back to VAT ‘inclusive pricing’ where the tax is broken out as a line item on the receipt or invoice.

They both argued that this would create more accountability and transparency, and better protect Bahamian consumers, while also eliminating the transitional challenge for many retailers.

Philip Beneby, head of the Retail Grocers Association, said he was also in favour of VAT ‘exclusive pricing.

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, however, reversed this position in the legislation that passed through the House of Assembly.