The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

BAHAMIAN retailers last night blasted the Prime Minister's 'tax free zone' and VAT exemptions plan as "terrible policy", warning it could create increased "fraud and corruption".

A Bahamas Federation of Retailers spokesman, in a statement, warned that a key element in Dr Hubert Minnis's 2017 election campaign was simply a populist attempt to "win votes" that will not help the poverty-stricken, lower income Bahamians it is targeted at.

"It cannot be stressed enough; the Government's tax-free zone plan and VAT exemptions on breadbasket items are simply terrible policy that is designed to win votes, but will not actually benefit the people they are supposed to help," the spokesman said. "In the case of tax-free zones, the duty concessions offered favour foreign enterprises over local businesses, as [they] are not being given to registered, licensed and already tax-paying Bahamian companies to import and sell locally, but to individuals to import from foreign companies duty-free. This doesn't create employment in the local economy and is ripe for abuse, corruption and fraud as the Chamber of Commerce rightly points out."

The Federation's concerns were stoked by the Prime Minister's announcement this week that the Government intends to introduce its Over-the-Hill revitalisation plan, involving 'tax free zones' and VAT exemptions for so-called 'breadbasket' food items, with the 2018-2019 Budget.

Dr Minnis and his party were warned against it when it was unveiled for the general election campaign, and this week's announcement also prompted Edison Sumner, the Chamber of Commerce's chief executive, to urge the Government to implement the necessary "safeguards" to prevent the duty concessions from being abused.

"The Government should be seeking to provide a level playing field for all Bahamian companies to be able to be more competitive in this ever-more globalised economy," the Bahamas Federation of Retailers spokesman said.

"Band-aid solutions like this will not fix the Bahamian economy, which needs serious tax reform on duty and Business License fees for all Bahamian-registered, licensed and tax-paying businesses to see growth again. Creating tax-free zones will only create loopholes for fraud and corruption, and that is exactly what got us into this deficit and debt mess in the first place."

Turning to the elimination of VAT on 'breadbasket' items, the spokesman added: "The Government has been told by every group that understands taxation and its impact on costs and prices that this is a terrible idea, which may actually cause prices to go up.

"Again and again, the Government has been told to keep VAT low, broad-based and universal, and has been repeatedly warned that VAT exemptions and loopholes are both costly to implement and allow for corruption and fraud to enter the VAT system.

"Business License fees impact food store prices more than VAT currently does, so if the Government was serious about reducing the price of food in the Bahamas it would eliminate Business License fees for food stores and make sure they pass on the huge savings that would result to the Bahamian public. That would be smart reform, and serious relief to the poor and middle class would actually happen if that policy was pursued."

The Bahamas Federation of Retailers spokesman, though, argued that the Minnis administration "seems hell bent on implementing these bad policies over the advice of the international tax consultants that helped set up VAT in the first place, and over the advice of the business community that have repeatedly warned that it is bad policy and prefer a low, universal and broad based VAT that keeps everyone on a level playing field and prevents corruption and fraud".

They continued: "Why is this government so determined to execute bad policy when, if it wants to give relief to Bahamians, they have been told over and over again that the smart way to do that is to further lower duty, eliminate or greatly reduce Business License fees and tackle energy costs head on. Those policy reforms would actually help reduce the cost of living in the Bahamas.

"Instead, the Minnis administration is pushing full steam ahead for bad policy that the people will end up regretting having called for in the first place. This is just bad governance and may even create fraud and corruption that didn't exist previously. The Government must stop playing with band-aid economic reforms and tackle the big issue: Duty and Business License fees. Leave VAT alone, it is working just fine. Fix the other archaic taxes.