By YOURI KEMP
Tribune Business Reporter
The government’s plan to increase the $300 VAT-free threshold on monthly electricity bills is an admission that hiking the tax rate to 12.5 percent was a mistake, the opposition’s leader said yesterday.
Philip Davis, responding to Tribune Business revelations that this threshold may be raised to offset the impact from BPL’s $650m bond issue, and the associated debt servicing charge that will be added to customer bills, argued that this amounted to “a confession” that the 60 percent VAT rate increase was negatively impacting consumers and the wider economy.
“The government’s increasing fall-back on decreasing VAT to respond to criticisms of adding extra burdens on the Bahamian people is a confession that their ill-thought out increase in VAT by 60 percent is having a deleterious affect on our economy and its growth,” Mr Davis said in a voice note.
Desmond Bannister, minister of works, last week said the average household’s monthly light bill could increase by between $20 to $30 for ten months during 2020 as a result of the bond debt servicing charge being added to their bills. This increase could push some customers who currently enjoy exemption from the VAT levy above the $300 threshold, hence the government’s intent to raise it.
“With respect to this specific idea of increasing the billing number, and to apply a VAT decrease, again we don’t understand the dynamics behind this and to what number will it be increased?” Mr Davis asked. “And, until such time as we understand what their arrangements are with relation to raising this $650m through this rate reduction bond, we will be shooting in the dark always as to understanding what is going on.
“We cannot have any confidence in the negotiating skills or ability of this government. We have seen time and time again where they have negotiated some of the worst deals on behalf of the Bahamian people. This requires negotiating skills, this requires knowledge of the money market, this requires forward thinking and principles to ensure that we get the best deal for The Bahamas.”
Mr Bannister last month accused the opposition of hypocrisy given that it was the former Christie administration that passed the initial legislation to facilitate the National Utility Investment Bond in 2015, only to fail to implement it and leave it up to the current government.
However, Mr Davis criticised the light bill exemption for undermining the concept of a low-rate, broad-based VAT. “It also demonstrates a misunderstanding of the VAT tax,” he argued. “The reason why VAT is an acceptable way of taxing is because of its simplicity.
“It is an across-the-board tax and, when you start tinkering with it by exempting or decreasing various different items. It makes for uncertainty; you create bureaucratic nightmares and, of course, instead of costing less it costs more because of the manner and the time that will be dedicated to it to determine what items or what rate the VAT should be on any given item. That is a nightmare.”
Drawing comparisons with the problems merchants are now experiencing with Customs’ newly-implemented Click2Clear Bahamas electronic single window (BESW), Mr Davis said: “You are seeing it now with this Click2Clear programme that they have for importing goods. Merchants are already screaming about the inefficiency of this programme.”
And, dismissing the increase in the VAT-free threshold for light bills, he added: “This is purely a public relations gimmick to attempt to solve and to allay the fears of the Bahamian people, and to make it appear that something is going to happen for them. Trust me, this may look good in the near term, but it will not alleviate the challenges and pain that is in store for the Bahamian people.”