Superwash chief: VAT bites 12-14% off key products

Dionisio D’Aguilar

Dionisio D’Aguilar

A leading businessman says the Bahamian economy is stuck "in a funk" as Value-Added Tax's (VAT) full impact starts to bite, with sales in two of his key product categories down 12-14 per cent.

Dionisio D'Aguilar, Superwash's president, told Tribune Business that the Bahamas desperately needed to change its attitude towards "rebooting the economy" and making it easier to conduct business.

And he accused the Government of being "so obsessed" with its fiscal woes and social initiatives, such as National Health Insurance (NHI), that it was failing to inspire confidence and job-creating investment in the private sector.

"It seems like the economy of the Bahamas is in a funk, remains in a funk, and a lot of business people in the country don't see us coming out of this funk," Mr D'Aguilar told Tribune Business.

"I think the full effects of VAT are beginning to take hold, and people are seeing sales trend down in certain areas of their business. It's not a good feeling.

"There's a lot of things closing and shutting down. You hear a lot of talk about closing and shutting down. You've got talk about dialling back."

The Bahamas is now in its fifth month post-VAT implementation, and its effects on consumer demand and spending are starting to come through. Several companies have suggested privately to this newspaper that the consumer adjustment may take 12 months, rather than the six previously expected.

Mr D'Aguilar, meanwhile, said the Government was neglecting to foster an environment that facilitated private sector growth and job creation in the domestic economy.

While foreign direct investment (FDI) "puts juice in the economy", he argued that it was Bahamian-owned businesses who created the bulk of local jobs.

"I think the Government is so obsessed with balancing their books and embarking on their projects that they fail to realise they're doing a bad job of creating some confidence in the economy for people to invest," the former Bahamas Chamber of Commerce president told Tribune Business.

"I think the Government has run out of ideas on how to deal with this, and they're not prepared to make the hard decisions to change the dynamic.

"What happens is taking too long, and the Bahamian economy continues to stall and stumble along. The politicians are in this bubble where they think things are going well, but on the ground the story is not a good one."

Pointing to VAT's impact on his own business, Mr D'Aguilar said only washer and dryer sales of Superwash's three business lines continued to perform strongly.

"The other two areas, pressing and sales of detergent, they've been hit quite hard with double digit decreases," he revealed.

"Comparing January to January, February to February, March to March, April to April, a lot of locations' detergent sales are down 12-14 per cent as people become more cost conscious and look for deals."

Mr D'Aguilar added: "Before [VAT] it was not an issue, as they'd come in and buy detergent, plus washer and dryer use. Now, they're more price sensitive and are looking for value, rather than coming to the laundromat and buying detergent."

The 7.5 per cent VAT levy's impact on consumers was among the private sector's greatest concerns, given the 'knock on' effect it would have for revenues and profits.

Mr D'Aguilar told Tribune Business that if the Government's initial projections and revenue take held true, then VAT would "suck $360 million out of the economy".

That represents a wealth transfer from Bahamian consumers/households and the private sector to the Government, and the Superwash chief added: "If they're sensible, they're using that money to reduce the deficit.

"But it's not a good dynamic right now. The Government has got itself in a complete muddle. People don't have confidence that the Government is running the country well.

"I don't think they make decisions with the idea of what's the most important thing to our economy, businesses and how we get business people to grow and create jobs," he added.

"They're so focused on launching these social programmes, but they've got to put their house in order before they offer these benefits. They want to build BAMSI, start talking about NHI.

"We don't have power. How can you run the country without power if the power is off three hours a day, two, three, four days a week?"

Mr D'Aguilar told Tribune Business that breaching the International Monetary Fund's (IMF) so-called 'danger threshold' with a debt-to-GDP ratio of 73.4 per cent was merely another symptom of the Bahamas' economic stagnation.

"The debt-to-GDP ratio is a manifestation of the fact the economy is not getting any better," he said. "Hopefully, with the VAT monies they take in, that comes down......"

Mr D'Aguilar added, though, that the Government's seeming reluctance to commit to a Fiscal Responsibilities Act and other reforms "shows it's not serious" when it comes to greater transparency and accountability in managing the public finances.

Expressing fears that the Government would merely use its VAT revenue stream to increase spending, he warned: "You're creating some headroom only to run it [deficit and debt-to-GDP] right back up again with this VAT money you're taking in."

Candidly admitting he did not have all the solutions to the Bahamas' problems, Mr D'Aguilar still argued that this nation continued to take the same measures to issues such as crime and education, yet expected different results.

"We need a change in the mindset of people in this country," he told Tribune Business. "How do we reboot our economy? What is it that we have to do to make our local businesses more successful and improve their ability to succeed?

"They're the ones that really create the jobs. While FDI is good to put the juice in the economy, at the end of the day it really has to trickle down to your people.

"We've basically got to stop doing business the way we've always done it," Mr D'Aguilar continued. "Our economy has not fundamentally changed that much, and we have got to be innovative and insightful in how we manage it.

"Take energy. We've been talking about different ways to generate energy, and reduce energy costs, but the politicians are thinking about NHI and costing us more money rather than reducing costs.

"It does seem like nothing is changing and nothing is improving. It's showing in the way we're running this country. The model we're using is tired and old, and not working any more."


TheMadHatter 8 years, 6 months ago

I applaud the Government efforts to sabotage the economy. Only by making our economy and the country as a whole really SUCK - can we hope to discourage the migrants from coming here by the boatload. If there is nothing here to come for, then they might stop coming. LOL.



paul_vincent_zecchino 8 years, 6 months ago

No nation in history has ever taxed itself into prosperity. The power to tax is the power to destroy.

The VAT tax is a failed, moth-eaten, 50s vintage eurosocialist scheme which reduces everyone while solving nothing. As with all tax hikes, it begets more of them and never goes away.

There seemed a rush to pass this thing, the old used-car salesman pitch: 'hurry up and buy now - before you see the truth.

Marry in haste. Repent in leisure.


birdiestrachan 8 years, 6 months ago

It is good for the Bahamian people to use common sense. They may be able to buy detergent some place cheaper than he is selling his for. to be sure they have not stopped using detergent. It is wise to use clothes lines to dry one's clothes instead of using dryers. So many Bahamians throw their money to the wind, and the gentleman in this article becomes richer and they become poorer. They will also be wise to only talk on cell phones when it is absolutely necessary.


asiseeit 8 years, 6 months ago

Yes Birdie, so many Bahamians do throw their money to the wind, just like our government. Wouldn't it be nice if our government learned how to tighten it's belt just as the citizens are learning. Jobs are disappearing weekly, money is extremely tight and government just keeps spending, does that make any sense? Debt is at 70% of our GDP, soon they will devalue our dollar and then the fun starts.


jlcandu 8 years, 6 months ago

Excuse me, Birdie. But not all of us are as fortunate as you to not pay our loans because of our political persuasion. Some people may have to walk to the wash house because they can't afford a car, and the ease of buying detergent instead of carrying it only makes sense. Mr. D'Aguilar is a businessman and is in business to make a profit to provide jobs for all of you idiot PLP's as well as others. Since you are so good at providing advice on how to save money, why can't you pay off your BOB loan.


ohdrap4 8 years, 6 months ago

who presses clothes? Most things nowadays need no pressing.

the shoe shine boys lost their occupation years ago, so will the clothes presser.


John 8 years, 6 months ago

As I indicated I last year the only way vat can be sustainable is the economy has to grow by as much as the Revenues VAT is drawing out. Otherwise the difference will result in a decline in business activity. Non essential goods and services will be hit hardest and those businesses that were not making the cut before the introduction of VAT will be the first to go under. While some businesses have adjusted their prices just slightly to cover the burden of accounting for the VAT tax and implementing it, businesses that adjust their prices too high will find themselves in an even worse financial position. The regulation and taxing of web shop have brought some stability to that sector of the economy as owners can now operate their businesses with confidence and under the protection of the law. Employees are no legitimately employed and now qualify for loans and other financial services. The large injection of new cash and employment that was expected from Bah Mar has not happened yet and unless something drastic happens between now and the time it opens many businesses will not survive until then.


duppyVAT 8 years, 6 months ago

VAT is not the #1 problem ............... the government's use of the funds derived from VAT is the main issue .................... so far, the government's stated intent for VAT is not being realized or confirmed (to pay down the national debt)

The #1 overall problem is government's collection of ALL public revenue (40%???) and political cronyism (the no-tax list)


newcitizen 8 years, 6 months ago

Not just funds derived from VAT, but any funds that the government manages to get their hands on. There is absolutely no fiscal responsibility from our leaders what so ever. Given then money is like giving a junkie crack. They are addicted to wasteful spending.


birdiestrachan 8 years, 6 months ago

Yes indeed I do owe BOB and I will not pay them a single dime, because I have protection. If that is what you want to hear, you have heard it. if it makes you feel good then go for it. It is a lie. but some people love lies. ask Cash how much I owe. I have money sense, I learned it from my mother. Take care of the cents and the dollars will take care of themselves It is not what you have it is what you do with what you have" and the person who makes the most does not necessarily have the most". Thank you my Dear Mother, I never forgot the things you taught me.


asiseeit 8 years, 6 months ago

Birdie, maybe since you are so tight with our esteemed P.M. you could give him the advice your mother gave you. We need someone to talk "cents" to our minister of finance as we can not handle any more DEBT. How much has the PLP BORROWED in the last three years. How much is the deficit each of those years. What do we have to show for this massive spending? A party and a school in the bush that is for maybe 50 students? Please tell your PM we can not afford his lifestyle, it is much to rich for the poor Bahamian people!


birdiestrachan 8 years, 6 months ago

Crooks ,what Crooks are you talking about? you defend persons who over charge poor black people., when they can charge them less and make a little less profit. Do you know who really defaulted on their loans at BOB. or are you of the mind set that all Black people are thieves , ignorant and lazy, and the FNM is this perfect party without sin. you folks are to the PLP what Fox News is to the USA president. Mean spirited and blinded by the torch and you all Papa who has never really done anything for the poor Bahamians.


Well_mudda_take_sic 8 years, 6 months ago

TIP: Never respond to taunting comments.....doing so only plays to the taunter's yearning to be recognized when in fact he or she never puts forward anything worthy of recognition. Take great comfort in knowing that just ignoring taunters infuriates them more than anything you could say to them in response to their babble.


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