The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bay Street’s “very serious concerns” over the proposed VAT refund scheme for duty-free shopping were yesterday said to have eased, with the Government now looking at exempting genuine tourists from the 7.5 per cent levy.

Todd Howard, Little Switzerland’s operations director for the Bahamas, told Tribune Business that discussions between luxury goods retailers and the Government over an alternative approach were now “going in a positive direction”.

He explained that the two sides were moving towards a scheme where, provided they could prove they were a visitor, tourists would not be charged VAT on duty-free purchases at the point-of-sale.

This marks a major departure from the previous plan, which would have seen the Government outsource management of its VAT refund scheme for duty-free shopping to a Swiss company specialising in this area, Global Blue.

Under the plan proposed initially, the electronic process run by Global Blue would have seen bona fide tourists receive an 85 per cent refund of the VAT they have paid. This, though, would not have been refunded immediately, but credited to their credit cards within five working days.

Luxury and duty-free retailers, though, pushed back against the Global Blue plan due to fears that it would create a bureaucratic, time-consuming process that discouraged cruise passengers and other visitors from shopping in the Bahamas in favour of other Caribbean destinations. The main concern was lost business and sales.

“There was a VAT situation that was a concern, but that seems to be going in a positive direction,” Mr Howard told Tribune Business. “Originally, it was something that hit the customer at the point-of-sale when they made a purchase, and now it’s a more favourable solution.”

Mr Howard confirmed that tourists will not be charged VAT on their purchases under the new scheme, provided they prove they are genuine visitors.

“That’s definitely an encouraging situation with the VAT,” he added, representing a marked departure from the ‘pay and reimburse’ Global Blue offering.

“That would have been a concern for us,” Mr Howard explained of the latter. “If a tourist coming in on a cruise ship is going to other locations, and know they do not have to deal with that, they’ll go and shop on another island. They’re not going to be inconvenienced by that set-up.”

Mr Howard said it was impossible to know what the sales and business impact would have been had the Government stuck with the original Global Blue proposal.

Yet he added: “The fear was if the process is encumbering, and there are too many steps involved, and cruise passengers and ships’ staff start to experience and hear that, and there are not much cost savings, that could have an impact.

“It was a serious concern for myself and my company that it could deter sales to other islands. We definitely feel that if it had gone through like they said it was going to go through, it could have had a pretty serious impact on our business.

“It’s a small world in the sense that everyone knows what’s going on in other places, and it will not take long for cruise passengers and crew to be aware of steps going on here compared to other islands,” Mr Howard said.

“What they’re presenting now seems like a more logical approach. It seems a good direction for us and other retailers on Bay Street.”

Mr Howard said there had also been discussions about whether proven tourists could receive “on the spot” refunds to their cards.

He also implied that attempting to refund tourists VAT on their purchases at the airport, if they were stopover visitors, was not practical.