The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

The insurance industry was yesterday said to still be “in a state of flux” and unsure how to customise its systems for Value-Added Tax (VAT), with the rules governing the industry yet to be finalised.

Vibert Williams, head of Netherlands Antilles General Insurance Company (NAGICO) Bahamas, said that based on his experiences of witnessing VAT implementation in other Caribbean countries, the tax would increase premium costs and likely result in persons electing to drop coverage.

“No other country who has implemented VAT in recent years has actually placed VAT on insurance premiums; it’s always exempt,” Mr Williams said. “The Bahamas is trying that, and it is not without its challenges.

“For the industry, the main challenge is ensuring that we get our systems ready for July 1. That normally is not a problem, except that  the VAT Rules pertaining to insurance are still not yet decided by the Government.

“The Insurance Association had a meeting with the consultant that the Ministry has assigned to the industry about a month ago but we are still waiting for at least  a final draft,” he added.

“We’re in a  state of flux. We don’t know how it’s going to be implemented, and so we don’t know how to tweak and customise our systems to make sure that we comply.

Mr Williams continued: “What I do know is that VAT in general is a regressive tax. It’s really hurtful to the poorest among us.If you put VAT on insurance it makes it even harder.

“When I came here first in late 2012, the information I had was that one in five drivers on the road was uninsured. I imagine that is going to increase if the cost of motor insurance increases.

“In addition we have got a whole lot of houses uninsured. If you have a large catastrophic event, that then feeds back negatively to the Government and increases social  costs. There are a lot of spin-off effects from putting VAT on insurance.”

Insurance is being exempted from VAT until July 1. Life insurance and annuities are to be treated as VAT ‘exempt’, given that they are long-term savings products, while all other forms of insurance - property and casualty (home and auto) and health - will be VAT-able and attract the 7.5 per cent levy on top of consumer premiums.

“I still don’t understand how we can put VAT on health insurance. There is a big health problem in the Bahamas,” said Mr Williams.

“You want to make sure the cost of health insurance and healthcare is as reasonable as possible. When you increase the cost some people drop their insurance. If you have a decision to make between buying milk or buying health insurance, it’s not a decision. Most people are going to buy the milk.

“We have not yet begun to feel the effects of VAT, but another month down the road it’s coming. We have seen this movie before in St Kitts, St Lucia, Guyana and St Vincent; the effects are really tough on the people who can least afford it. You’re  talking about VAT plus VAT on insurance.”