The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A leading insurance executive yesterday said he fears there will be “unintended consequences” when the industry starts levying Value-Added Tax (VAT) from July 1, with the sector “at the sharp end” of any consumer backlash.

Patrick Ward, Bahamas First’s president and chief executive, told Tribune Business that the 7.5 per cent tax’s addition to insurance premiums would “put pressure on margins” and the prices charged to consumers.

Reiterating concerns that VAT will further exacerbate the insurance affordability problems being experienced by many Bahamians, Mr Ward added that the sector was still attempting to obtain “a complete understanding” from the VAT Unit over how many implementation details would work.

“I think the industry will ultimately implement as efficiently as possible any changes or regulations it’s required to implement,” the Bahamas First Holdings chief said.

“What I’m concerned about is there may be some unintended consequences for consumers that are not easily understood or accepted.

“We [the insurance sector] may be at the sharp end of those arguments when we had no hand in the rules and regulations on how VAT is implemented.”

Asked whether he was referring to the insurance industry having to deal with the brunt of consumer anger, over insurance premium costs inflated by VAT, Mr Ward confirmed this was so.

“It really creates a very difficult scenario in what is a complicated situation to begin with,” he added of VAT.

Mr Ward said the Bahamian insurance industry’s research into how the sector was treated by other jurisdictions employing VAT showed this nation was relatively “unique” in seeking to levy the tax on the sector.

“The industry is still trying to negotiate or get a complete understanding of a number of variables as it relates to VAT treatment in a number of instances for the insurance industry,” he told Tribune Business.

While declining to specify all the sector’s concerns, Mr Ward said one related to the immediate transition period around July 1, and how “different claims scenarios” for different insurance business lines would be treated before and after the implementation date.

He emphasised, though, that his main concern was the impact insurance industry VAT would have on consumers, who had already seen their disposable income hit by the tax in other areas.

With insurance affordability already an issue, and many persons electing to either not insure or underinsure, Mr Ward said levying VAT on the industry would likely exacerbate this problem to the detriment of Bahamian society.

“If everything is effectively going to be impacted by the inflationary amount that VAT brings into the marketplace, that’s going to exacerbate the problem even more,” he told Tribune Business.

“That’s a negative impact that could rear its head on an individual claim basis, or on a major catastrophe basis, affecting a lot of clients at the same time.”