By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
The Democratic National Alliance’s (DNA) leader and party chairman both said yesterday that their businesses had suffered “low double digit” sales decreases post-Value Added Tax’s (VAT) introduction, and warned that a retail shake-out is imminent.
Branville McCartney told Tribune Business that his family’s pharmaceutical business had endured a 10-15 per cent decline in business volumes since the New Year, when VAT was implemented.
And Andrew Wilson, owner of the Quality Business Centre (QBC) retail chain and other formats, also confirmed that his companies had sustained a “low double digit” sales decrease on a quarterly basis since the new tax’s arrival.
Both blasted the Government’s “bragging” over VAT’s successful implementation, and the millions it was taking from the private sector and consumers, as Mr Wilson warned of a mid-market retail ‘squeeze’ that has already begun.
The DNA chairman told Tribune Business that the ever-increasing “pricing pressures” being imposed on Bahamian retailers was driving local consumers to increasingly shop online for better deals, facilitating an explosion in the number of local freight forwarding companies.
Mr Wilson added that the Bahamian retail industry would soon consist of just the large operators, plus specialists and ‘Mom and Pop’ stores, as he fielded increasing calls from other businesses seeking an exit route.
And he warned that small and medium-sized businesses were reducing working hours and cutting staff every day, creating a vicious circle where consumers had even less disposable income and monies to withstand VAT.
“It’s happening as we speak,” Mr Wilson said.
His party leader agreed, with Mr McCartney telling Tribune Business: “We have certainly seen a decrease in business in terms of income since VAT has been implemented.
“I was talking to the party chairman, who has certain retail businesses, and I’m involved in the pharmaceutical business as well, and we’ve seen a decrease in business because people simply don’t have the funds to spend in the community because of a lack of jobs, and the increase in the cost of living as a result of VAT.”
Mr McCartney added: “For Government to be bragging about this being a success, people are hurting and struggling to keep their doors open.
“Instead of the Government trying to boost our economy, and introduce new industries and reduce the corruption and cronysim that continues to cost our country every year, they brag about taxing the poor people, who are suffering, and collecting their funds.”
Arguing that the Government was failing to provide the enabling environment for economic growth, which would offset VAT’s impact, Mr McCartney said his family’s pharmaceutical was increasingly seeing the new tax bite.
“We’ve seen it [business] go down 10-15 per cent right up to this day,” he told Tribune Business.
“We do have the National Prescription Drug Programme, but for persons not on it, and for whom drugs are a necessity, they are reluctant to get what they need. It is as simple as that.”
Mr Wilson, who is a quarterly VAT filer via his businesses, added: “Quite frankly, sales continue to spiral downwards.
“While the Government boasts of the $110 million it collected in the first quarter, and the success they’ve achieved with VAT, to a large part that’s been at the expense of the business community and consumers.”
That is a reference to the fact that VAT effectively represents a ‘wealth transfer’ from Bahamian consumers and businesses to the Government to get it out of its debt and deficit ‘hole’.
Mr Wilson, meanwhile, suggested that many retail businesses had yet to recover from the up-to 50 per cent sales decline they experienced during the 2008-2009 recession.
Focusing on QBC and his own businesses, he told Tribune Business: “Since the introduction of VAT, sales have continued to fall on a month-to-month basis; I would say in the low double digits quarterly, compared to the previous year.
“At the consumer level, while they are forced to bear the brunt of VAT, we [businesses] have not been able to increase employee salaries to offset that. We are very challenged in terms of maintaining current employment levels.”
Mr Wilson said further complications had been caused by Radioshack’s closure in the US, which had forced him to rebrand his local franchise under the QBC brand. He is now organising alternative product sourcing and supply chains for “thousands of” products previously obtained via Radioshack.
Still, the DNA chairman said VAT’s effects were likely to spark major changes in the Bahamian retail industry.
“One of the things happening is that there is tremendous pressure on your price points,” Mr Wilson told Tribune Business.
“It’s not coming so much from traditional bricks and mortar retailers, who are in the same boat, but the shipping companies that provide support for the Amazon.coms and Wal-Mart.coms.
“They have gathered a substantial chunk of the local retail market, the international retailers. We’re seeing freight forwarders pop up in Nassau on virtually every street corner. It’s not a pretty picture,” the DNA chairman added.
“As a matter of fact, I’m getting calls every week from persons in business for decades who are praying they will find a buyer for their business so they can get out.
“The cost of operations in Nassau is extremely high. When you look at rentals, the cost of utilities, the cost of staffing and everything else, it’s extremely high. I think a lot of the business is going to go to Wal-Mart and Amazon.com.”
Mr Wilson said that while staff lay-offs by major companies attracted much attention, such activity was occurring daily at small and medium-sized businesses.
“Businesses are reducing their work week and downsizing to a bare minimum just to pay their electricity bill, and VAT and other expenses that are most pressing,” he said.
“I shudder to think what will happen in the local economy if Baha Mar stays shut for much longer.”
Comments
asiseeit 8 years, 10 months ago
I spoke with two friends who own business's and one was down for the year 20% from last year and the other about 25%, that is a major drop. Good luck with numbers like that.
killemwitdakno 8 years, 10 months ago
Because VAT additionally taxes the cost of the product itself, which is unfair. Just tax the markup and eliminate duty for business imports. Then more local sales would still mean more tax revenue. Why is this hard to test? A season of experimenting is worth it. America earns most on tax free weekend and other holiday sales.
Think about it, aim to have as little hindrance to low income paychecks as possible so that companies retain the most positions they can afford, and those workers who don't travel as much but must shop here have more to spend and something left to be taxed for NHI. Not to mention the small Bahamian business can bring in better merchandise, increasing attractiveness and competition for when the international companies forcibly move in (WTO and two-way trade deals with no protectionism).
Economist 8 years, 10 months ago
Finally, a Politician who puts the facts out. Thank you.
proudloudandfnm 8 years, 10 months ago
I'm down about 30% since January. Most businesses in Freeport are down 30% or more. new taxes and fees are killing this country....
Stupid ass government. Reacting with no thought or planning. Just drowning the country in taxes and fees. meanwhile they wasting 4 million of our money on a Canadian firm to run their re-election campaign...
ohdrap4 8 years, 10 months ago
the effects of Amazon.com would come, VAT or not.
Avon closed its doors because of ease in shipping from Amazon and Walmart.
So the business models have to change. I remember years ago when a local bookstore started offering books at US Cover price to remain competitive with Amazon.
They stayed competitive for quite a while, until the used book online sellers became more widespread. One can get used books for 1 cent, and pay the freight forwarder $9.00.
Nowadays, i compare all that I buy, sometimes the difference is only one dollar or two, so i buy locally. but many times I save 20% or 30% even paying shipping, duties and VAT.
birdiestrachan 8 years, 10 months ago
Mr: Mc Cartney All you have to do in order to become the Government of the Bahamas is to promise the people of the Bahamas there will be no more VAT. upon coming to office you will repeal VAT right away. Just go right ahead and say that. The DNA will not repeal VAT, nor will the FNM. no matter what stories they make up or how much they moan and groan. VAT will not go away. It will remain in place. Try not to fool the Bahamian people some of them may believe you.
Economist 8 years, 10 months ago
Mr. McCartney there are other methods of taxation The Bahamas can use to reduce the Vat rate, and it won't upset anyone. So Birdiestrachan don't be so sure he could not actually do it. If he introduced this new tax,collected the Real Property tax, shut down Bahamasair (it drains the Public Treasury at the rate of $3,200.00 per hour, yes that's 24 x 3200 per day) and privatized certain public services he could abolish Vat.
John 8 years, 10 months ago
They have a spokesman for the government in the media worshipping VAT and claiming how good it is for the Bahamian economy. Yet one of his employees ends up dead after committing suicide after losing his job after ten years on that job. Whats wrong with that picture?
TalRussell 8 years, 10 months ago
Comrades you can believe should the DNA form or share in a minority government the persistent discussions among thousands of Bahamalander aging and young families over the too pricey demanded from pharmacy owners for prescription drugs will never been heard on the floor of the House of Assembly. Out the DNA window will goes any talk to control the high price demanded for prescription drug. So true da green and red shirts are equally about policies to protect higher business profits.
OMG 8 years, 10 months ago
Shut down Bahamasair. Tax all the foreign owned rental properties. Charge a foreign vessel hook tax. Cut expenditure. Get rid of these so called "consultants" ie Baltron Belthel and ex BUT presidents who then get a plum job in the Ministry of Education. What do all the trips to places such as Belgium, Switzerland with all the associated hangers on cost ? Why is customs duty so inefficient because when prices go up so does the duty.. ? Unfortunately this and successive governments have squandered money left right and center on worthless schemes, the Carnival being the latest debacle. We as mortals realize that you cannot spend more than you earn yet successive governments cannot understand this and are never proactive. And one final word Mr Christie, the Bahamas is an overpriced destination which is living on past glory.Holiday makers have plenty of lower priced and equally attractive destinations.
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