The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A top private sector executive yesterday warned it might be “premature” for the Government to start ‘handing back’ its Value-Added Tax (VAT) windfall via other tax breaks, arguing that deficit reduction was the priority.

Edison Sumner, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chief executive, told Tribune Business he was unsure “how sustainable” the Prime Minister’s policy of “returning the dividends from a successful VAT” would be.

Mr Christie, in unveiling his 2015-2016 Budget, announced several tax rate cuts relating to Business Licence fees, Stamp and Excise Taxes, and real property tax rates after VAT revenues for the first three months exceeded expectations at $110 million.

Mr Sumner, though, warned that it might be too early for the Government to start relinquishing some of its VAT windfall, given that the Bahamas’ fiscal position remained dire.

“I’m not sure how sustainable that’s going to be,” he told Tribune Business of the tax breaks announced by Mr Christie.

“Anyone will welcome getting credits and dividends back. But it may be too soon, premature at this point, to make that offer.”

Mr Sumner added: “We’re doing what we can to assist the Government with tax collections through VAT. We’ve been very compliant, and have gotten an 85 per cent compliance rate across the board, which is fantastic.

“We want to assist the Government in improving its revenue and fiscal situation, and to start giving it back at this stage may be premature.”

The Government is projecting that VAT will generate the net $150 million in revenues that it targeted for the first six months of 2015, once the $60 million worth of Customs duty and hotel occupancy tax reductions are accounted for. It is also forecasting that it will earn $344 million from VAT in the 2015-2016 Budget period, the tax’s first full year, a 14.7 per cent rise on the original $300 million projection.

Still, Mr Sumner applauded the Government’s decision to implement further reductions in Customs duties and import tariffs, which he said could boost small and medium-sized enterprises (SMEs) and economic development, thereby enhancing revenue collection.

The biggest beneficiaries from the Budget’s tax amendments appear to be the auto industry and commercial real estate market. The former will now enjoy a uniform Excise Tax rate on all models at 65 per cent, plus its long-sought after ban on wrecked vehicle imports and 10-year age limit on used cars, while the latter will be lifted by a 75 per cent cut in Stamp Duty payable on transactions.

However, K P Turnquest, the Opposition’s finance spokesman, questioned whether the Government had returned anything of substance to hard-pressed consumers and businesses.

“I don’t think he’s given much back at all,” Mr Turnquest told Tribune Business yesterday. “You’re talking about giving rate reductions on items bought infrequently, so it does not affect the average consumer.

“It sounds great when someone says you’ve got a 20 percentage point reduction on tariffs. How many of us buy a car every year?”

However, Gowon Bowe, the BCCEC’s chairman, yesterday took a more sanguine view of the Prime Minister’s comment that he was returning the “dividends from VAT” to Bahamian businesses and consumers.

He suggested that Mr Christie was merely trying to fulfill a previous promise, which had been to reduce taxes in other areas once the Government was sure VAT was hitting the desired revenue targets.

“To be honest, I think that’s a play on words and a fair statement,” Mr Bowe said. “In reality, he said he would not change other elements until the Government was satisfied VAT collections were where they thought they’d be.

“They’re giving back to businesses more so than consumers, in terms of Business Licence fee reductions and Customs Duties. This is more him [the Prime Minister] keeping his word in terms of what he said in last year’s Budget.”

The Chamber is currently preparing an analysis of the 2015-2016 Budget that it plans to release shortly for viewing by its members and the wider Bahamian public.