By NATARIO McKENZIE
Tribune Business Reporter
nmckenzie@tribunemedia.net
Bahamian retailers yesterday said there was “no doubt” that 2015 sales volumes have dropped due to a combination of Value-Added Tax (VAT), Baha Mar delay and high energy costs, with one major company revealing its growth rate had dropped by 14 percentage points.
Jason Watson, Automotive Industrial Distributors’ (AID) vice-president of operations, told Tribune Business: “In Nassau prior to VAT, pretty much the whole of last year we saw a 20 per cent sales growth. Right now we are at 6 per cent.
“Our inventory is better than it was last year. We were expecting to see higher sales than what we have now. We made a lot of commitments last year for inventory going this year. I know for sure that next year our purchases will be way down. We’re not seeing the sales growth that we have seen before.”
Mr Watson added: “We expect that most consumers aren’t going to have the disposable income. I think that by next year we probably will see the full effect of the VAT tax.”
Ben Albury, Bahamas Bus & Truck’s general manager, told Tribune Business: “This year is drastically down over last year. The last two months, in particular, have been really stressful.
“I think that the thing that is affecting us the most is the difficulty to access financing. With all of the banks it’s very tough to get that financing, and a lot of people were waiting on Baha Mar to jumpstart the economy.”
He added: “We are down month over month. I just sold the first car today that I have sold in a week. Last month we went the first two weeks of the month and only sold one car. From what I gather from others in the industry, they seem to all be dealing with the same thing.”
Another retailer, speaking with Tribune Business on the condition of anonymity, said sales growth would probably have been more substantial in the absence of VAT.
“While the overall economy of the country is experiencing anemic or flat growth when it comes to sales, partially due to the Baha Mar bankruptcy, that anemic growth would probably have been more substantial growth if VAT hadn’t come into effect over the past year as well. The fact that Baha Mar went bankrupt had an impact on business confidence and, more importantly, confidence in the Government’s ability to manage the country as well,” the retailer told Tribune Business.
They added: “If government lowers duties further as promised, and as they are committed to do under the WTO accession talks, and maintains VAT under 10 per cent moving forward over the next decade or two, then the long-term outlook for growth will be undeniably positive, especially once Baha Mar or its equivalent opens in 2016 or 2017.
“This will end up having been a relatively painless structural adjustment of our tax system in the grand scheme of things, at least when compared to other jurisdictions that have undergone similar adjustments to their tax systems in recent years.”
The retailer continued: “With VAT coming on this year, it was always expected that it would have an impact on consumer spending, and we have seen that during the course of the year without a doubt.
“Many companies are hurting, that is the reality of the country right now and, as a result, many people are still looking for employment and not finding it, unfortunately. In the short-term, VAT’s impact is preventing growth in employment opportunities and that was always going to be the challenge of executing a structural adjustment of our tax system in the middle of a profound and prolonged recessionary period.
“Overall, though, VAT is a better tax than duty, which is terribly antiquated and a deterrent to both trade and growth, as it involves far higher up-front costs and thus seriously jeopardises the cash flow of businesses trading in goods, which impacts consumer prices.
“VAT, in the long-term, will improve cash flow, so long as duties are lowered further. Over the long-term, that should push prices down and make us a more competitive jurisdiction, but it will take some time to see that positive effect, as this year, inflation was quite high due to VAT’s impact.”
Philip Beneby, president of the Retail Grocers Association and Courtesy Supermarket, said VAT has not had a significant impact on food retail.
“Up to this point so far, we haven’t experienced any real difficulty. At the beginning there were challenges, but all of that has kind of leveled off,” he said.
“Things have been moving pretty good. At the beginning sales were also the same. Some days you may have had a dip but things have levelled off. The customers seem to have been familiarised with the VAT pricing, and you hardly hear any more queries. We have seen a shift in consumer purchases from some high-priced items to lower priced ones, but there is no big impact.”
Comments
asiseeit 8 years, 6 months ago
Don't worry, the P.M. has said it will be "dead good soon", now when soon is and what dead good means is anybody's guess.
John 8 years, 6 months ago
During the months of April and May, consumers seem to be adjusting to VAT. But when construction at Bah Mar came to a standstill so did the economy. Back-to-school sales for many businesses was ways down and as many retailers were faced with an up to 40% labor increase coupled with a 10% national insurance increase, due to an increase in the minimum wage, they had no choice but to reduce staff. So there are probably less persons working now than were working at the beginning of the year or this time last year. This has led to even more slowdown in the economy. And food prices seem to be extremely high, although some items, like chicken quarter,s have come down. Obviously persons want to shop but many don't have the money so they have no choice but to cut back. Does this lead into a gloomy Christmas.
sheeprunner12 8 years, 6 months ago
You have to eat and buy gas .................... but look at VAT effects on Bahamians' purchase of non-food personal items, luxury goods, recreation activities, non-essential personal services, insurance/health services etc ..... do your research on these sectors Tribune to investigate VAT effect on the business sector ............. stop being LAZY
Chucky 8 years, 6 months ago
Shouldn't be coming as any surprise, an obvious thing, needing no brain matter to understand; the size of the "economic pie" is what it is, the more people taking slices off it, simply means the smaller the slices have to get.
VAT is obviously a big slice out of the pie, government implemented VAT to get a bigger piece of the action, that has to come from somewhere.
Note the real inflation rate people, is it 2,4,6,8 10%, what is it? One thing for certain is that when the inflation rate exceeds GDP growth, you have a shrinking economy, called recession, and we are in one, and have been now for several years.
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