By NEIL HARTNELL
Tribune Business Editor
The government is today expected to clarify the “confusion and frustration” surrounding the post-Dorian Economic Recovery Zones, amid warnings that the uncertainty is fuelling “a loss of confidence”.
Marlon Johnson, the Ministry of Finance’s acting financial secretary, last night told Tribune Business that the Minnis administration should introduce the enabling legislation for the zones - and the accompanying rules and regulations - in the House of Assembly today.
He explained that a fifth government “exigency Order” had taken effect over the weekend to ensure that residents and businesses in storm-ravaged Grand Bahama and Abaco could still access VAT and import duty exemptions while the details for the zones - which were supposed to come into being on Sunday, December 1 - were still being worked out.
“We did an extension to the exigency order at the weekend because we were still working out the final elements of the Economic Recovery Zone Act,” Mr Johnson said. “That will be spoken to in Parliament tomorrow [today], and all the rules and regulations around that will be addressed then.
“In Abaco and Grand Bahama right now, there is VAT-free and duty-free treatment of select items as outlined in the exigency order. My understanding is that should be addressed in Parliament.”
Mr Johnson’s comments came as both the Abaco and Grand Bahama Chambers of Commerce voiced alarm about the lack of clarity coming from the government as to how the post-Dorian Economic Recovery Zones will be implemented and operate in practice.
Echoing concerns expressed by his Freeport counterparts at the weekend, Ken Hutton, the Abaco Chamber of Commerce’s president, told Tribune Business that the continued uncertainty threatened to both delay and undermine efforts by homeowners, the private sector and wider community to rebuild following the most devastating hurricane to hit The Bahamas for decades.
Revealing that he was still waiting for a reply to the letter sent to the Ministry of Finance last week outlining the business community’s concerns, Mr Hutton said some companies were still charging consumers VAT while others were not. Neither side, he added, knew whether they were right given the continuing absence of directives and rules from the Government.
“To-date we still don’t have the information on how it’s to be implemented,” the Abaco Chamber chief said of the zones. “All we have is an announcement. We still don’t have any documents on how it’s to be implemented. It’s in effect based on verbal confirmation but we have received nothing in writing.
“Effectively what you’ve got are are certain businesses not charging VAT and some businesses, which are not supposed to be charging it, charging it because there is no directive that they shouldn’t. I wrote last week to the ministry for clarification and have still not received anything yet. How are they going to notify businesses, and how will those businesses receive notification of VAT exemptions.
“A prime example,” Mr Hutton continued, “is that we have certain fuel suppliers charging VAT and other fuel suppliers not charging VAT. LP gas for the forklift is exempt, but gas for the generators and trucks is not exempt. I don’t know if they’re exempt or not as there’s no communication telling us what to pay VAT on.
“There is very little clarification. Great announcements but zero verification and documentation. The lack of clarification is causing people to charge VAT even though they may not have to charge it, and people paying it when they may not have to be paying it. It’s causing a lot of confusion and frustration for both buyer and seller.
“There is confusion where there shouldn’t be confusion and no need for there to be confusion. Unfortunately, it continues the loss of confidence in the Government in many ways. There’s no clarification coming from the Government.”
Mr Hutton also queried whether essential recovery and rebuilding services, such as construction, air conditioning repairs and other contract work will be treated as VAT ‘exempt’ or ‘zero rated’, warning that the tax would be “a significant burden on the recovery” if it remained in place.
And, with the food stores supposed to be VAT-free, the Abaco Chamber chief queried whether the same tax treatment would be extended to restaurants - especially since bold sold pre-prepared food.
Mr Hutton’s concerns echo those of his Grand Bahama counterpart, Greg LaRoda, who told Tribune Business at the weekend that “most businesses” on the island have not been informed as to how the VAT and import tariff/Excise tax concessions will be implemented.
“Local businesses were told of the VAT concession via the media, and it was announced that it would be implemented on December 1 to give local businesses time to adjust their systems,” he said.
“However, most businesses have not been engaged ... and there have not been any announcement or confirmations on exactly which tariff headings will be impacted, what specific goods will be VAT free and what the specific reporting responsibilities will be for businesses in Grand Bahama as of November 28, 2019.
“Businesses have been calling the Department of Inland Revenue locally and could get no direction from them as they had not yet been advised of such.”
Persons and businesses resident on Grand Bahama and Abaco, the two islands ravaged by Dorian, are supposed to enjoy the tax-free importation of goods through until end-June 2020 to facilitate their recovery once they can prove they are located there.
A private sector source, who was present at yesterday’s meeting between the Grand Bahama business community and officials from the Ministry of Finance, Customs and Department of Inland Revenue, said several key concerns were addressed.
Confirming Mr Johnson’s comments, the contact said the fifth exigency Order was in effect until December 30 but was likely to be replaced before then by the Economic Recovery Zones once the enabling legislation and accompanying regulations were passed by Parliament.
“They’re playing catch up,” the source said of the Government, “but are becoming more cognisant of what they have to do. The way it was put to us could work.”
They explained that all purchases from retail stores in the Dorian-hit zones will be VAT-free, with all products covered by the exemption treated as ‘zero rated’. This means businesses will not have to pay VAT on their inputs or at the border, and will be able to claim refunds for the latter payments.
As for import duties, these will be waived upon completion and pre-approval of a consolidated exigency form. Previous concerns centred around the fact that the tax breaks were not based on the Tariff Code, with the waivers based on broad, ill-defined categories or baskets of goods.
However, government officials present at yesterday’s meeting said they would set up a phone and e-mail “hotline” so merchants could clarify the eligibility of certain products for the exemption.
“The Government mandate was to make it broad to cover consumables and items that are needed to rebuild,” Mr Johnson said last night. “There will be some guidelines and guidance as to what items are included and excluded.”