The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Freeport will continue to see “a lot of to-ing and fro-ing” over Value-Added Tax (VAT), a top private sector executive predicted yesterday, as all sides attempt to ensure the new tax conforms with the Hawksbill Creek Agreement.

Kevin Seymour, the Grand Bahama Chamber of Commerce’s president, said VAT was “a learning curve” for both the Government and city’s businesses, with the latest issue coming “out of the blue”.

He told Tribune Business that among the issue on the agenda at today’s Chamber Board meeting would be the Government’s decision that Freeport VAT registrants with annual turnovers between $100,000-$400,000 could not use the ‘Flat Rate’ scheme to calculate their tax liabilities.

This would allow such companies to calculate their VAT liability at 4.5 per cent of their total revenues.

However, the Ministry of Finance said Grand Bahama Port Authority (GBPA) licensees cannot use the Flat Rate method because they do not pay VAT on the same range of input purchases as other businesses in the Bahamas.

GBPA licensees do not have to pay VAT on goods transactions with other licensees, after the Government crafted the tax to mirror the Hawksbill Creek Agreement. As a result, the returns of GBPA licensees “cannot be reliably estimated” using the Flat Rate calculation method.

“We haven’t addressed it yet, because it kind of came up out of the blue,” Mr Seymour said, adding that he only learned of the ‘Flat Rate’ move by reading yesterday’s Tribune Business.

“We did have occasion to express our concerns a couple of weeks ago over VAT on bonded fuel, and that was rolled back,” the GB Chamber chief confirmed to Tribune Business.

“I expect going forward that there’s going to be a lot of to-ing and fro-ing in terms of what can be done versus would could be done in conformity with the Hawksbill Creek Agreement.......

“One of the challenges, because of the nuances of the Hawksbill Creek Agreement, and with knee jerk reactions, is to say: ‘Treat Freeport like everything else except for some specific exemptions that need to be adhered to’. I think it’s a learning curve.”

Mr Seymour said the GB Chamber would likely have a position on the Government’s ‘Flat Rate’ decision by mid-week, acknowledging the Ministry of Finance’s rationale and the importance the scheme might represent for small business cash flows.

Turning to the recent furore over the Government’s plans, now reversed, to levy VAT on bonded fuel sales, Mr Seymour said the ‘u-turn’ was “important from the perspective of respecting the terms and conditions of the Hawksbill Creek Agreement”.

Noting that duty-free imports were clearly defined in the Hawksbill Creek Agreement’s Schedule 2, he added that the Government “made it clear of its own volition” that the same products would be subject to similar treatment from VAT.

As a result, GBPA licensees had a legitimate expectation that bonded fuel sales would also be exempt from VAT, only to see the Government suddenly tear this up.

“That was quite disconcerting and confusing for a number of licensees, as they had attended a number of conferences where those declarations were made,” Mr Seymour said, “and have been privy to the guidance notes published on the Government’s website, which carves out schedule two goods.

“It was a bit confusing, but happily the Government was able to resist that one and set it right.”