The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A well-known businessman yesterday said it was “far too premature” for the Prime Minister to boast about Value-Added Tax (VAT) being successful, accusing him of “gloating” over the hundreds of millions of dollars the tax will suck out of the Bahamian economy.

Dionisio D’Aguilar, the outspoken president of the Superwash laundromat chain, told Tribune Business that Mr Christie needed to “dial back” his excitement until it was clear whether VAT was hitting its revenue and compliance targets.

Suggesting that such trends may not become clear until summer 2015, Mr D’Aguilar said the Government was likely to enjoy a VAT ‘timing windfall’ in January because many businesses would not have received their bills for that month until now.

This, the businessman explained, would reduce the value of VAT ‘input’ payments and/or credits that companies will be ‘netting off’ against the ‘output’ taxes paid to the Government.

And, describing himself as “unimpressed” with the public spending and fiscal deficit numbers unveiled in the mid-year Budget by Mr Christie, the Superwash president branded the latter’s $273 million - 95 per cent of the projected full-year deficit - as “outrageous”.

Acknowledging Mr Christie’s skills as a politician and orator, Mr D’Aguilar told Tribune Business: “If the Prime Minister was an insurance salesman, I would purchase it from him. He’s always very upbeat and very positive about how things are going to turn.”

He questioned, though, why the Prime Minister would boast about a tax that is projected to generate a net $300-$350 million annually for the Government - money that will taken away from the private sector and consumer in a massive wealth transfer to the public sector.

“I found it a little bit odd he was gloating about how much VAT is going to suck out of the economy to pay the deficit,” Mr D’Aguilar told this newspaper.

“I know it’s necessary and applaud it, but he need not gloat about it. Yes, there’s been no bankruptcies and no business failures, but it’s certainly not going to expedite a turnaround in the economy.”

That was a pointed reference to the point in the Prime Minister’s mid-year Budget address when he hit back at the Opposition and “naysayers”, saying: “Contrary to what the doomsday prophets and pundits had been saying would happen, the introduction of VAT did not lead to panic or hysteria on the part of consumers, nor did it lead to the mass closure of businesses.”

However, Mr D’Aguilar warned that VAT implementation was only half the battle, telling the Government: “Don’t count your chickens before their hatched.”

While Customs may have collected $11 million in ‘border’ VAT for January, Mr D’Aguilar said large businesses with annual turnovers of over $5 million - and who will collect 70-80 per cent of total VAT revenues for the Government - have yet to file their first monthly returns.

With compliance central to VAT’s success, as the Prime Minister himself had conceded, Mr D’Aguilar said the Government would only get a ‘better read’ on whether its revenue objectives will be met when its quarterly and bi-annual filers submitted their first returns in April and July, respectively.

“He can’t say it’s [VAT] going smoothly until they start collecting the money,” Mr D’Aguilar told Tribune Business. “He’s excited about the roll-out, but it’s far too premature. It’s too early for him to claim a success.

“He needs to dial back his excitement and report to the people in April on who’s actually paying. Are the same large companies paying, and have you got what you expected to get from then?”

He then added: “January, I think, is going to be a windfall for the Government because businesses are going to collect VAT, and they will have very little that they can offset against VAT collections, because they will not get their January bills until February.

“The Government can’t get giddy and excited about how much revenue they collected in January, because most businesses will not pay on their inputs until they get their bills in February. This is a windfall for the Government.”

While backing the Christie administration’s decision to introduce VAT, and seek to balance the Budget, Mr D’Aguilar said he did not believe the latter objective was being achieved despite the Government’s rhetoric.

He added that he was disappointed by the absence of “meaningful reductions” in government spending, and branded Mr Christie’s attempts to compare its expenditure with that of the former Ingraham administration as “a stupid analysis”.

The previous government, he said, faced with a “massive recession”, had little choice but to “spend like crazy to stop the bottom falling out of the economy”.

“I was very unimpressed with the deficit at the end of the year, the mid-year,” Mr D’Aguilar added, referring to the $273 million in ‘red ink’ incurred.

“It was very high. That’s a number that’s screaming things are out of control on the expenditure front. At that pace, without VAT, they’re looking at about a $550 million deficit.

“He [Mr Christie] can’t pat himself on the back about that. That’s outrageous. Let’s hope collections are better in the second half, and we make a meaningful dent in the deficit.”

He added of the Prime Minister: “That’s a politician at work. That’s what he does. He doesn’t fool me, and I don’t think he fooled anyone else with sense.”