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Vat Services Relief 'Vital' To Dorian Revival Speed

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Ken Hutton

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Abaco's Chamber of Commerce president yesterday renewed his plea for the government to eliminate VAT on services in the Dorian-hit islands amid fears the tax will "just delay the rebuilding process".

Ken Hutton told Tribune Business that including services among the post-storm tax breaks was "critical" to the speed with which homeowners and businesses are able to restore their properties following the devastating category five storm.

Revealing that he disagreed with the decision by K Peter Turnquest, deputy prime minister, to maintain VAT on services in the just-declared Economic Recovery Zones, Mr Hutton added that Abaconians "don't want anything from the government apart from a chance to rebuild as quickly as possible".

Emphasising that no one expected the tax relief to last indefinitely, he added that maintaining VAT on contractor and construction labour costs would make it less affordable for some to rebuild while also delaying the resumption of tax-generating economic activity that would restore the government's revenues and enable it to end the exemptions.

"It's important services are included for the initial phases, and are considered VAT-free, certainly if they affect construction and equipment rental," Mr Hutton told this newspaper. "It's important these things are exempt from VAT. I think it's critical."

He conceded that the VAT and other tax breaks announced by the government for the Recovery Zones, which are currently due to expire in 2020, could not last forever but disagreed with the rationale advanced by Mr Turnquest for why services had not been included in the relief package unveiled earlier this month (see other article on Page 3B).

The deputy prime minister last week argued that applying VAT zero-rated treatment to services would be difficult to police and too costly, while granting tax breaks to companies that do not need them. He added that the government would be giving up too much revenue, having lost $236m this fiscal year alone to Dorian, when it still had essential public services to run.

However, Mr Hutton argued that the priority should be to assist Abaconians who "had everything taken from them" with rebuilding their homes and businesses. The quicker this was done, he added, the faster the Government would see its own revenues recover at the back end together with Marsh Harbour and the rest of the island's economy.

"It should be an ongoing negotiation, and obviously not be written in stone," Mr Hutton said of VAT relief. "As conditions improve, things can be added and taken away from the VAT exemptions.

"The Government hasn't given up anything. Most of the people in Abaco have given up or had everything taken from them. It's not a matter of the Government giving anything up. It's what percentage of our income should we be allowed to keep. It should not be a decision of the Government.

"We are desperately looking to rebuild Abaco, and get government back their money that they need to operate," he continued. "They're not going to get it back right away. The Government is not giving us anything, and we don't want them to give us anything apart from the chance to rebuild as quickly as possible.

"That's not going to happen if 12 percent of the costs of rebuilding, in terms of contractor costs, are added to it. The sooner we get back online, the sooner the Government can reimpose VAT and get their funds back. It's currently just going to add delay to the whole process."

The Government has currently eliminated all import taxes and VAT on construction materials and related products, such as furnitures and fixtures. These tax breaks are intended to provide some financial relief to property owners as they rebuild in Dorian's wake, but only cover physical goods that are imported at the border.

As a result, some - including Mr Hutton - are arguing that the failure to include services in the package of Dorian relief measures threatens to leave the recovery framework "half finished". However, the Abaco Chamber president said the Recovery Zone structures and mechanisms implemented to-date "do seem to be working".

"it is up and running. It's a great start," he added. "It's still early days. There are certainly things that need to be adjusted and added. I think the whole structure of the thing is being put together and finalised."

Mr Hutton praised the Government for creating the Disaster Reconstruction Authority, chaired by John-Michael Clarke, with Kay Forbes-Smith as managing director, and voiced optimism that its impact would start to be felt in early 2020.

"There's been a couple of meetings so far with that," he said. "It's everybody getting together, meeting with the local groups to find out what their priorities and needs are, and putting in strategies to deal with them as efficiently and quickly as possible. That's going to be the key: Dealing with them as fast as possible.

"In terms of what's happening, I'm encouraged. I'm glad the Government has formed the authority, and done what they have. The ball is in the Authority's court, and we should see some progress starting in 2020."

Meanwhile, Mr Hutton promised that the Abaco Chamber's Project Resurrect initiative will "make its presence felt" early in 2020 after completing its "tax exempt" structure with other legal formalities in the process of being finalised.

"It's no use launching anything right now as everybody is shutting down for Christmas," he told Tribune Business, "but early in the New Year we're going to make our presence felt. There's the United Nations-organised donor conference in January, and Resurrect will definitely have a presence there.

"I think it's going to have a significant role because it's going to be transparent private sector donations and money coming into this."

Tribune Business previously reported that the Abaco Chamber had obtained the joint support of the Bahamas Chamber of Commerce and Marsh Harbour/Spring City district council for Project Resurrect, which is focused on rebuilding the business community in Marsh Harbour and the wider island.

It will seek a combination of charitable donations and private sector funding to help Abaco businesses restart following the devastation inflicted by Hurricane Dorian.

"This seeks to provide a means for helping a new Abaco by tapping into capital, both intellectual and financial, to study and recommend to the Government of The Bahamas the best, most modern restoration of Abaco and, where appropriate, fund that restoration," the September letter announcing Project Resurrection's creation stated.

"Additionally, the initiative will seek to put in place the necessary infrastructure from the beginning that will allow Abaco to flourish into the future. This includes everything from civil planning to construction, temporary housing for workers to providing start-up capital and training, to qualifying Bahamian small business enterprises."

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